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| July 25, 2005 | Monday | Jumadi-us-Sani 17, 1426 |
Limited liquidity affects normal trading at KSE
LIQUIDITY problem again limited the normal trading on the Karachi Stock Exchange last week as investors played on both sides of the fence in an apparent effort to keep the wheel moving amid light activity.
All eyes were focused on the results of the four committees entrusted with the task of finding out the irritants which have taken the steam out of the market in last couple of weeks. The two submitted reports have pinpointed the liquidity problem beyond badla and bank margin financing.
There was a general perception that the implementation of the committees could go a long way in removing some major irritants by allowing it to perform in a normal way once the funding problem was resolved.
According to one committee, the market needs about Rs100 billion daily for smooth trading, while the current liquidity is billed at Rs67 billion, leaving a gap of Rs33 billion to be bridged by the other sources.
The stocks, therefore, are tossed between badla and bank margin financing. The investors are not inclined to take long positions even on blue chips and low-priced issues which have potentials to appreciate.
The KSE 100-share index suffered a fall of 181.96 points at 7,353.85 as compared to 7,535.81 a week earlier, reflecting the weakness of leading base shares, notably oil giants which were erratic during the week.
Owing to the funding problems, investors sold in part the overvalued shares to pick up the low-priced but without taking long positions on any counter amid falling volumes.
Conflicting reports about badla financing and broker exposure limits proved major inhibiting factors as the funding problem remained acute in the absence of willing lenders.
The official committee, headed by the Union Bank’s President for sorting out the stock trading problems, called it a ‘conflict of interest’ among the big guns. However, it has indicated to finalize its report in the next couple of days.
Analysts have welcomed the interest rate increase by one to two per cent in the National Saving Schemes but have ruled out the possibility of flight of capital from the market to this avenue as the rate of return on the dividend is still higher.
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The market may remain weak in the sessions to come as the COT-related issues, notably broker exposure limits in forward trading are resolved.
Other destabilizing factor is the heavy selling in leading oil shares on the perception of lower profits because of a feared cut in the consumption due to successive hikes, with the Shell Pakistan and the PSO being the leading losers.
The Pakistan Petroleum again received massive battering despite reports of privatization during the next month as investors could not pull themselves out from the negative reports about the offshore drilling.
Fresh selling in the PTCL is attributed partly to the warning it gave to some leading companies and to the workers’ union’s threat to disrupt the system at the time of takeover by the new management by next month.
However, major inhibiting factors are negative developments on the COT issue and exposure limits on the forward counter which in turn kept financers on the sidelines, brokers said.
The bourses chiefs may have swallowed the bitter pill after reversing their unilateral decision about the COT issues and toeing the official line. There is a loud whispering about the “future silent revolt in the form of low volume and falling values”, they said.
The meeting of the KSE high-ups, bankers and the PM’s adviser failed in accommodating the view points of all investors, which analysts said is terribly disappointing.
Committees never solve problems, they said, what is needed is an immediate solution to the problem rather than the long-term cure to put the market back on rails.
Share values are tossing between the badla and bank margin financing for the last couple of week followed by a steep rise and fall in the value and volumes. However, the technical tussle is there, said some adding, cap on the COT outstanding position at Rs12 billion could prove a last straw.
Auto shares again came in for active short-covering followed by the reports of increase in production for the year ended on June 30, major gainers among them being the Atlas Honda and the HinoPak Motors.
The Singer Pakistan, Ghani Glass, Artistic Denim, and the IGI Insurance also rose, while others were quoted fractionally higher.
The leading MNCs, notably the Shell Pakistan and the Nestle MilkPak were prominent among the losers being the Attock Petroleum, Javed Omer, Gatron Industries, the PSO, the Pakistan Petroleum, the Mari Gas, and the Treet Corporation.
FORWARD COUNTER: Speculative issues on the forward counter remained under pressure under the lead of the Pakistan Petroleum and other oil shares including the PSO on renewed selling and so did others, notably the PTCL, the Pakistan Oilfields, the Fauji Fertiliser Bin Qasim on post-interim dividend selling.
—Muhammad Aslam
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