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| October 29, 2007 | Monday | Shawwal 16, 1428 |
Karachi stocks shed Rs115bn on record oil price
THE strong weekend rally allowed the stock market to wipe out some of the initial declines, and analysts said it could well prove a launching pad for the KSE index’s march to its new coveted target of 15,000 points.
A record rise in the world oil price to $90 per barrel has triggered panic local and foreign buying in leading oil shares, notably OGDC, and Pakistan Petroleum, which with other base shares could take the index to a level where they want it to.
Although the KSE 100-share index managed to finish well above the weekly lows after last two months’ sustained run-up, there were, however, no sign of an extended fall when the market reopens on next Monday. The KSE 100-share index was down by 337 points.
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Opinions are divided over the future direction of the market, but leading analysts think there may not be any big shock before the index hits its newly set target of 15,000 level.
But some others say there could be some terrible setback in the current overvalued market in the form of fresh bout of profit-selling and much would depend whether or not bulls make fresh commitments at the declining prices.
“Apart from an expected apex court ruling on the president’s eligibility to be presidential candidate for the next term, what worries investors more is the fresh state of political uncertainty linked to election woes”, said a leading broker.
But he ruled out the possibility of a major shakeout at this stage as foreign investors were back in the ring after having taken profits in a highly overbought market. The recent speculative run-up on the Karachi Stock Exchange on Friday was halted as investors took profits at the highly inflated levels in a highly overbought market amid a briskly traded session but there were buyers at each dip.
The KSE 100-share index earlier in the week reacted by 337.57 points or by 2.5 per cent at 14,449.98 as compared to 14,787.55 at the last weekend eroding Rs115 billion from the market capital at Rs4,398 billion as all the leading base shares attracted selling at higher levels.
The free-float 30-share KSE index on the other hand suffered a bigger fall of 611.32 points at 17,383.97 points on identical grounds.
Leading oil and cement shares, notably OGDC, Pakistan Oilfields, D.G. Khan Cement, and Lucky Cement were among the prominent losers, which have larger weightage in the index. Later in the week they managed to finish with modest losses.
“It was a long overdue technical correction in a highly overbought market”, a leading analysts Ashraf Zakaria said. “It could go for further pruning in the coming sessions as some leading bears are out to cash in on the available margin of profits”, he added.
But some others said it was the belated reaction to the city carnage, which in turn added to the prevailing uncertainty and fears of law and order situation and the market may not fall before hitting index level of 15,000 points.
“There could be two opinions about the polarisation of the society, but one thing is clear in the developing scenario speculative traders and vested interest may not put money into the share business as they had been doing for the last three consecutive weeks”, analyst Ahsan Mehanti fears.
However, there was no indication of panic selling as was reflected by clipping of mostly extreme gains, while on the other hand some leading maintained their upward drive and did not follow the market’s general line of action.
Broader market on the other hand performed credibly well as the selling was directed against the leading base shares.
Owing to active selling, volume figure rose to 466m shares as gainers held a strong lead over the losers at 215 to 150, with 40 shares holding on to the last levels.
FORWARD COUNTET: Leading speculative shares, notably OGDC, Pakistan Petroleum, MCB, National Bank, Lucky Cement and some others, though on-balance, finished lower but were well above the early lows on mid-week short-covering in most of them - ICI Pakistan, Engro Chemical and some others managed to close on the higher side.-—Muhammad Aslam
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