A STRONG weekend rally enabled the share market to recoup some of its initial losses but the underlying sentiment remained unsettled as despite fund buying on selected counters at attractive levels, general investors did not indulge in buying owing to the prevailing political uncertainty.

The coalition government’s agreement on the impeachment of the president generated a good bit of short-covering at the weekend session amid hopes that political uncertainty would end in the coming weeks.

The KSE 100-share index shed 261.94 points at 9,909.45 as compared to 10,171.39 a week earlier, reflecting the weakness of leading base shares including oil, banking and insurance.

The snap rally at the weekend session after the coalition partners’ accord on impeachment of the president partly cleared the dust on the political front as was reflected by the market rally. But who will be the winner in the number game will be known in the coming weeks.

Analysts, however, hoped the rally was expected to be extended when the trading resumed next week on rumours that the government has allowed listed companies to purchases their shares up to 50 per cent of their reserves from the current 25 per cent and bank investment in T-Bills would be routed to the share market after their maturity, analyst Tabish Hassan said.

With the strong presence of market support fund, both these steps are expected to give the market the needed boost in coming weeks, he added.

Others said how the president would react to the coalition government’s move to demand his resignation or face impeachment would set the future course of market possibly by next week.

The coalition partners at the fag-end of the week announced at a press conference that they would opt for president’s impeachment if he did not meet their demand of resignation. They also claimed that they had the needed two-thirds majority in both the houses to go through the entire process.

But much would depend on investment plans in a highly oversold market of the recently set up Rs20 billion market support fund managed by the NIT. It had already made a modest buying showing on Thursday but how would it react in the post-impeachment political scenario would be clear by the next week when the president’s reaction will be known, most analysts believe.

The KSE 100-share index breached through the base barrier of 10,000 points on nervous selling after the MQM chief vowed to fight out the alleged Talibanistion of the city. The Sindh Chief Minister has termed it a bogey.

“The fall of the index into 4-digit figure, signals that all may not be well on the bourse in the coming weeks also until the government steps in to salvaging the situation after taking some more corrective steps”, most analysts believe.

Already weighed down by economic worries, falling rupee (Rs73 to a dollar), weak economy and high inflation and the threat of bloodshed in the city appears to be the last straw on the camel’s back, analysts said.

“The country risk factor in the developing situation, notably the US pressure to rein in ISI and do more in Fata may not be around but investors hate to investment until sanity returns to the capital market”, they added.

The recomposed 100-share index surpassed its base of 10,000 points at 10,304.72 on March 15, 2005 on heavy buying in OGDC and D. G. Khan Cement but breached through it at 8,050.25 on April 4,2005 for the first time and then steadily soared to all-time high so far at 15,674 points early this year.

The current breach is the second in its eight-year career and more disturbing amid loud whispering that that it could fall to any lows in the developing scenario on all fronts, some analysts fear.

News from the political front, mainly about the future of the coalition, leading to uncertainty on all fronts needed to rope in investors in a falling market and at the current attractively lower levels, they said.

The opening was on the higher side as the KSE index earlier rose by 111 points on reports of settlement of margin calls on well over three dozen brokers in last Saturday’s special session but a galore of fresh lower locks in the current session could further aggravate the situation, said a leading broker.

Forward counter: Most of the leading shares wiped a good part of the previous losses under the lead of MCB, Pakistan Petroleum, National Bank, Engro Chemical and some others but the on-balance closing was again on the lower side owing to early selling.—Muhammad Aslam