KARACHI, May 22: Bulls staged a grand rally at the Karachi stock market on Tuesday, which propelled the KSE-100 index by 266 points, or nearly two per cent, to cross the 14,000-point barrier. The index settled at 14,142 points.
The paper value of corporate Pakistan rose by Rs68 billion in a day, represented by the market capitalisation that shot up to Rs3.612 trillion, from Rs3.544 trillion the previous day.
The massive local institutional buying sent prices of 226 stocks scurrying up with about two dozen shares closing at their ‘upper-circuit’ — the maximum permissible increase of five per cent in price of any stock in a single day.
Arif Habib, former chairman of the KSE, said that after the loss of over 400 points over the past two weeks, the market had all the right reasons to rebound.
He said he believed that corporate earnings growth was likely to be impressive in the next quarter for several sectors, including cement, fertilizer and energy. “And there are great expectations of a ‘market-friendly’ budget,” he said.
Most other brokers and dealers concurred that the investor sentiment was buoyed by the belief that the federal budget, expected to be announced on June 1, could be heavily tilted in favour of industrial investment and incentives for listed corporate entities, mainly in the form of tax incentives.
Mohammad Sohail, CEO at brokerage Topline Securities, pointed out that investors’ sentiments in stocks across the region had taken a turn for the better, which had provided comfort to local investors. He, however, thought that the volume of business at the bourse was still on the lower side.
On Tuesday, the turnover was witnessed in 179 million shares with the traded value at Rs5,259 billion, which many thought was third of their previous peak in 2008. Yet, business had picked up pace from an average of just 95 million shares traded in the financial year 2011.
Much of that was attributed to small investors who having distanced themselves from the market after the 2008 debacle had started to flock back and breath life into what analysts term the ‘second and third-tier’ stocks.
The dramatic upswing of over 4,000 points in KSE index since January this year has provided investors a gain of more than 35 per cent in fewer than five months. Yet at this dizzy height of the index, many market gurus caution small investors to look before taking a leap.
Several market experts thought that fall in the market the previous week was also fuelled by the fear of flight of foreign investors, who were net sellers of $6.01 million worth equity during the week, compared to net buyers of $3.32 million the week earlier.
Although in the comparative tiny sum of $0.87 million on Monday and $1.01 million on Tuesday, the net buying by overseas investors was a relief for local investors who were assured that Pakistan equity market was seen on the international fund mangers’ radar.