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| June 12, 2006 | Monday | Jumadi-ul-Awwal 15, 1427 |
Weekend rally helps recoup some losses
Weekend rally enabled the stock market to recoup some initial losses but the underlying sentiment remained nervous owing to massive manipulation by some leading punters.
What seems to have restored the investor’s confidence in share business was the SECP warning that it planned to punish those erring speculators found guilty of manipulating the market which caused loss to general investor.
The market also derived a measure of strength from the KSE plea of seeking a withdrawal of the capital value tax and a five-year exemption from the capital gains tax which ends by next June.
Most leading analysts believed the return of sanity to share business by next week as regulators seemed active in correcting manipulations of vested interest, to protect the interest of small savers and investors.
Earlier in the week, stocks took a massive post-budget plunge as share values fell like the house of cards on panic selling but no matching buying was witnessed from any quarters, including the financial institutions owing perhaps to the fiscal closing.
The KSE index fell to 9,849.83 points from the previous week’s 10,346.23 points thus eroding Rs140 billion from the market capital at Rs2,783 billion.
The Federal Budget 2006-7 was billed as the bourses-friendly barring tax adjustments here and there. A positive reaction reinforced the perception that the market could attain new highs based on status quo, a robust economy and higher corporate earnings.
But bears and speculative forces thought otherwise as they intensified panic-selling after circulating conflicting rumours about the negative impact on future trading just two days after the announcement of the investment-friendly budget, analysts said adding that the motive appeared to grab the floating stock of most of the high-profiled issues at lower levels.
However, an objective analysis of the prevailing economic scenario and corporate earnings indicated that the sell-off may be inspired by the bears to outwit the bulls after indulging in massive selling in leading oil sector which holds more than 50 per cent weightage in the index.
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The KSE 100-share index on June 8 crashed below the psychological barrier of 10,000 points for the second time during last couple of weeks on panic selling and analysts fear this time the rout could be terribly alarming.
A decline of 7.32 per cent in two sessions eroded Rs204 billion from the market capital at Rs2,765.00 billion signalling that the market is in a terribly bad shape, although the bulls have more than one reason to fight back any time on the strength of positive corporate background news.
The bear targeted leading base shares notably the OGDC, the National Bank, the Pakistan Oilfields, and the Pakistan Petroleum which together hold a strong weightage in the index. All ended with lower locks followed by the limit fall in a single session.
The increase in the CVT and withholding tax in the budget, exit of foreign buyers and the fall of world bourses are not valid reasons for the market decline, says a leading broker adding the scarce is being spread purely on speculative basis to mop up the floating stock of blue chips at lower levels.
The selling which failed to find many willing buyers even at attractively lower levels appears to be inspired as the basic market fundamentals are not that weak, analysts said.
The turnover figure fell to 123 million shares, a day’s tally of an active share in a session, reflecting that it is virtually a sellers’ market with not many buyers despite an attractive bait of capital gains.
Opinions are, however, divided about the future market outlook but leading among the analysts predict that the market will be back on rails once the brokers’ infighting and the dust raised on the issues outside the market scope settles down.
A highly oversold market alone on technical grounds could well be an envy for speculators and bargain-hunters and the terribly lower levels it has reached during the mid-week sell-off has made it more attractive for any future investment both, by local and foreign investors on their respective counters.
Minus signs dominated the list as most blue chips fell like the house of cards on near-panic selling, although there were not many willing buyers.
Major oil shares led the market fall under the lead of Pakistan Refinery, National Refinery, the PSO, Shell Pakistan, Pakistan Oilfields, Pakistan Petroleum which suffered sharp fall followed by the MCB, National Bank, Millat Tractors, Pak-Suzuki Motors, Dawood Hercules, Colgate Pakistan, the IGI Insurance and Unilever Pakistan.
FORWARD COUNTER: Speculative issues also came in for persistent selling from all quarters and finished with sharp declines in each session.
Leading among them, including the National Bank, the OGDC, Pakistan Petroleum, Pakistan Oilfields, the D.G. Khan Cement, the PTCL, the MCB, Lucky Cement and some other active finished at the current year’s low levels. Most of them will take some time to be back to their pre-reaction levels on strong institutional support.—Mohammad Aslam
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