Stocks maintained their upward drive last week, as investors continued to build up long positions on selected counters anticipating an end to the post-election political deadlock, and continuation of the existing economic policies by the new government.
All roads led to Islamabad throughout the week as investors took positions, or sold in line with the political developments, and on the reports of political alliance or subsequent denials by the contenders of power.
In between there were bad news also, including the formation of forward blocs within the leading parties sans floor-crossing in a bid to weaken their own parties and support the prospective winners.
The leading bulls, however, intended to push the index above the 2,300-point level soon after the formation of a government at the centre and vowed to keep it above this level.
However, positive signals about the formation of a government at the centre, after summoning the National Assemble session on Nov 16, appeared to have cleared way for the bulls to demonstrate their strength at current lows. How they react to a possible end to the post-election deadlock would determine the future market direction.
“The clouds of uncertainty were certainly fading”, said a leading stock analyst commenting on the calling of the National Assembly session “a strong coalition government at the centre will ensure smooth sailing on the political front”.
There may still be many ifs and buts before the actual transfer of power to the elected MPs, some recent positive developments leading to a consensus candidate for top slot and a coalition government had raised hopes of smooth sailing, he hoped.
Apart from the positive political signals, investors were also anticipating that the acceptance of the UN resolution by Iraq would defer the US attack. The PSO sell-off after the pre-bid meeting on November 15, will reinforce the investor-perception of fresh robust rally above the 2,300 points index level.
The politically-driven rally was, therefore, intensified followed by the reports from Islamabad about a possible coalition government at the centre between the PML-Q and the MMA. It reinforced the investor-perception about the end of the post- election political impasse and hence fresh short-covering at lower levels.
An optimism about the settlement of the political standoff may well be had from the fact that the KSE 100-share index surged by 44.26 points at 2,271.60, sending signals that it was heading to set new record beyond 2,300-point level, if Pakistan Muslim League-Q, the majority party and the alliance of the religious parties (MMA) formed a coalition government at the centre.
Total market capitalization also rose by Rs9.381 billion at Rs515.646 billion after having hit the recent peak level at Rs564 billion late last month.
“Such an arrangement will also ensure a smooth working in the two highly sensitive provinces, the Frontier and Balochistan, having a common border with Afghanistan”, brokers said adding, “the opposition led by the ARD parties including the PPP and PML- N will also be strong”.
The breakthrough came after the government accepted some of the demands of the MMA (alliance of religious parties) relating to the Legal Frame Order and the constitutional amendments carried through it, analyst said.
However, investors should go for defensive scrips or those select performing scrips such as the MCB, the National Bank, the Engro Chemical and the ICI Pakistan, until the dust on the political scene settled down and the power transfer was completed, they added.
But some others said it is too early to predict about the formation of the government at the centre and the composition of coalition partners as much will depend “whether or not the forward bloc of the PPP turns into a reality and supports the PML-Q.
“The political situation was still fraught with high risks and no one should take a specific lead from the changing political scene”, they said warning investors to sell at the rise”.
However, as far as the background corporate news were concerned most of them were encouraging and the IMF’s satisfaction over the performance of the economy could well mean the extension of the poverty reduction aid programme.
The market was virtually being guided by the course of events in Islamabad not by its own demand or the investors’ liking.
Prominent gainers were led by the Pak Reinsurance, the Pakistan Refinery, on the market talk of bonus shares, the Unilever Pakistan, the Treet Corporation, the Siemens Pakistan, the General Tyre and the Shell Gas.
They were followed by the Sapphire Textiles, the Al-Abid Silk, the National Refinery, the Attock Refinery, the Shell Gas, the Shell Pakistan, the Crescent Steel, the BOC Pakistan, the Dawood Hercules, the Rafhan Bestfoods, and the Millat Tractors.
Losers were led by the Abbott Lab, the Morafco Industries, the Glaxo-Wellcome Pakistan, the Sarhad Cigarettes and the Fazal Textiles, the Rafhan Maize, the Bata Pakistan and some others.
Trading volume shrank to about 700 million shares from 1.090 billion shares a week earlier, owing partly to the advent of the holy month of Ramazan and partly to the uncertain political outlook.
The Hub-Power, the PTCL, the PSO and the Sui Northern Gas were among the leading volume leaders, which together accounted for about 70 per cent of the total, followed by the FFC-Jordan Fertiliser, the Engro Chemical Pakistan, the National Bank, the MCB, the ICI Pakistan, the Japan Power, the Dewan Salman, the Pak PTA, the ICP SEMF, the Telecard, the Kohinoor Energy and several others.
FORWARD COUNTER: After the initial surge, speculative issues on the forward counter turned into mixed performance under the lead of the PSO, which attracted selling ahead of the pre-bid meeting between the officials and the bidders on November 15. But its on-balance closing was on the higher side amid active two-way trading.
The PTCL, the Hub-Power, the Engro Chemical and the ICI Pakistan on the other hand managed to finish with smart gains and so did the Pak PTA and the FFC-Jordan Fertiliser, the Sui Northern and some others.—Muhammad Aslam