Stocks gain 323 points in two days on foreign buying

KARACHI, April 21: The Karachi stock market witnessed a turnaround with the benchmark KSE-100 index netting a gain of 323 points in two days.

Foreign fund managers who were thought to be on the run, returned to a heavy net buying of $6.3 million stocks on Thursday, with $2.7 million traded in “off-market”.

But the significant feature of trading on Thursday was the scramble for heavyweight oil and gas stock of Oil and Gas Development Company Limited (OGDC).The stock performed the rare feat of hitting its ‘upper circuit’ with a gain of Rs6.31.

All shares at the market are ‘locked’ at the maximum rise or fall of five per cent in value for a day, referred to as ‘circuits’. Due to its significant weightage of 16 points per rupee change in the KSE index, the OGDC share price rise contributed 110 points to the overall index upward spiral of 179 points in the day’s trading.

With more than 70 per cent of the ‘free float’ in OGDC passing into the hands of foreign funds, there has always been a lurking fear of the overwhelming power of a single stock to turn the market direction, either way.

”The resumption of local and foreign buying in OGDC was spurred after almost 30 per cent fall from the peak the preceding month,” said a trader.

Other than that cement, fertiliser and energy scrips also remained in the limelight.

Aqeel Karim Dhedhi (AKD), the major stock broker affirmed that oil and gas exploration and marketing companies had a world of untapped potential.

”Placing the proper people at the top positions in those energy companies can unleash a wave of prosperity, through intense activity in the drilling fields,” he said.

AKD, known to be the incorrigible bull, held high hopes for the $37 billion or Rs3.1 trillion Pakistani main equity market.

Mohammad Sohail, CEO at Topline Securities, said that the rally on Thursday was surely led by a significant contribution by OGDC.

“With more than $8 million in gross buying by overseas investors, the volume in rupee terms also rose”, he said.

Trading value rose to Rs4.8 billion on Thursday, from Rs4 billion worth of equity traded a day earlier. Brokers heaved a sigh of relief as the volume rose to 71 million shares from just about 25 million shares a few days back, which had hit upon their commission.

While the index stood at a stone’s throw from the 12,000 level at 11,923 points at the close of business on Thursday, analysts argued on the market’s ability to sustain the upward drive.

”But the index is not necessarily representative of the market conditions,” said another major stock broker and he pointed out the thin margin between stocks that gained values (141) and those that ended in the red (126) on Thursday.

Trading at only seven times the forward earnings, compared to double digit equity valuations in most emerging markets, the Pakistani stocks were ‘very attractive’, he said.

The KSE had provided return of 13 per cent in the past 12 months, though year-to-date the stocks were down one per cent.

The equities had returned 28 per cent on investment last year, which was thought to be alluring over other avenues such as the bank deposits, National Saving Schemes and commodities.

But several traders pointed out that the flurry of activity at the KSE on Thursday was also in line with a resurgence of investor interest in global stock markets.
Shares on all major bourses, including China, Japan, India and Hong Kong were on the rise.