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| May 30, 2005 | Monday | Rabi-us-Sani 21, 1426 |
Investors’ confidence in stocks fades on negative news
THE stock market appeared in trouble as negative news following in quick succession kept diverting the investors to other avenues. All eyes were now focused on the incentives likely to be announced in forthcoming Budget. The massive falling, each passing day, reflected the fading out of the investor-confidence from the share business. This could be there till the time the SECP launched a rescue operation. After meeting the demands of the bourse there was hope of the market’s revival.
Stocks suffered one of the largest falls last week, since January. A combination of negative news, including a bomb blast at a Shrine in Islamabad and the on-going tussle between the bourses and the regulator did not allow the investors to do long-term planning.
Somewhat, there was an emphasis to liquidate the overvalued oil shares and others - sending signals that the bear domination may continue sans the positive budget. The KSE 100-share index fell by 833 points or 10 per cent at 2,467.15 as compared to 7,300.09 points a week earlier, chipping away about Rs215 billion from the market capital at Rs1,821 billion.
The Budget was around the corner but there were no signs of the revival of speculative buying. The investors and brokerage houses were weighed down by some irritants thus abandoning the thoughts to buy even at lower levels on blue chip counters. Stocks finished the week with an uncertain tone as unresolved issues such as an increase in the exposure limit to five per cent, margin financing after phasing out the Carryover Trade, and an increase in the interest rates continued to haunt the investors.
The chief worry was the lack of word from the SECP on issues highlighted by the KSE high-ups which were halting the investment. Until there was a definite answer none would opt for fresh buying.
“Over the week, a crisis-like situation was developed as there were more sellers”, said a leading broker adding, “if the current situation continued there could be free-for-all in the post-budget session”.
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The massive plunge of the index below the 7,000 points barrier reflected the future trouble for the market. It was difficult for any incentive to pull it out from the prevailing impasse. The crash on Monday was triggered by the rumours that the SECP had rejected the KSE’s proposal to allow the free-float of five per cent instead of the existing one per cent on the forward counter. That was carried on to other days due to the prevailing uncertainty.
The massive snap retreat raised fears among the investors that the bears may be out to repeat the episode of last March when they pulled down the index by 30 per cent from the peak level of 10,300 to below 8,000 points.
Analysts had said that the current situation was quite different from that of March as the Budget was close and strong buying may emerge, though in patches to halt the downward drift.
However, the plunge reflected that the market was treading on a terribly weak wicket and will continue if the SECP failed in acting swiftly on some market-friendly proposals, they said.
The leading base shares which recently had assumed the role of trendsetters, notably the PTCL, the PSO, the OGDC, the Pakistan Oilfields and the National Bank, received massive battering but without finding matching support at the dips.
“The damage to existing price structure was so massive that it may not be undone by strong speculative buying on some good news or pre-budget positive leakages”, brokers said.
Some others said it was pre-budget price manoeuvring which could lead to a big “post-budget kill” on selected counters. There was panic all over as everyone was out to get out of the market but there were no buyers in the prevailing confusion as was reflected by a modest volume 102 million shares.
The market was in the grip of speculative forces who claimed to be expert in rumour-mongering despite official denials. They tilt the price balance in their favour whenever they wanted after circulating the rumours, some others said. The KSE sources said there that there was no question of rejection of their proposal of an increase in free float as the SECP was yet to consider it, he said.
The move appeared beyond the scope of stock trading alone, some others said. It may have political undertone of serious proportions to overshadow the economic gains in the backdrop of sharp increase in the GDP to 8.35 per cent. Oil giants, the PSO, the Shell Pakistan, the Pakistan Petroleum, and the OGDC led the market decline followed by leading shares, notably the PTCL despite its final bidding on June 10.
Some shares whose floating stock was not freely available showed modest gains under the lead of Central Insurance, Zulfiqar Industries, Goodluck Industries, Bhanero Textiles, United Sugar, Al-Gazi Tractors, and Shezan International.
FORWARD COUNTER: Speculative issues on forward counter also followed the lead of their counterparts in ready section and fell in unison - major losers being the PSO, the Pakistan Petroleum, the Pakistan Oilfields, the OGDC, the PTCL, the National Bank and others amid persistent selling.—Muhammad Aslam
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