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| June 05, 2006 | Monday | Jumadi-ul-Awwal 8, 1427 |
Equities stabilise on PM’s assurance
THE stock market finished the pre-budget week on an easy note but well above its early lows on active short-covering triggered by the Prime Minister’s statement that the exemption on capital gain tax will continue up to June 30, 2007. The index shed another 314.16 points at 10,346.23 points eroding an additional Rs84 billion from the market capital at Rs2,923 billion.
Although, a broader market ended the week on a low note as negative budget-related rumours did not allow investors to take even a technical breather as everybody seemed in a hurry to get out of the market.
Owing to successive lower locks, most of the blue chips and market leaders have fallen beyond their technical mandate and may take quite sometime to attain their pre-sell off levels on good news related to the Budget 2006-07 regarding the share market.
After receiving massive battering during the first few days of last week on rumours of fresh taxes to be imposed on corporate sector in the new budgetary document, the stocks began to show recovery signs at the fag end of the week on active short-covering at lower levels.
The protracted bearish spell was briefly halted after the Prime Minister gave assurance to the investors that the exemption on capital gains tax will continue until June 30, 2007 along with some other relief measures.
Some of the pre-budget worries were still there but investors decided not to miss an attractive bait of capital gains at the current low levels attained by most of the liquid shares having potential to rise. These were led by oil, bank, cement and some other base shares.
Earlier in the week, speculative forces circulated rumours of tentative taxation on the share business which in quick succession created a scare among small and genuine investors who lost billion of rupees amid panic and confusion.
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The KSE 100-share index recovered modestly but ended with a fresh decline of 314.16 points at 10,346.23 as compared to 10,660.39 a week earlier, eroding Rs84 billion from the market capital at Rs2,923 billion.
A rescue operation launched by the institutional traders and followed by the brokerage houses and speculative forces helped in controlling the situation but the market still has to go a long way in regaining its past glory.
The plunge on panic-selling originating from all and sundry wiped out more than once over Rs100 billion from the market capital as oil and bank giants fell like the house of cards.
But there was no matching buying at the dips from leading bulls and institutional traders followed by a complete rout of the bulls and lower locks on most of the blue chips.
It is interesting to note that only the index-heavy shares were targeted in an apparent move to outwit small investors and lured them into hasty selling.
The opening was on the higher side as it earlier rose to 10,707.95 points before the rumour-monger entered, followed b a terrible confusion and panic- selling without any buyers at the falling prices.
All leading blue chips, trend-setters and financially strong shares again faced lower locks and trading was suspended in them to forestall further fall. The OGDC, the National Bank, the Pakistan Oilfields and the PTCL were some notables among the lot.
But a leading stock analyst, Ahsan Mehanti of Shehzad Chamdia Securities predicted that the institutional support was expected to re-emerge at the current low levels during the next trading day and may put the market back on rails.
The selling may have political under-currents, feared a leading broker adding that it was more intriguing that both buyers and sellers appeared to be operating in unison for good reasons. A light volume of 161 million shares equivalent to single session tally of active shares reflected this phenomenon.
For the last couple of weeks, the market is in the tight grip of tax-related pre-budget rumours. The disturbing feature is that even the well-informed among leading investors, including the financial institutions are not coming to the aid of the market, some analyst said.
A perfect and fundamentally strong market is turned into a house of cards which is dancing to the tune of few they said asking where the rescuers called bulls are.
None could deny the fact that the share business mostly thrives on rumours, and any positive news seldom enthuse a formidable section of investors. But there has to be a judicious blend of positive and negative news to protect the interests of small investor, they added.
FORWARD COUNTER: Speculative issues on the cleared list also remained under pressure and fell in unison in sympathy with their counterparts in the ready section. Prominent losers who hit this year’s low level were led by the National Bank, the OGDC, the Pakistan Oilfields, the Pakistan Petroleum, the MCB and many others.—Mohammad Aslam
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