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Market likely to stage grand rebound next week

KARACHI - THE share market last week was back on the rails. Strong weekend rally pushed the KSE 100-share index well above psychological barrier of 10,000 points on active fund buying in the leading bank and oil shares. However, weak rupee at Rs77 to dollar worried the investors.

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The KSE 100-share index finished the week with a gain of 349.26 points at 10,258.71, adding Rs101 billion to the market capital. The KSE 30-share index also recovered 528.19 points at 11,690.23.

Analysts said the weekend rally is expected to be extended during the next week amid hopes that recent developments on political front will end the uncertainty in near future.

"The perception that the president is on his way out during the next couple of days seemed to be major factor behind the revival of strong fund buying followed by others," analyst Tabish Hasan said.

In an unsold market, backed by higher payouts and bonus shares by most of the leading companies, notably Shell Pakistan and PSO, positive developments on the political front again lured investor back in the market.

"The market is expected to stage a grand rebound possibly by the next week on the strength of higher cash payouts and bonus shares," Hasan said adding that any positive developments on the president's impeachment issue could add further depth to the underlying sentiment.

Mid-week rumours that the president has decided to quit on the Independence Day evoked a good bit of short-covering on selected counters enabling the index to avert major fall.

The market is ripe for a strong technical rebound aided by the higher corporate announcements by some of the leading companies including PSO, Shell Pakistan, Fauji Fertiliser, BOC Pakistan, Engro Chemicals and bonus shares by some others. Investors are also awaiting the president's reaction to the impeachment move of the coalition partners.

No one could deny the fact that investor confidence in the share business has been terribly shaken over the last couple of months. The coalition government remained busy in no-issues in the market parlance and did not come to rescue it from the impasse owing to dust raised on the political front, said a leading broker.

The next week could prove very crucial for the future outlook of the share business but the chief deciding factor will be end of the uncertainty and return of the prospective investors back in the arena.

The market recovered on strong fund buying aided partly by reports that the Moody's rating agency has maintained stable outlook for the Pakistan economy despite political turmoil and weak rupee.

Although, the market has still to go a long way to attain its pre-reaction level of well over 15,000 points, the strong equity fund support signalled the shaky investors to buy shares at lower levels.

The economy may not be that strong as Moody's think in the backdrop of whisper of another short cotton crop but it has the potential to rebound if the current political power tussle is resolved amicably, some brokers said.

Thin volume of below 100 million shares as compared to above average daily 250 million shares in normal political conditions shows that a good section of investors was still in two minds and await further developments on the political front.

Analyst Ahsan Mehanti said it is too early to say something about the return of the foreign investors in an oversold market. "They will probably await the outcome of president's impeachment before resuming local activity," he added.