What Happens When Beasts Roam the Earthen Markets

Posted on 02.01.07 by Tanveer Sultan @ 10:52 am    

Needless to say, a stock market is a very interesting playground; things change quite quickly and decisively. A few days ago we saw a bearish trend in the market and now the trend has changed to bullish. These were the levels and prices where everyone was selling and leaving the market; now, everyone’s back on the wagon again, everyone wants to buy and make money.

Last week the bullish trend continued. The Index crossed 11,000 points once again. There was an overall increase in 464 points in KSE-100 index. Though it was the last week of January trading, buying was strong in that it did not affect the pursuant bullish trend. On Wednesday and Thursday, the Index increased by 150 and 175 points respectively.

1. Stock valuation increased by Rs. 116 billion
2. Volume, increasing by 25 percent, reached 1,102 million transactions
3. Continuous Finance (CFS) transactions increased to the Rs. 47 billion and is Rs. 3 billion short of its limit.
4. Lahore Stock Exchange (LSE) increased by 200 points.
5. KSE 30 Index, after increasing 624.37 points, closed at 14,017.14
6. KSE All-share Index was at 7,413.86 after a 116 point increase.

Let’s see why this happened the way it did.

As in my previous posts, I mentioned certain reports by Merrill Lynch and Goldman Sachs playing their part. FDIs are coming in by the bundles. Due to the decisions made by the Indian Government in regard to their economic policies, investors are getting out from India and into Pakistan.

Another factor was the results announced by the companies that were showing better than expected earnings. This built up confidence. Iran, India and Pakistan agree upon the pricing of gas. This was a major hurdle crossed by these countries to move forward on the gas pipeline project. Expectations about National Investment Trust (NIT) to earn profits of Rs. 5 billion also played a part (I might have missed that earlier but here it is). Also, news that tax benefits would be given to the textile sector because of surging demands of the products. This was due to political disharmony in Bangladesh.

The cement sector showed some concrete settlement (pun intended), after lying dormant for some time. The ban on export of cement to regulate local prices affected the industry. Due to expansion of plants, cement production is now 33 million tons while local demand is 22 million tons. GoP has announced that it will take steps to export the cement in its own time.

Banking sector, yet again, was the main driver and attraction. MCB Bank reached Rs. 300, making an overall high on Wednesday and Thursday, though it closed on Rs. 295 on Friday. NBP, along with BoP, moved exceedingly in pace. MCB increased by Rs. 26 and NBP by Rs. 19.65. There was overall a buying spree in the sector. It can attributed to the news that banks were due recoveries above targets, coupled with news of M&As.

Oil sector continued to increase its graphs. OGDC was the volume leader with 124 million shares traded, while PPL’s volume was 84 million. OGDC’s second public offering (it’s NOT and INITIAL public offering, ladies and gents, as some would have you believe) was oversubscribed. GoP has also issued two new licences for oil reserves production. These news items led to a positive reaction.

Macroeconomic conditions are also improving. SBP officials said that in the current year, the current account would be in deficit, but our reserves will more than make up for the dip. This year remittances are projected to increase by 24 percent, where SBP targets (believe it or not) was between 5 to 7 percent!

In short, the market was good and healthy. Large volumes were generated after a long time. CFS position got stronger. Buying drifts moved share prices and thus the Index up.

Also, I’d like to inform you all something I have to get off my chest. Philip Morris bought Lackson Tobacco.