SOME emergency measures taken by the KSE highups at the fag end of the last week halted the market decline but analysts were not sure whether the snap weekend rally could be extended to next week when the trading resumes.

Apart from setting up of an emergency fund of Rs25 billion to bail out those who were trapped on the CFS counter, the major morale booster was said to be lifting of 55 million shares by some leading financial institutions worth Rs3.5 billion to give the market the needed breathing space.

Early in the week, the KSE 100-share index was again massively battered and at one stage it appeared that it may breach through its base level of 10,000 points as selling pressure continued unabated on the still overvalued counters in the absence of demand and even from financial institutions.

The small investors, who had lost everything in the share business waiting for the launching of rescue operation by the institutional traders, watched the slaughter of the capital market for the eight weeks in a row.

The fall over the week was around 1,500 points or 16 per cent, which eroded another Rs436 billion from the market capital or about $33 billion since the current market decline, which gripped it some two months back.

“It was a tragic story of the market fall from the peak of index level of 15,976 points to 10,234 points or over 65 per cent since January this year, and no one could precisely predict where it will end”, analysts question the silence on the part of high officials in Islamabad and the local bosses of the KSE.

Foreign investors are out of the market after liquidating their long positions both at the fall and at the rise, the local ones are groaning under the weight of persistent sell-off awaiting miracles to happen, they said.

Stocks suffered fresh widespread fall despite some corrective steps taken by the SECP and the KSE to put the market back on the rails. What seemed to have taken steam out of the market and triggered panic selling were reports of building up of Nato forces on the Pak-Afghan border and fear of attack on the tribal areas.

“The perception of country’s security risk appears to have a negative impact on the investors’ mind who tried to get out of the market rather than opting for short-covering”, an analyst said.

He said the market witnessed a massive outflow of funds to other safe havens, mainly US dollar and gold as was reflected by all-time high value of both. Gold at above Rs22,200 per 10 grams and dollar at Rs73 plus.

The restoration of previous lower and upper locks to provide the needed exit facility to the trapped leveraged investors and the debut made by the CFS MK-2, ensuring massive liquidity as well as transparency to the foreign investors, political uncertainty, and law and order situation did not allow investors to resume covering purchases at the attractively lower levels on most of the counters.

Expectations that the massively battered share market will resume trading under the new funding regime on the higher side, CFS MK-2, ensuring enormous liquidity failed on Friday to put the market back on the rails owing to investors’ worries over the sensitive external fronts.

The new funding regime did provide safe exit for the leveraged investors with no risk management issues, but investors were not inclined to go for fresh investment even at the attractively lower rates owing to prevailing law and order situation, weak rupee and slow down in the economy, analysts said.

Under the CFS Mark-2 funding system, investors will have an access to Rs85 billion and up to Rs100 billion on 10 per cent margin, which became effective from Monday (July 14) on the KSE. The new system also ensures transparency in the share transactions as demanded by foreign investors. The lower and higher circuit-breakers were also restored to the previous levels of five and seven per cent.

“External political factors may not allow the return of the bull market soon, but the new funding regime is expected to put the market back on the track after peace returns to FATA, law and order situation improves and the rupee is back to its sustainable level against the US dollar”, says leading analyst Hasnain Asghar Ali.

Analyst Ahsan Mehanti holds the same view and says investors are staying out of the market owing to political uncertainty and until peace returns to the country, many may not put money in stocks.

The market decline was led by the overvalued oil sector, which came in for active selling as investors found safe exits after the restoration of previous lower and upper locks.

Forward counter: Leading shares on the cleared list also followed the lead of their counterparts in the ready section and fell in unison under the lead of MCB, Pakistan Oilfields, Pakistan Petroleum, National Bank but Engro Chemical and some other managed to close higher from the early lows on active short-covering.

—Muhammad Aslam