According to Privatisation Minister Dr Hafeez Sheikh, four bidders have pre-qualified for PSO privatisation. The minister's statement about privatisation of PSO and PTCL by June 2005 created a hunch in the market which led to an immense rally in these scrips. And, of course, the invitation of EoIs for the PPL privatisation to sell 51 percent of its shares surged its share price by 30.6 percent to Rs 204.45 during the last one week.
Interestingly, the market did not close in negative territory even for a single day during the last week. The KSE-100 index closed at 7733 points on Friday, an increase of 495 points or 6.8 percent on week on week basis with market capitalisation reaching Rs 2.1 trillion ($36.2 billion).
The local stock market was well and truly wrapped in the throes of a bull-run last week. This is also the highest ever gain in terms of points on a weekend to weekend basis, so yet another record.
Kapco, a new listing on the Exchange, is currently trading twice the rate at which it is being offered to the general public. Kapco's IPO will be open for subscription from February 21 to 24.
A report of Jahangir Siddiqui of Capital Markets, said that the weighted average annualised Future spreads increased at the weekend from 11.2 percent on the previous weekend, and went up to 17.5 percent on Friday. This is surprising since investors in the Future market generally square their positions in second last week of maturity of Future contract. This usually causes spreads to come down. However, this time around due to bullish market, investors have preferred to stick to their long Future positions. The rising Future volumes also validate this observation. February Future contracts will mature next weekend.
Average daily Future volumes have increased by 47 percent to 52.4 million, reflecting massive activity in derivatives market. Badla market, which is preferred method of leveraging for equity investors, is gradually being phased out. This is one of the reasons for increasing Future volumes.
An analyst from AKD Securities, said that the market momentum is still positive and we tend to stick to the sector rotation strategy. We feel that the under performing sectors will now play catch-up to others; however, we still hold our reservations on fundamentally weak sectors like cement. Next week, results season will be in full swing, where heavyweights will announce their performance.
So far, telecom (led by PTCL), banks, E&P and OMCs have outperformed the KSE-100 Index. Therefore, we believe that during the coming weeks, sectors that have not performed at par with the ones mentioned above are likely to play catch-up with the recent outperformers. In this regard, sectors like fertilisers and chemicals are worth mentioning, where our top picks are Fauji (Rs 175) and Engro (Rs 128.25). This, however, does not imply that people should go underweight on the sectors that have outperformed and based on strong fundamentals, we still maintain our overweight stance on OMCs, E&Ps and banks.
The week would kick off with PSO announcing its 1HYFY05 results, where AKD Research estimates an EPS of Rs 15.50 - a growth of 25 percent. This would be followed by PTC where a positive reversal of about Rs 1.8 billion is likely to result in one-time improvement in the company's EPS to Rs 2.9 billion for 1HFY05 against Rs 2.6 billion in 1HFY04, a growth of 11 percent.
During the midweek, half-yearly result announcement by OGDC (Rs 97.95) and ICI will hit the market, where ICI's (Rs 103.20) result, in particular, may accompany a positive surprise on the dividend front. Although, better expectations from these companies may keep the sentiment positive, at the same time high volatility cannot be ruled out.