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| May 15, 2006 | Monday | Rabi-us-Sani 16, 1427 |
Rallies falter on negative news
THE weakness in oil, bank and cement shares due to persistent selling at inflated levels weighed heavily against the underlying sentiment as mid-week attempted rallies faltered half way in the wilderness of negative background news.
Throughout the week, investors awaited in vain for the return of foreign funds at attractively lower levels, notably in oil sector. Investors were conspicuous of the absence of investment apparently after having an overview of the political undercurrents.
The stocks, therefore, remained unsettled as negative news followed in quick succession never allowing investors a breathing space to plan on long-term basis amid highly volatile price movements.
The KSE 100-share index suffered a sharp fall of 155.05 points at 11,511.54 as compared to 11,686.44 points a week earlier owing to the weakness of leading base shares. The market capital also shed another Rs50 billion at Rs3,239.001 billion.
Bulk of the selling remained confined to most overvalued shares in oil, bank and cement as investors continued to unload long positions netting in handsome gains.
Oil giants, notably the OGDC, the Pakistan Petroleum, and the Pakistan Oilfields followed by the PSO and the Shell Pakistan remained victims of Iran’s oil diplomacy after its President sent a letter to President Bush followed by a decline in world prices - below $70 per barrel.
The profit-selling in them spilled over to other counters where profit margins were still intact creating panic among small investors and day traders amid hasty selling. Trading volume fell to new low as buyers kept to sidelines and did not cover positions at falling prices.
The more-than-once attempted rallies faltered half way owing to the inconsistency in buying support as intra-day trading remained a hallmark in the absence of strong financial support.
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Analysts said that the question being debated now was: Whether or not the market would respond to its technical demands? They further added that the positive news both from corporate and political fronts were lacking and one could only guess the future direction of the market at this stage.
The KSE 100-share index earlier staged a modest recovery as leading base shares came in for active short-covering at lower levels but failed to sustain it in subsequent sessions.
An early recovery was again led by the oil, bank and cement shares as investors and leading bargain-hunters were not inclined to expand their share portfolios owing to financial risks involved in it.
However, their erratic movements reflected that investors were mostly playing on short-term basis and none among them was in a mood to hold long positions on any counter.
Purchase oil and bank stocks at dips and dispose the same at rise in the same session without taking a risk of higher profit even in a growing market, said analysts adding that this appeared to be beyond the scope of a robust market.
As the dividend season was almost over, investors were in search of fresh stimulants to keep the market around current levels and general interest alive, they said. However, the background news was flat at the moment and did not give any cue to future positive developments.
The new mode of share financing, removing investment cap of Rs25 billion was still a month away and leading punters could not precisely decide to go for cheaper interest rates at this stage.
Although broader market ruled weak, losses were sharp and confined to overvalued shares which ensured large profit margins. There were some exception too but the blue chips sector was terribly mauled.
FORWARD COUNTER: Leading oil shares, including the OGDC, the Pakistan Petroleum, and the Pakistan Oilfields led the market decline on this counter followed by the National Bank, the MCB, the D.G. Khan Cement, and the Lucky Cement which fell sharply lower on active selling.
The PTCL also followed their lead as it failed to sustain the mid-week good gains and so did some others including the PSO, and leading bank shares.—Mohammad Aslam
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