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Bulls dominate

stock market

RECORDER REVIEW

KARACHI: Reports of privatisation played the tune and the index scored more than 200 points last week and bulls' domination was evident across the board as the stock was engulfed by renewed buying by financial institutions and other major players of the market.

The preceding week's slow-down in selling pressure and fresh liquidity injected by the financial institutions triggered heavy buying in primary and secondary stocks which further restored the confidence of small investors.

Trading pattern was mostly confined to fuel and energy stocks, which are on the privatisation block. Several statements from Privatisation Commission, Chairman M Saleem Altaf lit hopes that soon the companies like Sui Northern Gas, Sui Southern Gas and Pakistan State Oil shares were likely to be sold out to foreign investors. "The time is ripe," said an analyst, "because slowly the government is fulfilling promises and economy is back on the track."

The government's move to de-regulate the oil and gas sector is part of privatisation plan. The government last week made several state-run companies autonomous which every foreign investor appreciates before purchasing the stakes. Another positive argument given by the trade was that before the end of this month the government would finalise some deal with Hub Power Co. The Water and Power Development Authority (Wapda) has received an offer from the company that it might cut the power tariff rates by 17.3 percent to resolve the issue, in exchange of some concession in getting furnace oil on cheaper rates.

Most players of the market viewed that by the end this month the government and Hubco might issue a joint statement, agreeing on some broad-based measures to resolve the issue. The government has already signed agreement with 11 private power producers.

Share prices during the week rose across the board on heavy bouts of buying, taking the index to touch the three-year high. The peak level attained by the

KSE-100 index was 2662 reached in 1994 when PTCL, Hubco and some other mega companies were not in the list.

The KSE-100 index gained 232.78 points to 1938.17, from 1705.39 of the previous week. The volume amounted to 1.279 billion shares from 1.344 billion shares of the preceding week. Market capitalisation soared to Rs 494.971 billion from Rs 439.130 billion of a week ago.

Two more developments in fuel sector generated heavy buying. The government increased the furnace oil prices by 15 percent, and asked foreign companies or consortiums to place proposals for financial advisory services for Pakistan State Oil.

The increase in furnace oil prices, according to analysts, would boost the revenues of PSO and Shell by at least Rs 300 million in the current financial year. The proposal for financial advisory services for PSO has been another signal that the government is keen to privatise the state-run utility. The government is likely to announce privatisation laws by end of this month with a clause that all proceeds would be used for retiring foreign debts.

A leading trader said that beside activity in fuel and energy sector, the

share prices of several textile companies also improved since last month. The composite, weaving and fibre equities have bloomed on bumper cotton crop this year. The productions has surpassed last year's level of 7.4 million bales and risen by 31 percent to 9.492 million bales.

Stock prices reached record highs and many moved further up, but

chances of a downward correction could not be ignored. The next resistance level, according to a trader, is 1950. If it crosses in the week, there is possibility that by the end of the week, KSE-100 index might see the level of 2000. However, if some untoward incident takes place, the chances of index staying above 1900 level are quite remote.

PTCL on volume of 490.233 million shares recorded an appreciable rise of Rs 3.90 to Rs 31.50. Hubco on the trading of 240.882 million shares moved up to Rs 28.85 from Rs 26.75, PSO on the business of 134.306 million shares closed at Rs 254, showing an unprecedented growth of Rs 49.50, Sui Northern Gas finished at Rs 23.45, higher by Rs 4.35 on turnover of 85.710 million shares and ICI denoted a small rise of 15 paisa to Rs 12.75 as around 58.850 million shares changed hands.