November 11, 2002	Monday	Ramazan 5, 1423

STOCKS, throughout last week, danced to the tune of political news from Islamabad about the formation of the federal government. The market remained unsettled as investors were not inclined to take long positions and played on both sides of the fence.

A steep decline of about Rs49 billion in total market capitalization within a week reflects the on-going tussle between the bulls and the bears, and the market’s inherent weakness to withstand the undercurrents of negative news.

Nothing has changed in post-election standoff as the contenders of power are still polls apart, and no one can precisely predict what is in store for investors.

In such a situation as the prevailing one, quick gains become the hallmark of trading. This is currently happening on the market despite the fact that there are some sound reasons to be optimistic.

The negative developments in quick succession further intensified the post-election political standoff, keeping the investors on their toes all through the last week. They could not decide how to react in a developing scenario fraught with high financial risks.

But it goes to the credit of the market that it managed to hold on, in part, to its previously netted gains and it is a remarkable performance judged by any standard despite heavy odds.

However, no one could deny the fact that it needs heavy inflow of cash amounts to sustain the recently attained higher level as the massive badla volume can put a cap on the sustainable rise.

Whether or not, the extension in clearance of badla (carryover transactions) business after 10 days from the current daily basis will avert the undue and speculative selling from next week, and will set future direction of the market.

The general perception is that the market could further rise from the current highs if the pro-government political parties manage to form government at the centre, and it would collapse if the anti-government alliance captures power.

The delay in the National Assembly session may have some other reasons, analysts think it reflects that the majority coalition partners have failed to muster enough support to form the government.

The panic-selling was more pronounced on the forward counter under the lead of the PSO, followed by the rumours of delay in its sell-off. The ICI Pakistan, Engro Chemical and Fauji Fertiliser trailed behind, thus receiving heavy battering at their recent highs, while the Hub-Power recovered from its early lows.

“It is pretty difficult to say whether the sell-off spilled over from the forward counter to the ready section or vice versa, but one thing appears certain that the market is in for a massive technical correction in the backdrop of surging political uncertainty”, analysts said.

The KSE 100-share index, which had hit the second-best figure of its career at 2,305 points — the highest so far being 2,662 points touched in mid-90s — on Nov 1, 2002, virtually collapsed from its peak level to 2,203.93 points from the weekend close of 2,294.63 to 2,227.34, off 67.29 points or 4 per cent. This in financial terms wiped out about Rs48 billion from the market capitalization at Rs506 billion from Rs554 billion, a week earlier. The market capitalization also showed a sharp decline of Rs20.132 billion at Rs534.740 billion from the weekend Rs554.872 billion.

“The number game being aired by the contenders of power to form the government seems to have unnerved investors who had thought it fit to liquidate their long positions rather than holding on to them, owing to the risks involved”, one leading broker said.

Some leading shares, notably the PSO and the Shell Pakistan breached through their circuit-breakers because of the continued heavy selling.

What seems to have worried the leading brokers and institutional traders alike was the clear division of the post-election split mandate into two opposing groups, known as pro and anti government.

The fears that the exponents of the restoration of the 1973 Constitution — sans the amendments made by the military government in its original shape — led by a religious leader may win over the centre, triggered near-panic selling from all and sundry, analysts said.

The bulls tried to forestall the panic-selling after injecting heavy funds but in vain as the higher badla turnover unnerved investors who tried to get out of the market and the consequent sell-off.

The recent run-up may not be entirely speculative but was certainly beyond the scope of prevailing fluid political situation and its implications to the economy, brokers said.

They said the institutional traders may be able to restrict further sharp fall but the advent of the holy month of Ramazan could well mean further pruning in the current inflated levels.

Although, minus and plus signs spread all over the list some of the leading shares managed to finish modestly higher under the lead of the pivotals such as the HinoPak Motors, the Pakistan Refinery, the Unilever Pakistan, the Rafhan Maize, the Pak Reinsurance Co, the Treet Corporation, Gul Ahmed Textiles and several others.

Losers were led by the Wyeth Pakistan, the Shell Pakistan, the Gatron Industries, the Lakson Tobacco, the Grays of Cambridge, the Siemens Pakistan, the Attock Refinery, the Nestle MilkPak, Mehmood Textiles, Al-Abid Silk, and the Artistic Denim.

Despite the weekend slowdown owing to the advent of Ramazan, the trading volume was maintained above the billion share-mark, thanks to massive activity in the PTCL and the Hub-Power, which together accounted for 60 per cent of the total.

Other actives were led by the PSO, the Engro Chemical amid the rumours of bonus shares, the National Bank, the Sui Northern, Dewan Salman, the KESC, the ICP SEMF, the MCB, the ICI Pakistan, the FFC-Jordan Fertiliser, the Fauji Fertiliser, the Japan Power and the Adamjee Insurance and several others.—Muhammad Aslam