Equities cool down after three-month sustained run-up
By Muhammad Aslam
Stocks received a massive battering last week as leading investors unloaded their long positions at higher rates thus temporarily halting the market's last three-months sustained run-up.
Talks on 6,000-point index level may not fade under the current bearish onslaught. However, opinions are now dividend over the market's future line of action. It's highly overbought position warrants a lot of fresh selling at current levels and higher carryover rate and record volume.
Whether or not financial traders come to the rescue, market will determine its future trend on the pattern of Wednesday's massive sell-off and the snap recovery, next day. Leading investors, therefore, caution small players to stay away as none among them will be in a position to survive, if bulls and bears decide to take on each other to dominate the market. Chances are evenly matched in the "great fight if bears took the challenge.
The KSE 100-share index suffered a decline of about five per cent or 175.30 points at 5,406.98 as compared to 5,582.28 a week earlier, wiping out Rs35 million from the capital, which stood at Rs1,454.641 at the last weekend.
No one could deny the fact that the market is in a highly overbought position owing to last three months's sustained run-up but none appears to be in a mood to cash in on the massive capital gains on most of the counters.
The two major sell-off triggered by reports of some technical problems at the Hub-Power unit, followed by the omission of interim dividend by its management did pull its share value down but strong covering purchases on other counters kept the market in a good shape, analysts said.
"A three per cent decline in index after its meteoric rise of over 300 per cent in the last two months is just a peanaut", they said adding, "the important factor is that no one among investors is inclined to toe the bear's line of thinking".
Higher dividend announcements, an ambitious disinvestment programme of some state-owned units during the next months and lower bank credits; all point to a bull market at least until national budge due in the middle of June. It settled sharply lower after having hit the weeks' best level of 5,660 points as all roads led to the OGDC on market talk that its management plans to issue the GDRs (Global Depository Reciepts) shortly.
"The market situation is now fraught with high risks at this stage", most leading analyst fear. "Some others think otherwise basing their future assessemnt on positive basic factors".
"People have money but not many alternate gainful investment avenues and no one among them is inclined to miss the boom for allied financial benefits", they said adding, "the saturation point may already have reached". Massive buying in the OGDC followed by reports that its management is launching the GDRs on world markets featured yesterday's stock market where all other pivotals were also actively traded.
The breach of psychological barrier came within no time after the trading resumed. Bulls were not inclined to have an overview of the market's highly overbought position and high carryover volume and rates and pushed the index above their pre-determined level of 5,600.
It finally finished around 5,620.66,up 38.38 points as compared to last week's 5,582.28 boosted by sharp increase in the OGDC and the PTCL, which together hold a weightage of 38 per cent. "Reports that the OGDC plans to issue the GDRs at $1.25 to $1.5 per share on world markets to attract foreign buyers appear to have given a fresh boost to stock trading", analysts said.
They said investors hope a favourable response to the OGDC GDRs from foreign funds on the pattern of the PTCL, whose management also lauched the GDRs some years back. The current flare-up in the OGDC is expected to be sustained for next couple of sessions at least until its rupee value touched the rumoured GDR rate, said a leading broker.
But some other analysts predict a big shakeout alone on technical grounds. The stage will reach when bulls may not be able to hold the price line on the strength of free-float from the carryover market but "it is anybody's guess".
However, no one can deny this fact that the reaction is overdue as the market has extended its run-up beyond its holding capacicty. But when it will show up is still unclear as investors are a bit enthused by the prediction of eight per cent growth and an ambitious privatization programme before the budget.
"There is no credible evidence of a mighty technical correction", said a stock broker" adding, "the prices just could move either-way in case the current run-up is contained by the bears".
Enegry and cement shares were again actively sought after all through the session despite their inflated levels as reports of higher interim did not allow investors to sit on the sidelines.
Prominent gainers were led by the Shell Gas, Parke-Davis, Nestle MilkPak, Arif Habib Securities, Wyeth Pakistan and Javed Omer, Siemens Pakistan, Noon Sugar, International Industries, Lakson Tobacco and many others.
They were followed by Jahangir Siddiqui and Co, Burewala Textiles, Attock Refinery, Berger Paints, National Foods, Century Papers, Noon Sugar, Al-Abbas Sugar, Packages, and the EFU Life, despite late weekend sell-off. Losers were led by the Dawood Hercules, Fazal Textiles, Adamjee Insurance, Atlas Honda and many other including some blue chips.
Trading volume was maintained on the higher side thanks to alternate bouts of buying and selling, bulk of which went to the credit of the OGDC, the PTCL, National Bank, Hub-Power, the D.G.Khan cement, Lucky Cement, the FF Bin Qasim Fertilizer, Sui Nothern and Sui Southern Gas, the MCB and several others.
FORWARD COUNTER: All leading shares received massive battering at the weekend session on panic selling and fell sharply under the lead of the PSO, Sui Northerm Gas, Engro Chemical, the ICI Pakistan, the MCB, Hub-Power and some others.
