KARACHI, Aug 4: Mainly on the back of good corporate results, bulls have been dominating the Karachi Stock Exchange. On Friday, the KSE-100 index touched 10,773 points -— its 11 week high.

Analysts have noted that the outgoing week was the fourth consecutive week of positive closing at the Pakistan’s premier equity market. During those four weeks, the KSE-100 index gained 937 points or 10 per cent; the trading week that closed on Friday alone contributing 419 points or four per cent to the index rise. As nobody can make an absolutely accurate forecast of which way the market would turn -— not even the legendary investment guru, Warren Buffet —- the timid among investors are treading carefully at this dizzy height of the index, but the volume of 237 million shares show that, for the moment at least, most investors have thrown caution to the wind.

What is heartening to see is that small investors have learnt their lesson from the market crash (some big brokers love to call it just a ‘correction’) of March 2005. In picking stocks, they appear to be relying more on themselves than on rumours and ‘tips’ from brokers (whose livelihood depends on selling optimism) and analysts.

Small investors, who burnt their fingers in the March 2005 and April 2006 crisis, have learnt to touch each stock with a pair of tongs. No more do they believe in rumours of discovery of exceptionally big reserves of oil and gas and grab shares of those companies. From the ups and downs in cement stocks it looks like a pep talk of imminent construction of ‘big dams’ are not making a big impact; the pricing and policies of the government; the demand and supply situations are all being considered before going into concrete. Same is the case with other sectors.

But has the market traveled too far to the North? At its peak this year on April 17 at 12,274 points, many analysts thought there was a few steps further to climb, but then the index slipped to a four-digit at 8,767 points on June 4. Having recovered a long way from that, many stock strategists have begun to learn their lesson as well: why make the hazardous recommendation of whether to buy, hold or sell. Let the buyer beware. Year-on-year, the market has gained an impressive 43 per cent, of which 12 per cent has come this calendar year. The price-to-earnings (p/e) ratio, according to some analysts, works out at slightly over 13x, but comparable to other avenues of investment, stocks provide earning yield of seven per cent and cash yield of over four per cent, which still keeps investors loyal to the market.

Higher international oil prices, which continue to remain above $70 per barrel, have kept energy stock prices high and by virtue of their heavy weightage in the index, the market has continued to rise. But it also is the wave of bright corporate results that have spiked the stocks. It is difficult to find fault with any of the major companies that have come up with their earnings and dividend announcements: most of the favourites, such as Siemens, Unilever, Honda Atlas Cars, Fauji Fertilizer Bin Qasim, Faysal Bank, Engro and Pakistan State Oil have produced better-than-expected results.

But there are some hot stocks that are still keeping the investors guessing: United Bank Limited would declare its results on Aug 6, Shell on Aug 7, Askari Commercial Bank on 10, Hub Power Company on 10, Pakistan Petroleum on Aug 17, and Kot Addu Power Company on the 31st of this month. Commercial banking, cement and energy stocks have since led the way, financial figures and payouts of those companies, when announced would perhaps set the trend of the market for the rest of the year.