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| November 19, 2007 | Monday | Ziqa’ad 08, 1428 |
Stocks resist big fall on positive developments
STOCKS resisted a larger fall at the fag-end of the last week on active short covering on the blue chip counters aided by some positive developments on the political front, including formation of caretaker cabinet and perception of continuity in financial policies.
Some major market worries are, however, still there but bears seem to have run their course and are assuming the role of bulls and the next week could witness a number of pleasant surprises.
Although the future market outlook is still unclear, but if emergency is lifted during the next couple of weeks the market will bounce back to its pre-reaction levels just in no time.
And that will herald the advent of foreign buying on the oil and banking counters, which at the current level ensure attractive capital gains that too on short-term basis.
It was, however, a terribly disturbing week for the share market as prices fell like the house of cards on nervous selling from all and sundry as the political uncertainty continued to intensify by each passing day. The KSE 100-share index closed the week at 13,082.01, off 341.86 points.
What was more important was a partial exit of some of the leading foreign investors but the satisfying feature was that they did not opt for panic selling and held the fort anticipating some positive corrective steps by the government to defuse the tense situation.
The net outflow by them over the week was said to be around $135 million out of their total stake of about $900m, reflecting that they were not scared and hoped an improvement in the prevailing situation as long as President Musharraf was at the helm of affairs, analysts said.
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The dissolution of assemblies, perception of caretaker set up on the economic and financial issues and the law and order situation in the wake of opposition agitation against the imposition of state of emergency and world pressure to lift it continue to take their toll, intensifying the tense political situation.
But leading analysts predict that the market is in for a protracted recession as investors will think twice before resuming covering operations at the attractively lower in the developing scenario, mainly law and order situation and agitation against the emergency by political parties.
“In the absence of leading foreign investors, they expect financial support at the lower levels to save the market from a virtual crash and protect the interest of small investors”.
Earlier, the announcement of election schedule by the president seems to have ended the one phase on political uncertainty and investors welcomed it by resuming covering purchases at the attractively lower level on almost all counters.
Investors’ perception that sanity will return to stock trading after the national elections before January 15, next year as the future government will be well in place ending the current agitation and removing many other irritants was the chief factor behind the return of the prodigal sons, said a leading analyst.
He said the assumption that the re-election of the president for the second term appeared to be pretty certain and that could well mean the continuity of the current financial and economic policies sent a wave of optimism in the market leading to snap recovery.
“However, return of foreign investors may be further delayed until the emergency was lifted as they will await fresh development on the post-election schedule trading sessions”, some others said.
“The current lower levels attained by most of the leading shares, however, provide an attractive bait for any prospective investor having strong holding capacity to make fresh investment”, said a leading analyst, “but low volume figures showed leading among them are still in two minds about the future share market outlook”, he added.
FORWARD COUNTER: Leading shares on the cleared list also followed the lead of their counterparts in the ready section and ended with extended losses. The MCB, National Bank, Pakistan Petroleum, Pakistan Oilfields, Lucky Cement, Engro Chemical, OGDC and some others were leading among the losers.
—Muhammad Aslam
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