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| March 13, 2006 | Monday | Safar 12, 1427 |
Index crashes on negative news
THE stocks experienced terribly bad trading last week as negative news followed in quick succession never letting the investors think of a suitable long-term planning for a falling market.
What appeared to have sent shock waves among leading investors were lower locks on oil, bank and cement sector. The prices fell like the house of cards on panic selling.
The market failed to digest the negative fallout of the Bush’s visit and the reports of taxing the share business income despite the CBR’s denial.
The market, therefore, suffered one of the biggest weekly fall of about 941 points or 10 per cent, wiping out Rs255 billion from the market capital as investors unloaded long positions on blue chip counters under the lead of highly overvalued oil and bank shares amid negative fallout of some bad news.
The share market received first major jolt on panic-selling triggered on the outcome of the Bush’s visit which was not up to the expectations of the investors in financial terms. This added to the reports that the income from share business will come under the tax net, though the CBR later denied it.
During the two terribly disturbing sessions, the index lost 821 points or eight per cent, including 491 on Wednesday which is an all-time single session record so far. In between the massive sell-off, the market witnessed snap rallies but failed to boost the investor-morale.
The fall is too big to be recouped just in a couple of sessions. It could take long to put the market on a sustained recovery if all goes well with the background news, brokers said. But some others said that the current lower levels provide an attractive bait of capital gains to those who are capable of sustaining the financial risks
A smart recovery in the PTCL was also attributed to the management change which was due on March 11, as the Dubai-based Etisalat had met all procedural demands, including the payment after protracted talks to finalize the deal.
The financial institutions and some big investors tried to reverse the trend after injecting massive amounts but the general investor was too shaky to re-enter into the market even at the falling prices. It mostly stayed away as was reflected by the declining daily volumes.
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Opinions are now divided over the future market outlook. Some said that it would be back on track possibly by the next week as it has already absorbed the fallout of negative external news.
Some others predicted that the next target of 12,000 points now appeared to be a bit elusive as investors will think twice to ride the bandwagon of a rising market after having suffered massive fall during the two record sessions.
The single-session all-time low level was touched just at the heels of the Monday’s massive fall of 468.20 points or 4.10 per cent at 491.02 points, and 4.43 per cent on Wednesday caused by the negative comments of Bush and tax imposing rumours.
The total drop during the two sessions comes to 821.22 points or 7.27 per cent, and an erosion of Rs232 billion from the market capital. However, terribly low volume reflected that the bulls may be back into the market, soon.
Leading oil and bank shares, notably the OGDC, the Pakistan Oilfields, the Pakistan Petroleum, the PSO, the National Bank, the MCB and some others holding about 60 per cent weightage in index, received massive battering as they ensured attractive capital gains.
The sell-off was psychological rather than real tailored to and made an easy scapegoat to meet the demand of bears, a leading stock analyst Hasnain Asghar Ali commenting on the market crash said. He further elaborated that most of the leading brokers and investors were already in the tax net and need not to worry.
The selling seemed to have come from outside the bourse’s amibit; some others said adding that there may be a lot of untaxed money in the share business which may have beat a hasty retreat leaving in its wake a long list of casualties.
Another leading analyst, Faisal Abbas said that it was not that difficult to push the index massively low just in one go owing to its terribly weak base. Pull the investment from some leading half a dozen base shares and watch the panic selling, he stated.
He said some genuine investors were worried over the developing post-Bush visit’s political scenario and could not precisely decided how to behave in future stock trading.
FORWARD COUNTER: Speculative issues on the forward counter also followed the lead of their ready counterparts and fell sharply lower in unison under the lead of National Bank, the OGDC, Pakistan Petroleum, the PTCL, the D.G. Khan Cement and others.—Muhammad Aslam
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