THE share market finished last week on a dull note as investors were still in two minds about the bailout package announced by the Securities and Exchange Commission of Pakistan to support the post-floor market when the trading resumes on October 27.

The KSE 100-share index resisted fresh fall and moved within a narrow band throughout the week and was last quoted at 9,182.88, up by 1.36 points, but its junior partner, the KSE 100-share index fell by 38.86 points at the fag-end of the week at 10,003.99.

All eyes are now focused on the post-floor market, which opens on Monday under the umbrella of a bailout package of Rs20 billion, but indications are there that investors will keep to the sidelines awaiting further developments on the unsettled leveraged CFS investment of Rs11 billion before opting for fresh commitments.

“All may still not be well with the market as the bearish economic indicators reflect”, said analyst Ashraf Zakaria and added, “after having lost $40 billion since the current recession, the future market may not be the same billed as the best performing among the top ones as much water has already flown under the bridge since then amid massively shattered investor confidence in the share business”.

Opinions about positive impact of the package on the stock market are divided. Some say the amount is too small to absorb the unsold floating stock, notably from the foreign investors who are inclined to get out of the market after having sold their holding at a discount of 15 to 20 per cent.

But some others say the fund investment in the selected seven public securities including, National Bank, OGDC, Pakistan Petroleum, Pakistan Oilfields, could attract sympathetic buying in other blue chips still ruling at an attractively lower level giving the needed push to an ailing market.

“The default on debt repayment may not be around as IMF funding is said to be in the pipelines but 34 per cent fall in the value of the rupee and the widening fiscal deficit may not allow the consolidation forces to play determined positive role despite a bait at attractively lower levels”, some observers believe.

The important thing is how to rope in again the massively mauled general investor and to restore his confidence in the share business; they said adding “until he is back any bailout package may not evoke fresh buying even at the current bottom rates”.

However, it was widely speculated that fresh erosion in prices of leading shares may be resisted as the market will operate under the shadow of lower and upper circuit-breakers after the removal of the floor under the KSE 100-share index.

The trading on the stock market on Monday again resumed on a dull note as investors were not enthused by the last weekend positive steps taken by the central bank, although fresh fall in the value of rupee was arrested but banks continued to face the liquidity crunch.

Analysts said economic worries, mainly foreign press reports pointing to a possible default on foreign credits, continued to take their toll in the form of low volumes and absence of buyers even at the current lower levels.

“Pakistan immediately needs $3-4 billion to avert any major financial crisis on foreign debts”, they said and added “various options including the IMF are said to be under considerations”.

That is perhaps why the widely speculated revival of fund buying was not visible on any of the counter as was reflected by a fresh fall in the turnover figure to a new single-session low of 0.120m shares as compared to weekend’s 0.193m shares.

“There is a loud whispering in the trading hall that official fund buying may re-emerge after the index tumbles 20 per cent or to the level of off-the-floor current transactions”, said a leading stock analyst Tabish H. Rajabali. He said, “The removal of floor on the index on Oct 27, will give a fair idea about the future direction of the market”.

The margin calls by banks on some of the massively leveraged brokers also worried the investors and arrangements are being made by officials to avert possible default on the part of any one of them.

Analyst Hasnain Asghar Ali said, “With Oct 27 approaching fast, committed funds need to be arranged as the post-floor market could witness heavy foreign sell-off and blue chips will be available at well over 20 per cent discount”.

Forward counter: Trading on this counter is expected to be resumed after the removal of floor on the index as settlement of leveraged positions has been extended to 45 days.

—Muhammad Aslam