Margin financing, CVT issues keep investors at bay
By Muhammad Aslam
The stocks received fresh battering last week as the Capital Value Tax and margin financing irritants continued to haunt the investors, making them think twice before committing further.
It appears pretty difficult at this stage how the leading punters would behave after the prime minister's polite 'no' to the CVT waiver. Their reaction will be known by next week.
It has now fallen to financial institutions to rescue the market from further manipulations, and to protect the interests of small investors who have already suffered in the prevailing tussle, market sources said.
After having received massive battering earlier, the stocks showed signs of recovery on the revival of demand at lower levels. This was followed on the reports of positive developments on the corporate front, including higher dividend announcements.
The market derived its strength at the fag-end of the week on the reports that a delegation of the KSE will call on the prime minister to apprise him about the continued negative fall-out of the CVT on share business in the last couple of weeks.
The prime minister, apparently unhappy with the market's manipulated plunge since his election to the post, had told the delegation of the bourses' that the CVT was a settled issue and if there was any problem regarding its provision they could be sorted out in the next meeting in Islamabad.
The KSE 100-share index has shed 350 points during the last two weeks including some big jolts, which pushed it below the benchmark of 5,000 points and there were rumours of an imminent crash, said a leading broker.
Reports that the KSE is seized with the problem of falling prices and has decided to meet the premier, gave an instant boost to the market forestalling fresh panic-selling or unloading by the big ones, he added.
Shaukat Aziz may be worried over the market's plunge but a total CVT waiver appears a bit difficult at this stage, brokers said adding, but there is a possibility of a modest relief on this count.
The KSE 100-share index finished modestly recovered after having breached through the barrier of 5,100 and 5,000 on heavy buying in the Pakistan Petroleum and the OGDC, the two heavy weights in the index.
The former was shifted to ready board from the forward counter, and being massively-capitalized it restored respectability to the total market capital at Rs1,442 billion from the weekly low of Rs1,346 billion.
It finally finished with a fresh sharp fall of 126.30 points at 5,045.91 as compared to previous 5,172.21 points, reflecting the weakness of leading base shares. The initial market's plunge apparently overshadowed the assumption of an executive power of the prime minister, but the future outlook appears bullish.
The perception that the consistency in economic policies initiated by him in the last five years with positive results, and aided by higher corporate announcements could sustain any future run-up are being hoped by the analysts.
However, the opening was on a higher note but stocks fell across a broad front later as a spate of selling spilled over from the carryover market, halting the upward drive.
"I don't think bears have guts to negate the objective changes on political front", predicted a leading analyst. "The man of the finance is here as a prime minister with wider powers".
But some others said the market has already reacted favourably to Shaukat Aziz's prime ministership. Snap selling from the carryover market was long overdue but it came at a time when investors' needed a major boost to give a bullish welcome to Shaukat Aziz, they said.
Both investment and volume on the carryover market were at a record high of Rs25 billion and 546 million shares and it was speculated that this could overshadow some positive news, both on political and corporate fronts, brokers said. "Both, the weak holders and some institutional traders chose the week's opening session to alight their burden".
There were very encouraging dividend announcements from some leading companies, notably the Berger Paints, cash 65 per cent plus bonus shares of 50 per cent, the International Investment Bank, bonus shares of 15 per cent, the Colgate Pakistan, cash 100 per cent, the Cherat Cement and Papersack cash 40 per cent plus bonus shares of 25 per cent and cash 30 per cent were on the higher side of the expectations, but failed to boost the investors' morale.
Analysts said the market will be back on rails after technical correction as the "Shaukat Aziz factor" will remain dominating force behind the future stock trading. Although losing shares dominated the list some leading ones managed to finish with extended gains, leading among them being the Unilever Pakistan, the EFU General Insurance, the Atlas Honda, the Atlas Battery, the Pakistan Cables, the Nestle Milk Pak, the Feroz sons Lab, the Berger Paints, and the Shell Pakistan.
Bulk of the activity remained confined to the Pakistan Petroleum after it was shifted to ready section from the forward counter. It rose sharply higher amid heavy volumes.
Losers were led by the Lakson Tobacco, Javed Omer, National Refinery, the EFU Life Assurance, Aventis, Grays of Cambridge, and the Shell Gas, but later they recouped in part some of the earlier losses.
The Gatron Industries, the International Industries, the Pakistan Engineering and the Siemens Pakistan also fell. Other losers were led by the National Bank, the PSO and Pakistan Oilfields, which suffered fall.
FORWARD COUNTER: The OGDC remained under pressure on this counter on active selling by the leading investors and it fell sharply lower below the Rs60 level. The Pakistan Oilfields followed it on the post-dividend selling.
The Hub-Power and the D.G.Khan Cement on the other hand showed steady trend and ended higher amid active trading, while the National Bank and some others fell modestly on active selling.
