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| December 11, 2006 | Monday | Ziqa'ad 19, 1427 |
Equity market makes modest recovery
After last week’s massive fall, the shares on Karachi’s stock market showed a modest recovery, although the mid-week snap ran-up could not be sustained owing to late profit-selling and the absence of institutional support even at falling prices.
The KSE 100-share index recovered 174 points at 10,562 points and added Rs49 billion to the market capital at Rs2,943 billion. The on-balance close, however, was on the higher side as leading shares and blue chips only shed extreme gains netted earlier. But there were indications that the rally could be carried through the next week.
News from the political front after the postponement of resignations by the MMA were said to be a positive factor as they were linked to political uncertainty if carried out, and a section of leading investors was expected to be in the arena sometime next week.
Last week, the stocks therefore, recovered a good part of their previous losses and analysts believed the year-end portfolio adjustment by the financial institutions could keep the market in a positive mood before the year was out.
They said that a strong presence of foreign buying in leading oil shares ahead of the PSO’s privatization was another supporting factor which could evoke sympathetic buying on low-priced shares having potential of capital gains.
The mid-week positive debut made by the GDS of the OGDC on the London Stock Exchange at around $20 against the benchmark price of $18.90, however, failed to boost its local price as was widely speculated by some.
With the revised risk management system in place and the market talk of higher corporate earnings by leading banks for the year ending December 31, the market was expected to perform credibly well before the year was out.
Moreover, being in a highly oversold position because of the last week’s sell-off, it could attract a lot of covering purchases at lower levels on blue chips counters.
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The KSE 100-share index in part recovered a good portion of the last week’s massive fall and was quoted at 10,561.97 points as compared to previous 10,388.19, up by 173.78 points.
There was no trace of the last week’s panic caused by below-the-market- expectations of the Global Depository Share price at Rs115 and Rs.110 for local offerings as some bargain-hunters and institutional traders made modest covering purchases at lower levels on selected counters.
I think the worst may be over as investors and punters have had second thoughts on the fair value of the OGDC during the post-GDS trading, leading analysts said. The talk of another lower lock in it was ruled out as a section of financial traders was thinking to have it at the current level, they added. After having fallen to Rs117 at one stage, its share value was last quoted at Rs122.
However, buying support failed to gain in stature until the weekend closing as leading brokerage houses remained conspicuous by their absence as blue chips came in for fresh selling and fell sharply lower. But the mid-week witnessed smart rallies under the lead of the MCB.
The credit for initiating the recovery process largely goes to cement sector which attracted strong support at lower levels followed by the reports of restoration of rebate on exports, an analyst said adding that the Lucky Cement, the D.G. Khan Cement and the Fauji Cement were among leading gainers and trendsetters.
At the current lower levels and a rebound in international oil prices, oil giants could attract any amount of short-covering and could put the market back on sound footing, an analyst added.
But weakness of the bank shares under the lead of the MCB on selling followed by the central bank Governor’s directive to lower spreads and enhance rate of return to investors on their depositors would continue to have negative impact on their share values, some others said.
FORWARD COUNTER: Leading shares on this counter, on the other hand, remained under pressure and ended with fresh fall under the lead of the National Bank, the MCB, the Pakistan Oilfields, the Pakistan Petroleum, the OGDC and some others on late selling which clipped a good part of the initial gains.—Muhammad Aslam
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