The share market staged a handsome recovery last week on the back of expectations of good corporate announcements and on rumours that the government would soon raise the limit on badla financing, giving some ray of hope to investors to place fresh deals in pivotal and second-tier stocks.
During last week, the listed companies' penchant for announcing tremendous corporate results continued. Shell Pakistan provided the cherry on top of the sundae with a massive 63 percent growth in profit for FY05. Corporate results season is now entering its fast track phase where market might see more scintillating results, going forward.
Privatisation of govt entities is something that investors had put on the backburner since Etisalat's record bid for PTCL. However, on August 5, the PC Board decided to shortlist 7 parties for PSO and 4 parties for PPL, which was a confidence booster.
Finally, there was a bit of a scare among investors following the report of the Stock Market Task Force. However, that appeared to be short-lived. Investors still await a concrete decision regarding provision of liquidity to the stock market following a spate of meetings.
After fall during three consecutive weeks, equity values at the bourses were back on track, with KSE-100 Index gaining 240 points to close at 7419 points. Due to positive market sentiment and increased market activity, badla rates moved upward. Ready future spreads, on the other hand, remained on the lower side, compare to previous week, which was also the rollover week.
Average daily volume in ready market also increased from 88 million shares of previous week to 190 million shares last week. Market capitalisation ended the week at Rs 2.11 trillion on Friday, thereby registering an increase of Rs 61 billion, or 3.0 percent, from previous weekend.
The KSE-100 Index finally got out of its melancholic lull during last week and provided investors with a glimpse of what volumes used to be like in normal times.
The major events during the week included a series of so-called high-level meetings to conjure up a solution to the badla/margin financing issue, release of the Stock Market Task Force Report by SECP, and a Privatisation Commission board meeting at the weekend. Total leverage saw a decline during last week mainly due to settlement of July futures contracts. However, badla rates finally began to show the lenders' market that the COT sessions have become.
On Monday, the market kicked off with a lot of uncertainty on the COT issue as reflected from KSE touching all-time low volume of 41 million shares. An analyst from Alfalah Securities said: "The continuous fall in the market could generate good activity in attractive value scrips due to the bottoming effect, good enough for the sleeping bulls to wake up and shake their tails, as was witnessed on Tuesday when the market took a U-turn and rose 129 points with a volume of 134 million shares."
There was heavy buying in PTCL, OGDC and POL. The banking sector performed well, with MCB leading the way, and closed on an upper circuit due to an expectation of good result announcement this week. PPL was quick to join the bandwagon and closed on its upper cap.
With some good corporate results already announced and some others round the corner, the valuations seemed quite attractive and the same support was witnessed on Wednesday when the market crossed the 7450 level. It finished the day with an increase of 117 points. But enter Thursday and the market fell twice from the high of 7488 and closed at 7405 index level. Shell saw an unexpected 1.2 million shares volume due to a better-than-expected result announcement.
On Friday, the market opened on a negative note and saw a topsy-turvy movement with fluctuations resulting from rumours on the restoration of COT and sentiment generated from the task force report on the March crisis. But buying on dips due to attractive valuations averted the market from a major fall.
One of the major highlights during the week was the T-bills auction, which saw the SBP mopping up Rs 58 billion against a maturity of Rs 84 billion. The rates on 6-month and 12-month T-bills increased by 10 basis points each, while on 3-month it increased by 15 basis points.
Another key development was the submission of task force report on March crisis, which was one of the factors for the index dipping 37 points on Thursday and further led to a sluggish performance on Friday.
Moreover, PPL's joint venture exploration project of Pasni X-2 had incurred a cost of $31 million, all going down the drain, as it turned out to be nothing more than a dry hole. The company continues to incur rental charges of $52,000 per day on the oil rigs in place there.
"We feel the market is likely to move up in the coming week, and breach the 7500-index level. Our top picks for the coming week remain PTCL, NBP, DGKC & POL," an analyst from Alflah Securities said.
An analyst from KASAB Equities said the market would remain range-bound over the next week in the absence of any announcement to enhance the cap on COT from Rs 12 billion to Rs 20-25 billion. Askari Commercial Bank (10.8.05) and MCB (11.8.05) are expected to announce their 1H05 results next week, which may trigger some stock-specific activity. "We recommend investment in fundamentally strong stocks namely Fauji Fertiliser, Fauji Fertiliser Bin Qasim, Callmate Telips, POL, National Bank of Pakistan, Packages, Shell Pakistan and Nestle Pakistan," he said.
A leading trader from Atlas Investment Bank anticipates the market to move forward on the back of privatisation related developments in PPL and PSO and more importantly any positive outcome expected on the COT/Margin Financing issue and advises the readers to participate in fundamentally strong scrips only.
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