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| November 13, 2006 | Monday | Shawwal 20, 1427 |
KSE crash wipes out Rs135bn capital
SHARE market virtually crashed from its highs last week on persistent profit-selling originating from all quarters. However, there was no matching support from leading institutional traders at the dips.
Bank and oil shares led to a massive decline triggering panic-selling on other counters. This was ahead of the release of the SECP’s forensic investigative report on stock market’s crash in March 2005.
A massive fall of over 500 points in index eroding Rs135 billion from the capital signalled of a longer period required for the market to come back on rails. The analysts further expect that much will depend on rescue operations to be undertaken by financial institutions.
There was a big question being debated in the market: Will share index be able to sustain the crucial level of 10,000 points next week as an outcome of the probe report?
A combination of negative news which followed in quick succession kept investors at their toes and they could not precisely decide as how to respond to changing background news.
After turning erratic, the KSE 100-share index ended sharply lower by 509.26 point or 4.5 per cent at 10,739.45 compared to previous week’s 11,246.71 points, eroding Rs135 billion from the market capital at Rs2,982 billion. The KSE 30-share index followed its lead and fell sharply lower.
Apart from the killing of Army men in an attack in tribal areas and victory of the Democrats in the US mid-term Congress elections, investors were also worried about the conversion of in-house badla into the CFS. These were some major depressants which fuelled speculation on fresh pruning.
Several foreign investors did speculate that there could be some sort of cooling in the Pakistan-US relations in coming months following the Democrats’ victory as they differs with the Republicans on many world issues, including the Iraqi war.
Most analysts, however were of the opinion that the availability of Rs55 billion under the regular CFS financing facility beginning would boost trading and pull the market out from the prevailing impasse, notwithstanding the release of investigation report.
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The KSE 100-share index again plunged on panic-selling in leading bank and oil shares on some rethinking to put off the new risk management rules for a month and on fears of the SECP’s probe report.
After opening higher on early follow-up support, the KSE 100-share index crashed from the weekend highs as leading base shares, notably the OGDC, the National Bank, the MCB, and the Pakistan Petroleum finished close to their lower locks.
The capital market reform rules were not rolled back, these were very much there, said the SECP’s high-ups adding that the deadline of December 4 will be strictly adhered to. This perception gave a breathing space to big ones to bail themselves out after liquidating long positions.
The one month’s relief provided them a timely exit, they took it as a God-sent opportunity and indulged in massive selling on those counters where they reportedly were trapped, remarked a leading analyst while commenting on the market’s snap reversal.
On the other hand, their smaller links appeared to be happy on the perception that the raise in CFS to Rs55 billion could lead to a more liquid money market which will add to their manoeuvring capacity, analyst Ashraf Zakria said.
A leading stock analyst Faisal A. Rajabali said that the report of probe was ready and was expected to be presented to the National Assembly Committee shortly as it triggered a lot of selling by the long parties.
Fears that the probe report may have in it the names of some leading brokers also worked against sentiments and triggered selling by those who may be involved in price manipulations, he added.
FORWARD COUNTER: Speculative issues on forward counter showed sharp decline on active selling and finished lower under the lead of National Bank, the MCB, Pakistan Petroleum, Pakistan Oilfields, the OGDC, the D.G. Khan and Lucky cements, Bank of Punjab and many others on sympathetic selling in line with their counterparts in the ready section.
—Muhammad Aslam
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