The opening three days of the ongoing week being the Eid holidays, this was one long weekend stretching over five days on the go. Despite no trading, yet there are a few good things to report. After the all-pervading gloom of the last week of October, the KSE-100 index added 396 points – almost cancelling out the previous week’s loss of 463, to get within touching distance of the landmark 12,000.
The overall gain being a handsome 3.4 per cent notwithstanding, the areas of concern must have been low volumes: the average being slightly above 70 million – around 20 million less than the average this last year.
The upward push this last week largely came through buying in the oil and fertiliser sectors. Now this rally is going to sustain, and not just remain limited to these two sectors but include the banking sector too.
The weekend’s news that the government had decided to swap the massive energy sector circular debt and commodity loans, to be precise Rs313 billion and Rs78 billion respectively, with the five-year Pakistan Investment Bonds and year-long treasury bills, is likely to provide a massive cheer to the oil marketing companies and the banking sector.
As an aside, one must mention, the immense pre-debt swap buying in the oil sector. Apparently some investors had advance insider information of the impending move and after the late October bear-run that prompted them to buy the oil sector shares on the cheap.
Be that as it may, one really clued in market analyst Mr Ali Malik, CEO of the First National Equities, believes that things are definitely going to be a whole lot brighter in the weeks to follow. “In recent times, the market has never really been in a freefall. But the resolution of the crippling circular debt will have a consolidated effect in providing stimulus to the market, which means enhanced values and better volumes on a steady basis”, said he.
With foreign traders’ interest in our stock market taking a plunge during the last year despite its relative profitability, for the bourses the resolution of the said issue that has dogged this government for the best part of the last four years may indeed be what the doctor ordered. As alluded to earlier, this gives the oil marketing companies the strapped-up cash and at the same time improves the liquidity position of the banks. With this resolved, both these sectors can only head one way: up.
With fertiliser already slated for phenomenal growth, with prices of scrips constantly maintaining a steady upward curve, the overall impact is likely to be phenomenal.
For the Average Joe Investor, one little tip, but please do your own research and take independent advice before your committing your cash to it. Bank Alfalah, under a new management and with improved performance, is likely to offer a decent return by January 2012. Currently being traded at Rs11.47, value-wise this is indeed a cheap option – available at slightly more than its base price.
At close on previous Friday, the last trading session at the KSE, with upwards of 3.5 million shares traded it was easily the best by a distance amongst the banks in terms of trade volume. In terms of capital gain on that particular day, it was amongst a clutch of top four banks.
Take your pick, personally though my interest is whetted.
The writer is Sports and Magazines Editor, Pakistan Today
