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The KSE 100-share index virtually raced towards its pre-reaction level last week as investors covered positions at the attractively lower levels caused by the early panic selling triggered by the murder of Benazir Bhutto in a terrorist attack.
The market seems to have fully absorbed the shock of death of Benzair Bhutto as positive market fundamentals, notably higher corporate earnings did not allow investors to sit on the sidelines and they opted for short-covering almost on all the counter followed by four dozen upper locks in leading shares.
The notable feature of the snap recovery was that it was entirely an indigenous product as foreign investors still in tow minds about the direction of the market and law and order situation stayed away.
Stocks were back on the rails at the fag-end of the previous week as investors led by the financial institutions made panic covering purchases at the attractively lower on all the counters under the lead of oil, ,banking, auto and pharma sectors. The KSE 100-share index finished the week with a clipped loss of at 897.22 points at 14,250.60.
The market opened the new year account on a bearish note but subsequent positive developments allowed it to make a bullish start after interruption caused by the murder of Benazir Bhutto had been overcome.
However, the year that faded into history on December 31, 2007 has more than one all-time high records to its credit-- both in terms of prices flare-up, index levels and market capital at 14,814.00 points and Rs.4.5 trillion .
The market’s buoyant mood was also well-reflected in the KSE share index which soared to its pre-reaction level and halved the losses suffered in the post-Bhutto assassination trading on panic selling.
Apart from steep rise in the world oil prices to a record high of $100 per barrel, the other aiding factor was the president’s address to the nation which restored the investor confidence in the share business as was reflected in the sharp recovery on all the counters.
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Postponement of national elections to February 18, probe in Benazir Bhutto’s murder by the foreign experts along with the locals, perception of a relative peace on the law and order front before the polls and advent of foreign buying were said to be behind the smart recovery.
The snap rally reflects that the basic market fundamentals are bullish and what they need is peace on the political front. Reports of higher corporate earnings, for the year ended Dec 31,2007, notably by the banking and oil sectors also aided the underlying sentiment.
However, stocks opened the new year account on a terribly bearish note as post-Benazir Bhutto assassination panic selling again manifested itself in a bigger way amid an uncertain political and economic outlook but unlike the previous session there were buyers at the dips.
The KSE 100-share index early plunged by 10 percent or 1,400 points but managed to finish partially recovered on strong short-covering at the lower levels.
The oil, banking stocks which led the early market decline under the lead of OGDC, Pakistan Petroleum, Pakistan Oilfields, National Bank and MCB which faced lower locks as their values had declined by five per cent for the second day in a row raced toward their pre-reaction level at the fag-end of the week.
The bulk of selling in these shares came from the foreign investors as they still hold a premium over the purchased prices Opinions are divided over the future market outlook. Some analysts said, the market has already undergone a technical correction and could resume its new year rally despite tense political situation.
But some others say the market could face further price erosions that are technically necessary for its financial health on which a sound new year rally could be built-up.
“The market has risen by about 4,000 points during the momentous year that has just faded into history on a poignant note adding over Rs.4.00 trillion to the market capital”, a leading analyst Ambereen Jiwani at Invest Capital said.
She said if a thousand or odd points are chipped away from the massive rise, it does not necessarily can be called the return of the bears, adding that the market has more than one reasons to make the new year trading more rewarding for the general investor.
Analyst Ahsan Mehanti said, the market did mourn the death of Benazir Bhutto amid political turmoil but its base is not that weak to be jolted by snap psychological shocks.
He said, unsettled leverage positions for the rung off December contract also took its toll in the absence of buyers.
FORWARD COUNTER: Speculative issues on the forward counter, however, could not fully recover from the initial losses and closed lower under the lead of Arif Habib Bank, National Bank,MCB, but OGDC, Pakistan Petroleum, Pakistan Oilfields, D.G.Khan Cement and some others managed to finish with smart rallies and ended higher.—Muhammad Aslam.
