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| June 26, 2006 | Monday | Jumadi-ul-Awwal 29, 1427 |
Market’s upward drive halted by rumours
A SNAP sell-off during the weekend session halted the market’s upward drive i.e., beyond the index level of 10,000 points. The fact that the market has managed to hold on some initial gains reflects that many covering purchases will be witnessed at the current dips by next week, said the analysts.
The KSE 100-share index although ended below the crucial level of 10,000 points but showed a sharp recovery of 200.42 at 9,807.53 points thus adding Rs48 billion to the market capital at Rs2,748 billion.
The rumour-inspired selling which has pulled the leading index shares down but with a limited fall may not have a relevance to the changed corporate scenario as basically, there is nothing wrong with most of the fundamentals, they said. The rumours are expected to be discounted after the trading resumes next week.
The three rumours, apex court’s verdict in the Pakistan Steel’s sell-off, some brokers’ exposure limit problem, and fears that permission may be granted for short-selling on the forward counter for July settlements followed each other in quick succession. These rumours outwitted the bulls by creating panic-selling by all and sundry, along with a big plunge.
Earlier in the week, the stocks a staged a smart recovery from its previous lows on active short-covering on selected counters, aided partly by the attractively lower levels and to some corrective steps taken by the government for putting the market back on rails.
Apart from other measures what seemed to have arrested the market decline was the lowering of the circuit breaker from 20 to five per cent and a 100 per cent increase in the exposure limit. As fears of further decline were allayed, investors covered their position in a highly oversold market at lower levels.
As a result, the KSE 100-share index recovered about 500 points or 16 per cent following some corrective steps taken by the KSE. Some leading analysts said that its upward drive would continue in the sessions to come.
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The year-end portfolio adjustments of financial institutions are yet to make their debut. Although, there were indications of a crucial week ahead but analysts ruled out the possibility of a major shakeout as corrective steps appeared well in place. Moreover, speculative forces and bargain-hunters will think twice to repeat the episode of early June.
The index, therefore, maintained its upward drive followed by strong short-covering in leading base shares - aided by lower levels in the backdrop of last week’s massive fall and on hopes of a continuation of the current bull-run in the near future, as well.
But doubts were evident that whether it would be able to sustain the level above 10,000 points. Some others claimed that it could rise to its pre-reaction level of well above 12,000 points, apparently basing their perception on the rebound of other regional markets.
An idea of the investor-scramble for leading shares, notably the OGDC, the Pakistan Petroleum, the National Bank, the PTCL, the Pakistan Oilfields and some others - together holding a weight of about 60 per cent in the index - ended in the upper circuit breakers, well above the session’s ceiling rates.
It was literally the number game of some big ones, including the financial institutions to outwit their rivals but those small investors scared by the previous week’s massive decline, mostly played safe, the stock analyst Hasnain Asghar Ali said adding that most of them were still nervous on the fears of another major reversal.
Previous week’s massive fall has knocked out a good number of big players as some are still licking their financial wounds by sitting on the sidelines and some genuine ones are keeping away, apparently awaiting the price stability.
The oil and bank sectors, at the current lower prices, alone provide enough manoeuvring to any shrewd investor and that is crucial point behind the market’s 10 per cent rise in just three sessions, another stock analyst Faisal Abbas said adding that there were no set rule of the market to always climb without the technical correction.
Ahsan Mehanti another analyst, however, is not precisely clear about the sustained run-up and have some reservations about the bull-run but denies the presence of any negative undercurrent, both psychological and real.
FORWARD COUNTER: Despite late week selling, most of the speculative shares managed to finish higher on active short-covering at lower levels. The OGDC, the National Bank, the MCB, the Pakistan Petroleum, the Pakistan Oilfields, the D.G. Khan Cement, the Lucky Cement, the PSO and the Shell Pakistan, along with others were leading among them.—Mohammad Aslam
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