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| March 05, 2007 | Monday | Safar 15, 1428 |
Shanghai stock fall affects local bourses
LOCAL stock trading was bearishly influenced last week followed by turmoil on the regional bourses after the crash of the Shanghai stock market on reports of slow down in the Chinese economy. Negative news from the US also influenced the global decline.
Initially, the KSE followed the regional market trend but as the local fundamentals were positive in the backdrop of higher cash payout and bonus shares, it managed to absorb negative fallout of terrible plunges elsewhere.
With Client Level Netting (CLN) in place by next Monday, indications are that investors may not miss an attractive bait of lower levels and cover positions, pushing the market to its pre-reaction levels.
However, despite higher dividend announcements by some of the leading bank and other companies, attempted rallies could not be sustained and the share market remained depressed during the preceding week as negative news followed in quick succession never allowing investors to re-fix their investment priorities.
The KSE 100-share index was quoted sharply lower by 474.49 points at 11,133.35 as compared to previous week’s 11,607.84 after attempted upward rallies as some of the leading base shares finished sharply lower under the lead of OGDC, National Bank, Pakistan Petroleum and some other leading base shares. The market capitalisation was lower by Rs130 billion at Rs3038.62 billion.
The KSE 30-share index recorded a sharp fall of 702.28 points at 14,010.48 as leading base shares suffered fresh fall. The market has already credibly absorbed the negative fallout of some of its irritants and indications are that it could resume its upward drive during next week.
Attractively lower levels attained by some of the leading shares on the bank and oil counters could attract a lot of short-covering when trading resumes next week, brokers said.
Two opinions about the implementation of Client Level Netting (CLN) risk management regime was a first major blow for the budding rally but its settlement later in the week boosted the market as KSE members agreed to implement it from scheduled date of March 5.
The market also survived China’s Shanghai bourse crash, which has negative fallout on the regional Asian markets and the KSE was not an exception, analysts said.
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Both the local and external negative factors weighed against the mid-week underlying market sentiment but its inherent strength played pivotal role in putting it back on the rails.
An idea of market’s inherent strength may well be had from the fact that it literally ignored the “reported tough message” to Pakistan conveyed by US Vice-President Dick Cheney and suicide attack on him in Afghanistan, and recovered after each fall.
“Sell at news and buy at rumours remained the key word throughout the last week and investors and bargain-hunters strictly followed analyst advice”, brokers said.
Earlier, analysts said investor fears that the capital adequacy related issues under the Client Level Netting (CLN) regime to be implemented by March 5, may act as a drag on the KSE index in the coming weeks was one of the chief reasons behind the sell-off. An increase in share transaction costs could well limit the daily volumes, they said.
The fear appears to be psychological rather than genuine, they said adding the market has already braved many a crises and is firmly holding the index level of well over 11,000 points, an outstanding performance judged by any standard.
“The result-oriented market may response to its technical demands here and there but the future outlook appears to be bullish”, said a leading stock analyst Ashraf Zakria. “The fall and rise is the part of stock trading, which mostly adds to the inherent strength of the market,” he added.
Another analyst Ahsan Mehanti said fears about the last March market crash may be lurking in the investors’ mind but the current corporate scenario is pretty different from that both in terms of payouts and earnings.
The management of National Bank of Pakistan has announced a cash dividend of 40 per cent plus bonus shares at the rate of 15 per cent on earning of Rs24 but a section of investors took profit thinking that the payout is on the lower side as compared to earnings, analysts said.
Faysal Bank announced a cash dividend of 25 per cent on earning of Rs6.65, while Pakistan Oilfields, D. G. Khan Cement and Habib Metropolitan Bank came out with earnings of Rs19.00, 3.40 and 9.25 respectively.
FORWARD COUNTER: Leading shares on the cleared list also followed the lead of their counterparts in the ready section and fell under the lead of MCB, which fell to Rs294.50 from the previous close of Rs308, National Bank, OGDC Bank of Punjab, Lucky Cement and some others followed them, finishing lower on late selling.—Muhammad Aslam
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