The benchmark KSE-100 continued its positive pattern during last week and gained 204 points, creating a favourable environment, which led to the highest intra-day level of 7832 in the last five months and investors thronged to counters, placing fresh deals in choice scrips.
The index gained 2.7 percent during the week to reach 7789.76 points. During the week, a bull-run was witnessed, mainly on the back of a) rising oil prices in international market, b) higher-than-expected corporate results, c) increasing interest of foreign funds in local market as the badla issues have been resolved in the shape of CFS.
Global oil prices hit a record high of $70.8 per barrel, mainly due to the threat posed by 'Katrina' hurricane to US refineries. Bulls ruled the market on Monday and the index went up by 1.4 percent (106 points), as $598 million worth volumes changed hands. The upside was mainly due to the surge in oil prices and good corporate result announcements.
On Tuesday, the upward trend continued and the index went up by 0.7 percent (56 points), as the refining companies benefited from the increasing oil prices.
T-bills auction on Wednesday did not create much opportunity for investors to enter the market as people were expecting major correction due to rise in interest rates by 10 to 15 basis points on all tenures of T-bills. The index was up by 0.7 percent (52.67 points), achieving the level of 7796 after nearly 5 months.
Thursday showed a mixed trend and volumes were 0.35 percent lower than Wednesday. Profit-taking was observed in major stocks, and even a jump in local oil prices by 5 percent to 9 percent on average did not support much to OMCs as PSO went down by 1.3 percent. Volumes were lower on Friday, being last working day of the week. Oil and gas and banking remained the hot sectors with OGDC and POL together contributing 32 percent to the volumes. Pak Oilfields was up 5 percent, in line with good result expectations (BoD on September 11). MCB was up 1.8 percent with better-than-expected earning figures for the last two months.
Overall, refineries showed a correction, after doing well for three days. Power sector also showed good upside after Hubco's announcement. Hubco and Kapco were up 2.2 percent and 5 percent, respectively.
Outlook: Correction was witnessed in major stocks and can continue. Index is getting support as other stocks (under-performers) have been moving up recently. Market is likely to behave the same way this week. "Our recommendation is to buy on dips. However, we feel that a sustainable/better upside would be witnessed once the market takes a good correction," said an analyst at Alfalah Securities.
Among the major reasons, availability of funding to leverage positions through 'Continuous Funding System' (CFS), coupled with better-than-expected corporate earnings compelled the investors to participate in blue-chip companies, taking the index onto an upward trajectory.
"For this week, we expect the market to remain stable to positive as some important companies are scheduled to announce their financial results and there are possibilities of improvement in Pakistan's relationship with other countries following the first-ever dialogue with Israel. Moreover, a third round of talks between Pakistan and India is scheduled for January 2006."
An analyst from KASB Equities said he expected the market to remain range-bound during current week since CFS has already gone over Rs 24 billion level against the cap of Rs 25 billion. However, futures trading would be another option. Kapco, FCCL, ATRL and NRL are expected to announce their results, which should generate some stock-specific activity. "We advise investors to adopt a cherry-picking strategy while we recommend buy for POL (rising oil prices), Kapco and Hubco (attractive dividend yield), FFC and FFBL (benign farm economics), NBP (low advance-to-deposit ratio), Nishat Chunnian (high margins; beneficiary of WTO) and Callmate (strong result expectations)." "We foresee the market to remain range-bound between 7600 and 7800 level whereas investors are advised to take investment decisions in accordance with the market trend," a leading trader said.
Last week, KSE was yet another gainer, but towards the end of the week, the rally sputtered out with the 7800-point barrier proving too strong. The Index closed the week with a gain of 204 points (2.7 percent) at 7790. Trading volumes continued to remain encouraging throughout the week.
On the CFS front, the level of total financing slowly and gradually crawled towards the Rs 25 billion upper limit during the week, while open interest in stock futures also saw an increase.