January 28, 2008	Monday	Muharram 18, 1429

THE smart rally at the fag-end of the last week allowed the market to finish with clipped losses, but some analysts said it was difficult to predict about the future direction of the market owing to political uncertainty and the absence of foreign investors.

Some others said the dividend season has just begun and predicted higher payouts by the banking, oil, cement, fertiliser sectors and other blue chips during the next month, which could keep the investors optimistic.

The current volatility in prices is expected to end possibly by next week as some leading investors and financial institutions have started their new year operations at the prevailing lower levels.

Earlier in the week, stocks remained under pressure for the fourth consecutive week as investors played on both sides of the fence indulging in alternate bouts of buying and selling.

The KSE 100-share index finished with an extended decline of 18.18 points at 13,856.36, eroding another Rs12 billion from the market capital at Rs4,252 billion but on the other, the free-float 30-share index managed to end with a modest rise of 30.59 points at 16,516.5.

Political uncertainty and law and order situation was one of the chief worries of the investors most of whom were not inclined to take even a calculated risk.

In the absence of strong foreign and financial support, there were not many instances of special features despite a 75 basis point cut in the US interest rates followed by rebound staged by the world bourses.

But the worries of the world recession were there as a leading section of investors played safe awaiting some positive developments on the political front.

Dividend news from some of the leading companies, notably PPL (interim of 50 and 30 per cent on ordinary and preference shares), 30 per cent cash by Abbott Lab, and five per cent cash and 10 per cent bonus by Pervez Ahmed Securities, and 10 per cent cash and 10 per cent bonus shares by Fauji Fertiliser Bin Qasim were on the higher side of the market expectations, but were overshadowed by law and order worries.

“So the market does not go as January goes”, according to an old adage for the first time after several years as negative external factors are not allowing the consolidation forces to play their role.

However, all hopes are now pinned on positive elections result and higher corporate dividend due from the leading sectors, including banks, oils and cement sectors due during the next couple of weeks.

After having fallen by 300 points in early week trading, the KSE 100-share index on Monday staged a massive recovery on short-covering at the lower levels but ended lower after each rise.

Essentially, it appears to be last week’s repeat performance as leading base shares, notably OGDC, PTCL, National Bank and some others significantly contributed to the initial fall and though finished well above the session’s low on late covering purchases.

The early fall was attributed to a belated sympathetic reaction to turmoil in the regional stock markets and the New York bourse on fears of global recession, but later massive recovery of about 200 points reflects that there is nothing wrong with the inherent strength of the KSE.

“I don’t think the local market has much relevance to the turmoil on the international bourses because of its narrow base,” said a leading stock analyst adding “India can do as world investors had a massive stake in it”.

Foreign funds had already withdrawn a good part of their investment here in the share business because of political uncertainty. They may not resume their fresh operations until the general election on Feb 18, and after having ascertained that the new regime is stable.

But Ahsan Mehanti thinks decline in regional markets, notably India where it has fallen by another five per cent for the second consecutive session did impact the local trading, while steep fall in world oil prices accelerated the early fall.

“The terribly high volatility of well over 300 points in a session reflects investors’ worries about the future outlook”, another analyst Hasnain Asghar Ali said adding “no one is inclined to make long-term investment in the prevailing conditions and that reflects the investors’ mood”.

The market appears to be in tight grip of speculative traders and bargain-hunters and they swing it either-way as they like, and are the ultimate gainers, they added.

Forward counters: Barring OGDC, and Engro Chemical and some others, which recovered, other leading shares on the cleared list were further marked down despite weekend rally, notably among them being MCB, Naional Bank and PTCL.

—Muhammad Aslam