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| May 9, 2005 | Monday | Rabi-ul-Awwal 29, 1426 |
Stock market limping back to normal on ‘hedge facility’
AFTER several lean weeks and highly volatile price movements, the Karachi stocks at last showed the glimpses of its past glory and analysts pointed that the worst may now be over after looking at the relative strength of oil shares. A strong run-up at the fag-end of the week was largely attributed to the acceptance of new KSE’s proposals by the SECP to boost the forward trading. There were indications that both the leading financial institutions and brokerage houses would resume their normal activity in the backdrop of ‘hedge trading’ facility.
Heavy buying at low levels in oil raised the hopes that the bull-run initiated at the fag-end of the week may be extended as an attractively lower level could draw big short-coverings, notably from the financial institutions.
The KSE 100-share index managed to finish modestly higher by 78.60 points after fluctuating either-way amid alternate bouts of buying and selling. The market capital also rose from the early low of Rs1,950 billion to Rs2,021 billion as all heavily-capitalized shares ended higher.
It virtually was the PTCL week followed by reports that eight out of 15 bidders, including the Emirate Telecommunication Corporation of Dubai had been short-listed for bidding for the 26 per cent controlling shares, on May 28. It alone averted a major fall after attracting heavy-buying from all and sundry.
Heavy short-covering in all oil shares was another supporting factor as the PPL, the PSO, the Shell Pakistan, the OGDC, the Pakistan Petroleum, the National Refinery, the Attock Petroleum and others managed to recover. Blue chips on other counters followed them signalling the return of a bull-market.
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Reports of further developments on the remaining COT issues at the weekend also triggered a lot of fresh buying by investors, including some inactives.
“With all the COT-related issues resolved to the satisfaction of the parties concerned, the market should have responded bullish but it failed”, said a leading broker. “What was lacking in the entire episode was the confidence-building step for massively battered small investors”.
The market failed in holding on to an initial rise of 125 points in the index as leading shares remained under pressure by not responding to the significant change in basic fundamentals and to the positive future perceptions about the business.
Opinions were divided over the future direction of the market in the backdrop of massive price erosions in last six weeks after the index fell from its all-time peak level of 10,303 points to below 7,000 points, or about 26 per cent erosion.
Some said that the market could be back on rails as banks have offered Rs20 billion to investors in margin financing, and the individual financial buying would be in addition.
But some others said investors including big ones may be slow, while not jumping into the bandwagon lured by current lower levels which could save the market from further erosions.
However, it may not be that easy to lure back general investor whose confidence had been badly shaken after massive losses during the market’s historical retreat.
Some brokers predicted that the market could resume normal trading by Tuesday as by that time financial institutions and banks may extend helping hand to put it back on rails.
Although, the PTCL tried to avert the renewed fall but early weakness of the energy sector weighed heavily against the underlying sentiment amid active trading, although the late smart recovery allowed most of the leading shares to finish well above the early lows.
FORWARD COUNTER: Speculative issues on the cleared list came in for strong speculative support followed by reports that the new rules have be framed to streamline forward trading.
As new rules, market sources said, meet the demand of investors and brokers they were well-received as was reflected by a grand rebound staged by all shares under the lead of the PTCL, the PSO, the OGDC, the Sui Northern Gas and several others.
But the largest recovery was witnessed in the PPL which remained in active demand and rose sharply amid active trading as investors continued to build-up long positions hoping further price appreciation.
—Muhammad Aslam
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