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| July 10, 2006 | Monday | Jumadi-ul-Sani 13, 1427 |
Share market takes a breather
THE run-up, prevailing for last couple of weeks, was halted on the Karachi Stock Exchange owing to profit-selling at the fag end of the week. The break was triggered on the National Assembly’s probe committee report, instituted to investigate the March 2005 market crash and unloading of stocks by some leading brokerage houses on technical grounds.
Analysts said that the market has already absorbed the negative fallout of last year’s crash as post-crash trading was witnessed by the KSE 100-share index which attained its all-time peak level of well over 12,000 points and since then is fluctuating between 9,000 and above 10,000. This is said to be a fairly stable figure.
However, investors may have some rethinking on a possible negative fall-out of the heating up of the political scenario. The opposition is demanding resignation by the President and Prime Minister by July 31.
But some others said that the half-yearly and annual corporate announcements due this month could keep investors in a positive mood as most of the interim and final dividends, notably of banks, cement and oil sectors are expected to be on the higher side.
Earlier, stocks opened the new financial year account on high note as leading base shares in oil, bank, and cement continued to inspire fresh covering purchases amid reports of higher interim earnings.
The other supporting factor was the report of higher final dividend by the National Investment Trust (NIT), whose board meeting was due on July 8. The rumours of a cash Rs5.50 payout per unit helped in triggering buy-stops in leading shares, notably the National Bank, the Faysal Bank and the Bank of Punjab who would be chief beneficiaries of an enhanced dividend.
The National Bank also remained in strong demand followed by reports of a sharp increase in the share value of Saudi Bank Al-Jazri in which it has about six per cent stake.
All eyes, therefore, remained focused on the NIT meeting, which analysts said could give the market much-needed boost in new account as most of the shares in its portfolio are market leaders and trend-setters.
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An idea of the market’s upward drive may well be had from the fact that the KSE 100-share index at one stage breached through the psychological barrier of 10,000 points but failed to sustain it on late selling in some key shares.
It finally finished the maiden trading week of the new fiscal at 9,836.04 points, off 153 points as compared to 9.989.41 points but well below its weekly highs on late selling in some of the leading base shares, including the OGDC, the National Bank, and some others.
The opening, however, was a bit hesitant owing to new financial year’s tax worries and a good bit of profit-selling which kept bulls at their toes all the time. The mid-week covering purchases allowed the market to finish on-balance, thanks to active short-covering at the early lows.
The fears of heating up of the political scenario after signing of the ‘charter of democracy’ by two former premiers while the ARD demanding resignations of President and Prime Minister by the end of this month, also weighed against the underlying sentiment leading to panic-selling on blue chip counters.
But the chief negative factor behind the sell-off was the new tax regime for share business which has become effective from July 1, and stipulates an increase both in the capital value and withholding taxes. And adding to this was the 10 per cent increase in gas prices for both, commercial and industrial units which would significantly add to the production cost in the new fiscal year.
An idea of early panic-selling may well be had from the fact that all leading base shares finished with lower locks, although some managed to attract a good bit of covering purchases at the fall. The reports of opening of probe about the crash in March last also took its toll on relevant counters.
The OGDC, the National Bank, the Pakistan Petroleum, the Pakistan Oilfields, the MCB and some others were leading losers as well as volume leaders. But some institutional traders picked them up on the perception that their current levels were attractive enough for capital gains.
I don’t think bears have the courage and conviction to check the market’s new year opening, stock analyst Hasnain Asghar Ali said adding that the cash-heavy financial institutions are there to absorb the unwarranted selling.
However, the future outlook appears to be a bit bearish due to the changing political atmosphere, notably the ARD’s demand which could destabilise the market on fears of agitations, another stock analyst Faisal Abbas said.
For being too sensitive to negative political developments, the share market mostly gives in at the peak of anti-government movements, some others fear.
FORWARD COUNTER: Much of the activity on this counter remained confined to oil, bank and some cement shares, most of which managed to finish on-balance higher. The OGDC, the Lucky Cement and the D.G. Khan Cement ended below their weekly highs on late selling and so did some others, including auto and chemical shares.
—Mohammad Aslam
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