KARACHI: Usman Farooqi, Head of Research of Alfalah Securities, foresees that KSE 100-share Index would be standing somewhere around 13,000 points by the end of the ongoing calendar year 2006.
In an exclusive interview with The News, he calculated that index would consolidate near 10,200 points by the end of the June 2006, as index has recovered massive points since it dipped below December 30 level earlier owing to one or the other reasons.
He expects some intra-day technical corrections and profit-booking during the remaining days of the current month, but views no big or massive downfalls, as the next month would be of announcing annual, half-yearly or quarterly corporate results.
Farooqi believes that buying rally would be generated around mid July by buyers on hopes of smart dividends.
He was of the view that mutual funds’ managing companies would have earned at least profits of 20 per cent margin by the end of the ongoing fiscal 2005-06, and out performing mutual funds might register a growth of 40 to 50 per cent in their net income.
Responding to a query, he said that listed companies would register a strong growth in their respective sectors while GDP growth would be near 6.1 or 6.2 by the end of the next fiscal year.
He maintained that macro economy has matured that is why the pace of growth in percentage would be lower as compared to the last year. However, in Pakistani rupees or in US dollars it would be higher than the last year, he added.
Percentage wise, the oil and gas companies would get a growth in between 15 to 20 per cent, whereas bank deposits would register a growth between 5 to 6 per cent. The reason is that people have already put their excess money in bank accounts.
Therefore, Karachi Stock Exchange would attract more capital especially from the local investors, as investors are getting aware of the mutual fund industry that is offering an attractive rate of return as compared to the bank deposits.
However, the banking sector would receive no big negative impact in terms of its year-to-year growth in comparison with KSE 100-Index, as this is one of the best investment attracting sectors owing to announcing smart cash dividends by banks.
Moreover, the real estate speculators are expected to move in the share’s trading business at the local bourse, as government has imposed Capital Value Tax (CVT) of two per cent on making investment in real estate, he added and said that the measure would increase the size of capitalisation at the Karachi stock market and would help in recoding a good percentage of growth in the indices.
Farooqi maintained that Karachi bourse would soon be having “Real Estate Fund” and “Commodity Exchange Index” that would provide alternative investment opportunities to the investors and would help in attracting more capital into the stock exchanges of the country.
Another element that would lead positive development at Karachi bourse is the ongoing process of privatisation of Pakistan State Oil, Pakistan Petroleum Limited, Sui Southern Gas and Sui Northern Gas Pipeline Limited.
But, this time buying spree in privatisation scrips would start after confirmed sell-off as investors have learnt lessons from the delayed privatisation of PTCL, Pakistan Steel Mills and KESC.
Rising trade deficit and inflation are likely to leave negative impact on shares’ trading. Government needs to tackle these two alarming areas very immediately otherwise business at KSE could be discouraged.
To deal with these two red areas, government has three options; devalue currency, raise interest rates or secure external loans.
The best possible is to increase interest rates, he opined and maintained that devaluing currency is a failed practice in the past and government has already decided not to go to the international loaning agencies to mitigate the rising inflations or trade deficit.
He asked investors to carefully read the research reports being prepared and issued by the research departments of the brokerage houses and take advise from any of the analysts. Moreover, investors should avoid day to day trading and should invest at least for three to six month so that they could earn smart profits and equity market would get mature rather than volatile.