Buying spree might resume in the coming weeks as full-year financial results are around the corner and investors would bet on those companies which have good dividend paying history, hoping that the market would surge sharply on slightly better volumes.
The KSE-100 index continued to move along upward slowly and gradually during last week, and ended the week with a gain of 101 points (or 1.9 percent). The Index closed at a level of 5454.
Trading volumes in the local bourses remained low during the course of the week, as investors tried to see exactly how much impact the newly levied taxes on shares purchase and sale would have.
The local badla market saw a bit of a spike in badla volumes during the course of the week, which in turn affected badla investment. Badla rates remained rather range-bound during the week.
There were bullish spells on the first trading session of the week. NBP and Bank of Punjab led the market owing to Rs 2.55 per unit dividend announced by NIT, which pushed the index up by 0.87 percent.
Bulls aggressively welcomed PPL on its very first provisional trading day and it closed at Rs 116.5 per share as opposed to the offered price of Rs 55 per share. Selling pressure from both individual and institutional investors eroded trading activity on Tuesday, which pulled the index down by 0.17 percent.
Buying in the blue chip companies helped the index to cross 5400 mark on Wednesday but the volume remained low owing to lack of interest from institutions and large brokerage houses.
The rally in Blue Chips continued on Thursday and the index recorded a 0.27 percent gain. The slow and steady growth ultimately pushed the index to 5,453.55 on Friday, thus taking the index gain to almost 1.88 percent over previous week's close of 5,352.97.
Bank of Punjab, New Jubilee Insurance, Jahangir Siddiqui & Co, Lakson Tobacco, and ICI Pakistan were the major gainers while Cherat Cement, Bosicor Pakistan, PIA, Nestle Milkpak and Ibrahim Fibre were major losers at KSE.
According to an analyst of KASB Equities, the announcement of corporate board meetings is likely to drive the market this week. "We expect most of the companies to come up with the dates for their June 30 result announcements."
This may affect trading volumes positively, which have seen some slowdown owing to CVT levy. The liquidity situation is fairly comfortable with badla rates likely to stay in their current ranges.
On politics, opposition is unlikely to come up with joint candidates against Shaukat Aziz in the upcoming elections. Consequently, traders feel that Shaukat Aziz will face little difficulty in winning the elections.
Thus politics will remain a net positive factor for the market. "We do foresee some stocks shifting where small investors are likely to raise cash for their PPL subscriptions," they said.
According to AKD Securities research report, the market has entered a range-bound phase, for the time being. Lack of fundamental news flow has arrested the bullish momentum and the trend is likely to prevail for the next couple of weeks.
However, by that time the FY04 earning announcement season would start to kick in. This earning season (Jun-end) is accompanied by greater dividend payouts from companies; hence an air of optimism is likely to prevail in the market in the near-term.
On the long-term horizon, value investing is becoming difficult with each passing day. Furthermore, the rising short-term interest rates and tightening of monetary policy (reducing money supply year-on-year) do not augur well for a bull market.
The brokerage house believed that the growth stocks like Telecom were ideal bets to counter these negative developments as the return from these stocks would more than compensate investors for the rising cost of investment.
With most of the companies following the same fiscal year, a barrage of FY04 earning announcement would hit the market in the next couple of months. Full-year result announcements have a greater impact on the market as they are accompanied by greater dividend payouts.
In fact, some major stocks like PTCL, Sui Northern etc only pay once a year, while other major stocks like PSO, Pakistan Oilfields pay the bulk at the financial year-end. "If we limit our view to these upcoming result announcements, the big dividend payout is expected from Pakistan Oilfields since the company had skipped interim payout, as it also ran for the cellular licence." Similarly, rumours are hotting up on stock dividend from PSO.