950818

Index climbs to 1850.22

points in last week

Market capitalization

up by Rs 4.413 bn

RECORDER REVIEW

KARACHI: Investors staged a comeback as average daily market capitalization recovered to the Rs 1.1 billion mark. The presence of foreign investors was also felt in selected scrips but main thrust was built up by the local institutions.

The KSE index during the week maintained its upward trend and climbed up to 1850.22 from 1823.27 points in the previous week, reflecting strength in the base share. Total rise in the index was 26.95 points and the market capitalization during the period under review improved by Rs 4.413 billion, reaching Rs 343 billion.

Business during the week was restricted to four days because of Monday's holiday on account of Independence Day. All in all, the bulls were on the driving seat and did not give a free hand to bears. Selling originated from some quarters but was well absorbed at nearly all counters, especially at banks, cement, leasing and fuel and energy.

The market's forward thrust came to a sudden halt on Tuesday and prices suffered a mild correction which was quite understandable after Monday's escalation in violence. Many overvalued shares came under profit-selling as bargain hunters and sundry jobbers offloaded their holdings to book the available margin to meet the clearance obligations.

However, an analyst believed that as new accounts had to commence from Wednesday, several quarters unloaded their scrips just to minimize their paper losses. But there was an air of optimism whirling around the ring and beside local institutions, foreign fund managers and leading brokerage houses notched some big deals.

Surprisingly, the lion's share went to local investors, which is surely a positive sign and could strengthen the capital market as the trading moves on to the next week.

One of the leading research analysts said that buying has emerged at this stage because of two reasons. One reason was that the market had gone so low that investors had finally realised that it was buying time. The market had lost almost 1214 points till May after touching the highest level of 2664 points in March 1994. The other factor was the dismal scenario at the economic front and the unabated violence in the city. About 1,250 have been killed since January as against 800 persons in 1994.

The talks between the government and MQM gave a little breather and equities started moving up and, since touching its lowest at 1450 level, the index has recovered almost 400 points which reflected that once again bull run is somewhere in the corner. The market capitalization in the last two months has also improved by almost Rs 66 billion, or 2.129 billion dollars, and had reached Rs 343 billion by the end of the week (August 17, 1995).

One very significant feature of the week's business was that the investors cautiously changed their course from favourites to non-traditional items which, according to a stock broker, indicates that the market is well on the way to last year's buying euphoria. The investors have moved out of the safe havens on the perception that a grand rebound is imminent and it is more profitable to buy a low priced issue which offers better chances of capital appreciation.

The index has also been steadily inching upwards and may cross the 1900 mark before the end of the week. Many analysts hope that if the bullish trend persists, the index might cross the 2,000 points mark before the end of the month.

Some analysts maintain that if nothing untoward happens till August 31 - in ten trading sessions - and the index, on an average, scores 10 points per day then it will surely settle at 1950 level. Several investors have discounted the fears of violence and commented that they had learnt to live with daily killings in the city and have decided to strictly follow the technical factors while deciding about investment strategy.

On Monday, the market was stable throughout the session as buying surfaced in some of the under-priced sectors. Prices generally fluctuated in narrow ranges and the plus-minus signs ratio stood at 2 to 1. The steady rise in the market for the last couple of sessions indicates that now it is a buyer's market and relative calm in the city has raised hopes among investors that good days are ahead.

However, escalated violence on Independence Day overshadowed the equities and values suffered widespread falls. A small slide was registered in the index but larger decline was averated because of improvement in Hub Power, Dhan Fibre, PIAC, Dandot Cement, Fecto, Gadoon Textile, Hinopak, Dawood Hercules, Brooke Bond, Lever Brothers and ICI.

On Wednesday, heavy anticipatory buying was made on low priced blue-chips in the hope of a big jump in prices in the near future. Selling emerged in patches but due to strong fundamentals the equities bounced back. To all appearances, the market had turned the corner in expectation of major gains in the coming sessions. Some of the mutual funds and insurance scrips were under focus, while a few multi-nationals also attracted support because of the current low prices.

The recent measures to promote the capital market, improvement of liquidity position and prospects of better return and continued support from the institutions as well as foreign fund managers in selected scrips were responsible for brightening up the outlook of the share market.

The curb on outside trading of prize bonds and amendments in FEBC's trading also gave a significant boom to the share market because, steadily, funds are flowing to this channel. But still some believed that the future of share market was inextricably linked to the law and order situation and the outcome of the government-MQM talks. There was consensus that the chances of another bear-run were remote. The worst is probably over and now the situation is quite ripe for a grand technical rebound.

Total transactions during the week settled at 45.605 million shares as against 47.321 million shares of the preceding week, giving an average daily volume of nearly 11.401 million shares.

The share of five scrips i.e. Faysal Bank, PTC, Hub Power, Dhan Fibre and LTV accounted for 40 percent from 49 percent of the turnover. The major share went to Faysal Bank as about 4.108 million shares of this crip changed hands and the value of the issue depicted a fall of 75 paisa to end up at Rs 31.25.

Hub Power, on a volume of 5.208 million shares, showed a significant rise of Rs 2.50 and settled at Rs 23.

PTC claimed third position and, after total business of 4.130 million shares, denoted a meagre rise of 25 paisa and reached at Rs 32.50.

LTV Modaraba moved down to Rs 5.80 from Rs 6.60 and during the week about 2.898 million shares changed hands.

Dhan Fibres on a transaction of 2.3 million shares slipped to Rs 12 from Rs 12.35, indicating a fall of 35 paisa.