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| September 18, 2006 | Monday | Sha'aban 24, 1427 |
Hike in financing limit fails to sustain buying euphoria
THE share market last week experienced a terribly dull trading week amid falling volumes as investors played on both sides of the fence keeping the wheels moving. However, there was no indication of a technical rebound which was long overdue.
The talk of a liquidity crunch appeared a dominating factor as it limited the trading to a few current actives which fell and rose — as a section of investors sold the overvalued and purchased the undervalued ones.
Trading volume fell more than once below the benchmark of 100 million shares as investors indulged in alternate bouts of buying` and selling without making fresh commitments over tight money supply position.
Despite the higher dividends announced by some leading companies and a massive increase in the Continuous Financing System (CFS), the stocks failed in maintaining the initial buying euphoria and remained directionless amid low volumes.
The market’s volatility was also well-reflected in the erratic either-way movements of the KSE 100-share index which tossed between the levels of 9,000 and 10,000 points and finally finished around 9,984.57, up 19.36 points over the previous close.
The initial investor-reaction to an increase in the CFS limit was bullish but gave a cautious reaction to the ban on in-house financing and short-selling on perceptions that it could lead to another impasse in the weeks to come.
The CFS increase, an addition of another 40 in the share list, and few positive steps taken by the Securities and Exchange Commission of Pakistan to restore investor-confidence in the market were expected to boost the stock trading after October 2.
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A higher final cash dividend of 20 per cent by the new management of the Pakistan Telecommunication Company (PTCL), plus 30 per cent interim already paid was well-received in the market but it came at a time when investors were preoccupied by some other depressants.
A sharp increase in the KSE 100-share index which twice breached through the barrier of 10,000 points, however, reflected that the investors have not fully analysed the long-term impact of their manoeuvring, as well as the market’s vulnerability after the ban on in-house financing and short-selling from October 2, 2006 comes into force.
A massive rise of more than double in the CFS limit, however, had sent a wave of optimism among investors who enthusiastically participated in the trading.
The CFS limit increase, among others, had been a major demand of investors during the last couple of sessions and the falling volumes seemed to have sent an SOS to the relevant quarters followed by a quick decision on the issue, Faisal Abbas a leading stock analyst said.
The chief official move behind the increase appeared a check on the in-house financing which leads to market manipulation with a steep rise in rates by badla financers thus resulting in the market collapse, some others said.
The move had taken away from one hand what the other had given, commented another stock analyst Ahsan Mehanti, adding that many may not like to part with an attractive bait of in-house financing being major source of their income once the ban comes into effect.
However, an immediate reaction to some steps taken by the SECP to boost stock market was positive but others warned the investors, in the name of sanity, to play safe until their impact was fully absorbed.
The market had been facing liquidity crunch owing to various reasons as was reflected by the terribly low volumes in the last couple of sessions, including the Monday’s 60 million shares as investors did not carry enough liquid to make fresh purchases, although political uncertainty continued to be a major depressant, brokers said.
FORWARD COUNTER: Barring the MCB, which managed to finish modestly higher on active support linked to its GDR, all other leading shares suffered fall under the lead of the OGDC, Pakistan Oilfields, Pakistan Petroleum, National Bank and the D.G. Khan Cement.
—Muhammad Aslam
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