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A STRONG mid-week rally linked to amicable settlement of the Client-level netting (CLN) issue boosted trading on the stock market last week as investors’ fear about its negative fallout on their exposure limits were allayed.
A significant increase in the daily volume after weeks of lean sessions reflected that investors had accepted the new regime seeking further transparency to the share business.
Although results of major listed companies have been announced, higher dividend plus bonus shares coming from the insurance sector could keep investors active during the forth coming sessions.
Bulk of the short-covering, however, remained confined to banking, oil and cement sectors as investors were not inclined to miss an attractive bait of capital gains plus higher dividend.
Stocks earlier in the week, however, was highly volatile as both negative and positive news followed in quick succession never allowing investors to plan on long-term basis in a market still promising a fair return on investment.
The KSE 100-share recovered from the mid-week lows and finished higher by 279.77 points at 11,413.12 as compared to 11,133.35 points a week earlier, adding Rs70bn to the market capital at Rs3109bn. The KSE 30-share index also rose by 369.43 at 14,477.32.
The major factor, which pulled the market out of the prevailing sluggishness was an amicable settlement of the issues linked to the CLN as was evident from a significant increase in the daily volume. As the brokers’ fear about an increase in their exposures was removed by the SECP officials the market came into action.
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But the mid-week foreign press reports and renewed fall in global markets scared investors and their weaker links indulged in near-panic selling. The situation was further aggravated by a threat linked to Dick Cheney’s recent visit to Pakistan on the Taliban issue “act now or let us do it”, sent shock waves among the investors followed by market’s plunge.
Some leading analysts attributed the sluggishness to prevailing tension in Pakistan-US relations over the Taliban issue and successive veiled threats to Pakistan “to do more”.
“The implementation of the CLN had already taken its toll last week after the KSE 100-share index had shed 500 points,” leading analyst Ashraf Zakria said. “The thaw in ties with the US appears to be a new element, which has crept into stock trading”.
No one could dispute the fact that the CLN regime will add to the share transaction costs of both the buyers and the sellers, he said adding but what worried the brokers was the fear that small investors might be eliminated from the share business.
The steep fall in the daily turnover figure at 117m shares reflects the developing situation on the share market and news from the political front could further aggravate the situation.
All leading base shares, notably National Bank, Pakistan Petroleum, fell around their lower locks, plunging the index to new year low.
“I don’t think the current run-up is overdone”, said analyst Ahsan Mehanti. He predicted that the market would be back on its bull trek after the current psychological depressants found their logical end.
Another analyst Hasnain Asghar Ali said background news, notably from the external front were not positive, the unloading by some foreign investors and the activism being shown by the institutional traders could save the situation forestalling further market decline.
News of acquiring controlling shares (93.4 per cent) of the Prime Bank for Rs13.8 billion at Rs54 per share by the ABN Amro, however, did not stir activity on the banking counter much owing perhaps to other negative factors.
FORWARD COUNTER: Leading shares shrugged off early sluggishness and managed to finish with fresh gains on active speculative buying both from the general investors and the financial institutions.
The Muslim Commercial Bank led the list of top gainers followed by PSO, National Bank, Pakistan Petroleum, Pakistan Oilfields, OGDC, D.G. Khan Cement, Lucky Cement, Alfalah Bank and some others.—Muhammad Aslam
