Stocks remained under pressure for the third week in a row as negative news followed in quick succession never allowing investors to plan for the future trading strategy even on short-term basis.
Literally, the market was direction less in the absence of institutional traders leading among them keeping to the sidelines throughout the week in apparent effort to push price further lower in an oversold market and then to cover positions at the lower levels.
Dividend news, both cash plus bonus share were on the higher side of the analysts predictions but failed to lure leading investors back in the market. Even prices of some of the leading shares, which came out with higher dividend fell sharply lower.
The pleasant surprise was given by the board of directors of EcoPak, which announced a maiden cash dividend of 10 per cent plus bonus and right shares at the rate of 50 and 100 per cent for the year ended June 30, 2004.
Leading stocks, however, received fresh massive battering as investors tried to get out of the market in panic because of the phased introduction of margin financing to replace the decades-old badla system. The market sentiment was further dampened by reports of bombing in the tribal area on the terrorist training centre and killing of about four dozen persons.
There was confusion all around as panic gripped all those who are operating in badla trading since late 40s when the system began on the KSE. The chief reason behind the panic was the investors reluctance to understand margin-financing's merits and demerits.
Monday's session witnessed one of the largest market plunge of 123 points followed by another lean session next day, which eroded value of the shares by about 3.5 per cent just in two sessions.
The mid-week attempted rally failed to get through in the absence of follow-up support from any quarter including the leading institutional traders. Price fall on the overvalued counters was massive despite higher corporate announcements by some of the leading companies over the week.
After breaching two consecutive barriers, the KSE 100-share index suffered a fresh fall of 146 points at 5172.21 as compared to 5318.73 a week earlier as all the leading base shares, notably PTCL and OGDC remained under pressure and fell sharply lower.
Market capital also fell from the recent peak level of Rs1,437 billion to Rs1,394 billion as heavily-capitalized shares remained under persistent selling. Analysts said investors are awaiting policy initiatives from the prime minister on the financial front and may not be back in the market until they hear some good news on the Capital Value Tax (CVT).
Bulk of selling originated from the financial institutions, notably Faysal Bank and PICIC followed by some others but there was no matching buying offers from any quarter even at the falling prices, analysts said.
But the immediate worry of investors appears to be the introduction of margin-financing in phases, replacing decade-old badla system and it will take quite some time before investors, notably the small savers and short-term dealers could fathom the merits and demerits of the system.
"The market appears to be in a terrible mess," says a leading stock analyst. "Punters enter the market early in the session and leave toward the close without having a look at their day's tally of loss and gain."
Both the imposition of the Capital Value Tax (CVT) and the margin-financing has taken steam out of the market for the last about three months allowing outflow of money from the capital market to other gainful investment avenues, he adds.
"A robust share market seeking the index level of 6,000 points during the post-budget months was pushed in the reverse gear just with two negative financial steps for a few billion of rupees," brokers complain.
"We still hope there must be some official rethinking on both the issues if the market is sought to put back on the rails, emitting bullish sparks as it did after resuming its strong upward drive from 3,000 index level to 5,620 point before national budget in June.
Colgate Pakistan again came in for active support aided by higher dividend and finished with an extended gain of over Rs35 followed by Millat Tractors, Wyeth Pakistan, Javed Omer, Nestle MilkPak, and many others.
On the forward counter, Pakistan Petroleum did not toe the market's general line of action and came in for heavy buying at the current lower levels and ended sharply higher, while others including PTCL, OGDC and Hub-Power remained under pressure.
FORWARD COUNTER: Massive buying in Pakistan Petroleum featured the trading on this counter, which rose by Rs5.20 on active speculative buying including Friday's 65m shares. It ended at Rs113.50, apparently heading toward its peak level of Rs118.50. PTCL, National Bank and some others were also actively traded and ended on the higher side. DG Khan Cement and Hub-Power ended modestly lower amid late week selling.
