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| November 27, 2006 | Monday | Ziqa'ad 5, 1427 |
Positive trends after the probe report
TRADING at the Karachi Stock Exchange last week was dominated by the release of forensic investigation report by the US expert, on market’s crash in March 2005. However, subsequent reports clearing some leading brokers of price manipulation gave it a positive direction.
The pent-up demand, as well as a good bit of speculative bargain-hunting was witnessed in bank and oil shares which in turn evoked sympathetic support on some other blue chip counters.
What seemed to have reinforced the investor-perception of a continued bull-run was the strong presence of foreign-fund buying on oil counter - notably the OGDC which came in for the GDR share-related covering purchases.
The forensic report allayed the fears of investors by pulling the market out of the prevailing sluggishness. Investors were back in the ring and made massive covering purchases at an attractively lower level - giving the trading the much-needed boost.
The KSE 100-share index virtually raced to its pre-reaction level of 11,000 and was last quoted at 10,870.90, up by 165.63 points as compared to 10,705.87 points last week. The market capital also rose by Rs63 billion at Rs3,116 billion.
The market was out from one of its major depressive phases as the probe report had cleared leading brokers from the alleged charge of price manipulation leading to market crash in 2005, analyst Ashraf Zakria said adding that another factor, the MMA’s resignation threat was still there and could take the toll, if materialised.
The talk of the Notices to some erring brokers in respect of wash trade or withdrawal of funds from the future market were present but the amount involved was too small to bear any negative impact on the future stock trading, he said.
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Although, there was no specific evidence of the presence of foreign-fund buying on oil counter, notably the OGDC ahead of its share offer under the GDRs, but a price flare-up in leading bank and oil giants suggested that it was very much there.
The market's spontaneous bullish reaction to the report could be gauged by the fact that the KSE 100-share index finished fully recovered as all leading base shares, notably the MCB, the OGDC, the PTCL, the National Bank and the Pakistan Petroleum finished sharply higher - few too close to their upper locks.
The report compiled by the US experts after detailed discussions with the relevant quarters claimed that it was hardly likely that the influential brokers manipulated the market through the withdrawal of COT funds as they were provided by the banks.
The fears of analysts that some leading brokers may have been involved in price manipulation were allayed as was reflected by the positive reaction of the market to the probe report.
Floor brokers said that the other contributory factor was the highly oversold position of the market which acted like a morale booster.
However, it was too early to predict the future direction of market as the developing situation on political front tells a different story and may take its toll, they added.
Plus signs dominated the list under the lead of oil and bank shares followed by other blue chips which recouped their initial losses and finished well above the previous level. Losses on other hand were mostly fractional.
FORWARD COUNTER: Speculative issues on the forward counter came in for strong short-covering at lower levels and generally finished recovered under the lead of National Bank, the MCB, the OGDC, Pakistan Petroleum, Pakistan Oilfields, PICIC, and many others.—Muhammad Aslam
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