Good times for stock market Summary

The impressive gains of 17.7 per cent in fewer than 50 trading sessions since the start of the calendar year, even small investors who had picked up equities in the hope of making them financially sound in short time despite having lose in the crash of 2005, 2006 and 2008, are now returning with a hope it would be different this time On Friday, the last trading day of the week, the KSE saw an aggregate volume of 553 million shares the highest in six years, since March 1, 2006. A noteworthy feature of the hefty turnover is that, unlike the past, all of it bounced back this time, without the leverage or the badla (purchase of shares on borrowed money), says Arif Habib, a former KSE chairman. On the other hand, volumes contribution from those identified stocks was only 15 per cent while 85 per cent of the market activity was generated through either second or third-tier (low priced or penny) stocks. This signifies increasingly high level participation of individuals or retail investors with institutional participation being average, says Schehzad adding it alerts investors to look beyond the changes in the benchmark index for their investment decisions. Hamad Aslam, head of research at the Lakson Investments Limited, also puts up the red flag: While the market volumes stood at 553 million shares on Friday, the last trading day of the week, the total value of shares traded was recorded at just Rs7. 1 billion, which means that the average price per share traded was priced at less than Rs13 per share. And he recalls: The last time market showed such a hefty volume was on March 1, 2006 when 596 million shares changed hands, the traded value for that day amounted to a staggering Rs82 billion, which means the average price of share traded on that day (in 2006) was worth Rs138 and was therefore concentrated in blue chips, rather than in speculative stocks of companies which have either shut down, are in losses or are being pumped up by speculative forces. The analyst concedes that the recent tax relaxations by the SECP and tax authorities have brought the retail investor back to the market and should therefore be applauded. The analyst asserts that the retailers and day-traders were once again picking up the penny stocks that had robbed them of their wealth in the three previous stock crises.

While the KSE 100 index may still be 2,300 points short of its all- time high of 2008, yet a number of strong blue chip stocks are already trading way above their levels of April, 2008.