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| August 28, 2006 | Monday | Sha'aban 3, 1427 |
Shares breach through 10,000-point barrier on nervous selling
THE KSE 100-share index last week crashed below the psychological barrier of 10,000 points on massive selling by a leading broker for unspecified reasons followed by panic liquidation by others which led to virtual market collapse.
Some leading analysts linked the nervous sell-off to no-trust motion against the prime minister but some others said it was the rollover week, which played a role in the market crash.
However, it was total market collapse as overvalued shares on the oil, bank, cement and some other counters fell like ninepins but there was no matching buying even at the dips including by the financial institutions.
“Another market crash is around reminiscent of last June and March 2005 plunge,” analysts said “the intriguing thing is that market rescuers tight lipped on the developing situation”.
Stocks suffered massive battering on panic-selling triggered by the perception of political uncertainty after the opposition’s no-trust motion against Prime Minister Shaukat Aziz and below market payouts by some of the leading companies in the bank and oil sectors during the week under review.
The market’s terribly weak stance was also well-reflected in the KSE 100-share index, which breached through the psychological barrier of 10,000 points for the second time during the current year after the last June market crash.
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The no-trust motion voting to be held on August 29 may not succeed as the opposition does not have the required strength to push it through but it has certainly created panic-like trading conditions.
The official confirmation of an extended ban on short-selling in the newcomer September future contracts, reversing the KSE board’s Aug 17 decision to lift it also worked against the market sentiment as leading operators sold in a haste after the SECP asked the rationale behind lifting the ban.
The SECP decision reflected that the memories of market crash of March 2005 and this June are afresh in their minds, which wiped out $12 billion from the market capital. A section of investors also awaiting the outcome of ongoing probe against the two crashes.
Essentially, being sensitive to negative political developments, the market needs stability to keep it in buoyant mood. But negative news in quick succession did not allow the consolidation forces to play their role as rescuers.
Interim dividend by some of the leading companies, notably ICI Pakistan and MCB at 25 and 20 per cent, respectively, and market talk of lower final payout by the oil giant Pakistan Oilfields have also contributed to the market decline.
“The negative news came at a time when the market was bracing for a big technical rebound on the strength of higher payouts by the leading bank and cement shares,” floor brokers said.
The other disturbing factor was reports of a possible downgrading of Pakistan rating from the current “positive outlook” by the Standard & Poor’s owing to political and economic risks.
All the negative news created panic-like situation both for the leading investors and brokers followed by hasty selling on the overvalued counters.
In the developing situation pointing to an extended lean period investors decided to keep to the sidelines rather than jumping to any hasty conclusions, Faisal Abbas an analyst said.
But another leading analyst Ahsan Mehanti predicts this is the time to buy at the current lower rates as the positive impact of higher payouts may not be in a fading stage and some of the higher dividend announcements from the bank and cement sectors are due shortly.
FORWARD COUNTER: Leading speculative shares fell sharply from the recent higher levels on persistent selling. The fall was across-the-board, major losers being Pakistan Oilfields, Pakistan Petroleum, OGDC, National Bank, MCB, PTCL, Bank of Punjab and D.G. Khan Cement.—Muhammad Aslam
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