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Pakistani stocks extend their previous recovery

The 50 per cent basis increase in the state bank discount rate from 10 per cent to 10.5 per cent to halt the rising rate of inflation at the fag-end, however did not have an immediate negative impact on the share business despite the fact that the cost of borrowing will be much higher in future.

After having fluctuated both ways amid alternate bouts of buying and selling,the KSE 100-share index managed to finish with a gain of 118.05 points at 13,974.41 as compared to 13,856.36 a week earlier as some of the leading base shares tended further higher. It crossed the barrier of 14,000 twice but failed to sustain it on late weekend selling.

The question among the leading analysts is being debated about the future direction of the market, notably whether or not it could stabilise above the 14,000 points.

But leading among them say with market capital hovering between $72billion and $68 billion on the higher and lower side respectively for the last couple of weeks indicate that the market has the will and capacity to rise from each bearish spell.

Unlike the previous weeks, the rally was well-sustained during the last week aided partly by higher payouts and partly to positive from some other leading companies.

A final cash dividend of 50 per cent, 50 per cent interim already paid plus bonus shares of 25 per cent by the MNC Clariant Pakistan, and final of 35 per cent by Fauji Fertiliser, with 75 interim already paid were on the higher side of the analyst predictions and stabilised the highly volatile market.

"The dividend season has just started," said a leading analyst Faisal A.Rajabali adding"some other pleasant suprises are also on the card in the coming weeks."

However, falling daily volumes indicate that both the general investors and the financial instutitions are not inclined to go beyond specific limits at least for the near-term. Elections uncertainties are, however, still there as a section of investors was not inclined to make long-term investment for obvious reasons although fears about the law and orders situation in the backdrop of last week's relative calm are gradually fading out,floor brokers said.

Worries over the fighting in the tribal areas also appear to be an inhibiting factor,which is said to be main chief factor behind the absence of foreign investors,they said adding Tuesday's police operation in the city during which terrorists and police men were killed was well absorbed by the market.

But a leading analyst Ahsan Mehanti think otherwise. He said dividend season has just begun and as the rates of payouts suggest,they could play a stabilising impact on the volatile market.