Post-election rally continued at the Karachi share market as the bench market KSE 100 index jumped to an all time high, breaking the psychological barrier of 15,000 mark. However, investors remained cautious, due to the uncertainty about the prevailing law and order situation in the country after the killing of high-ranking military officer in Rawalpindi blast.
Major parties, PPP, PML-N and ANP, which bagged majority votes in the elections, have decided to form coalition governments at the federal and the provincial level. Market players are expecting that the national government will be formed amicably within the given timeframe paving the way for smooth transfer of power to the new leadership. Analysts predicted that the coalition government will be stable and could deliver despite economic worries and local and foreign pressures. However, analysts are of the view that relationship of the new government with President Musharraf will determine the future direction of the political and economic progress.
During the last couple of days the rumors that President Musharraf is considering to exit sent mixed signals in the market, which triggered selling from the weak holders. However, analysts say that if the president decides to quit then there may be a brief interruption in the market’s current stance because market has attained a sustainable level and it would be difficult to pull it down by any negative developments on the political front.
Equity market is passing through an interesting phase as post-poll buying euphoria aided by both higher payouts and the positive political developments have restored the shattered confidence of the investors. Analysts believe that market sentiments are positive and emitting bullish signals.
Market players, after touching record high level of 15,000, are now eying new high level in the backdrop of strong fundamentals and continuous inflow of positive news from political, economic and international fronts. Strong rally is also supported by the outcome of the corporate results.
Banking and insurance sector announced results in line with the expectations. Faysal Bank announced final cash dividend of 25 per cent in addition to 25 per cent bonus shares already paid. Meezan Bank and Bank Al-Falah announced bonus shares at the rate of 20 per cent and cash and bonus shares of 15per cent and 23per cent, respectively. Central Insurance announced 20per cent cash dividend in addition to 30per cent interim dividend already paid and bonus shares of 20per cent, Pakistan Gum Chemicals announced 20per cent cash dividend. PICIC Investment Fund announced interim dividend of 7.5per cent, and PICIC Growth Fund, an interim dividend of 15. Auto manufacturer, Indus Motors announced interim cash dividend of 40per cent and PICIC Insurance announced 75per cent rights shares. BOC Pakistan reported final cash dividend of 100per cent in addition to the interim dividend of 30per cent already paid.
The cement heavy weight DG Khan Cement reported profit after tax of Rs329.66 million while the earning per share during the first half of fiscal year2008 remained Rs1.30. Lucky Cement also released its financial results for the half year posting after-tax profit at Rs1,349 million, earnings per share of Rs5.12. The company announcement said that the aggregate sales increased to Rs7,200 million which was supported by exports that rose by 156.05 to Rs3,614million. However, its local sales declined to Rs3,587 million, from Rs4,175million.
Positive news inflow for the cement sector both from the domestic and international fronts invited heavy activity in the cement scrips. Major development was the enchantment of the frequency of trains between India and Pakistan for the exports of cement to the Indian market. In first phase three trains on daily bases will run through Wagah border with each having a loading capacity of 1,500 to 2,000 tons and their number would be increased to five per day. This would resolve the long-standing problem of cement export, as there is no truck service being provided at present. Major hurdle being the non-availability of required infrastructure on the Indian side. Another development was the announcement by blue chip Lucky Cement that said it intends to offer GDR worth $150 million during the current financial year. Both the aforesaid news would positively affect the cement manufacturers and their shareholders.
International brokerage house are continuously watching Pakistan’s rapidly changing political and economic scenarios. Moody’s sees the political uncertainties still proliferate and a wider process of reconciliation faces deep chasms due to the delay in developing a consensus to resolve the pre-poll political issues such as restoration of judiciary which has created doubts among investors and analysts about smooth functioning of democracy. Moody’s analyst says that elections may offer opportunity for the new government to restore rule of law, alleviate institutional rifts, and reduce regional, religious and ethnic tensions.
Future direction of the market will be determined by the outcome of the recent elections in the shape of government. Good governance was one of the main priorities of all contenders and now time has come for them to implement rule of law and transparency through better governance. As far as the stock markets are concern the bullish sentiment prevails which needs to be strengthened by rational policies and sane decision making and most importantly through provision of security to the investors.