Equity market keeps breaking records in hope of ‘pro-business’ govt

The Karachi Stock Exchange (KSE) on Friday hit another all time high on the back of what the market observers believe investors’ hope for the formation of a “pro-business” government as a result of Saturday’s historic general elections in the country.
With Friday’s historic hike, the analysts say, the volume of Pakistan’s equity market has neared the $50 billion mark.
The analysts are expecting the country’s largest bourse breaking more records ahead as Friday saw the benchmark KSE 100-share index peaking to a record 19,916.27 points, gaining 254.81 points or 1.30 percent compared to Thursday’s 19,661.46 points.
“This is not the all time high. It is yet to come,” senior stock broker and a KSE board of director Muhammad Yasin Lakhani told Pakistan Today.
Declining to predict the numbers for index’s future upsurge, the former KSE chairman attributed Friday’s hike to the investors’ optimism for the formation of a “pro-business” government in the country and good corporate results.
“The market participants are upbeat that the new government’s economic policies would be pro-business,” said Lakani who sees lawlessness, energy crises and international image-softening as major challenges facing the future elected government in Pakistan.
The broker, however, warned the investors against being misled by the current spirals in index. “The people should invest keeping in view performance of the individual scrips,” he added.
Other analysts were happy about the current upward trend that, they estimate, has augmented the country’s market capital beyond $ 50 billion.
The day under review witnessed market capitalization standing above Rs 4.889 trillion compared to Rs 4.836 trillion of the previous trading session.
“Pakistan market is now worth approximately $ 50 billion,” rejoiced Mohammad Sohail, an equity market analyst and CEO Topline Securities.
Ahsen Mehanti, a director at Arif Habib Securities, said investors’ sentiments remained bullish amid higher trades in the pre-election rally.
“Stocks closed yet again at all time high led by stocks across the board on renewed foreign interest and speculations ahead of general elections tomorrow,” said the analyst.
The investors’ hope for early resolution of the lingering crisis of circular debt, having accumulated to Rs 537 billion as of April (2013) in energy sector, the issue of gas supply to fertilizer and textile sectors on political commitments had played as a catalyst on Friday.
Mehanti also viewed strong oil sales data for the month of April, strong valuations in oil, cement and fertilizer sectors and easing political uncertainty as major attributable factors for a bullish market.
He seconded Lakhani in citing better quarter-end earning announcements by the listed corporate entities as one of the positives for KSE.
The political election-related developments in the country, however, remained at the central stage in defining direction of the stock market in recent weeks.
“Investors in Pakistan market are curious to know what news will trigger the market after the May 11 elections,” said the analysts at Topline Research.
Hoping for change in the political set-up beyond May 11 general elections had been the major theme for 2013, the analyst said.
Other positives for the stocks market, they said, included continuous foreign buying, as net buying standing at $198 million in 2013YTD and a sharp reduction in the SBP’s discount rate to nearly 7-years low of 9.5 percent that compelled the equity investors to shift their funds from fixed income to equities.