May 12, 2008	Monday	Jamadi-ul-Awwal 6, 1429

THE weakness of rupee against US dollar continued to have its toll on the share market as investors remained in two minds how to manage a judicious balance between the falling rupee and the share values.

The rupee at the end of the last week was quoted as low as Rs69 and the dollar was not readily available from currency dealers at any price after its reported shortage. But the weaker links in the share business having a little holding capacity sold in unison followed by leveraged investors more than twice never allowing consolidation forces to play their destine role in supporting the market at the time of its distress.

Share values on the stock market last week fell further across a wide front despite midweek recovery as economic worries and political uncertainty continued to take its toll for the second consecutive week amid sporadic panic selling on high-profile counters.

The KSE 100-share index plunged by 728.15 points or 6.5 per cent at 14,228.67 on renewed selling triggered by conflicting statements by coalition partners on the issue of reinstatement of judges and fears of breakup of the newly formed government at the centre.

The KSE 30-share index also suffered massive fall of 1,242.76 points at 16,768.16 and major industrial shares fell like nine pins.

The virtual run on the US dollar, which was not available at Rs70, was another destabilising factor behind the market’s current fall.

However, it goes to its inherent strength that after having breached at one stage the barrier of 14,100 at 14,048.32 points, it managed to finish well above the week’s lows.

Rising trade deficit, high rate of inflation and fears of massive taxation in the federal budget by early month and absence of foreign investors did not allow local investors to make fresh commitments at the current attractively lower levels on most of the counters.

The mid-week recovery caused by active buying in the leading shares followed by a record rise in world crude oil price to $126 per barrel did not allow the market to recoup some of the initial losses and the overall trend remained bearish.

Investors are awaiting the deadline of May 12 set for the reinstatement of the superior judiciary despite fears about the implementation of the resolution. If the process is smooth, the market is expected to respond positively, brokers said.

The removal of one of the leading psychological depressants could buoy investors on the perception that the coalition government is intact and so are its financial policies, they added.

There is a perception shared by leading analysts that investors would be back in the market and resume normal activity if the judges’ issue is resolved without intervention by presidency, they said.

But a leading analyst Faisal A. Rajabli thinks it was mainly the weakness of the rupee, which is causing a massive outflow of foreign funds invested in the share business, which seems to be the main reason behind the market’s current stance.

The developing situation in the Bank of Punjab followed by reports of a Rs13 billion fraud and arrest of its top executive also had its toll owing to sympathetic selling in those shares having links, in one way or the other, with BoP. However, towards the end of the week, it recovered from the early lower levels on stray support.

The breach of three consecutive barriers in a session, which wiped out Rs200 billion from the market capital is significant in more than one ways, analysts said. “The plunge may continue in the coming sessions also if sanity does not return to the contenders of power”, he added.

At one stage the index was down by 700 points but late short-covering by some leading financial institutions on selected counters pushed it well above the week’s lows.

“Investors, mainly foreigners, seem to be terribly worried over the post-election events as their perception of a stable government is fading out after each session”, said leading analyst Ahsan Mehanti.

The market is yearning for good news from political leaders, but has failed to hear even one so far as the early euphoria is fading out each day, another analyst Ashraf Zakaria said adding “if the current tensions continue the market could hit new lows in the coming sessions”.

“The talk of index level of 16,000 is now a distant possibility as investors are at the lookout to bail them out of the current impasee”, analyst Hasnain Asghar Ali said. “With the company result season over it will be pretty difficult for the market to find new stimulants”, he added.

Forward counter: Speculative issues on the cleared list also followed the lead of their counterparts in the ready section and mostly followed where changed under the lead of MCB, which suffered massive battering after Maybank of Malaysia took 15 percent stake in it.

Others actives, notably Engro Chemical, Lucky, and D.G.K Cement, OGDC, Bank of Punjab, Nishat Mills and some others also fell on active selling.—Muhammad Aslam