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KARACHI, Jan 13: A mere 0.29 per cent rise in KSE 100-share index on Monday was thought to mean that investors were still considering discretion to be better part of valour. But some market gurus asked not to look at the index but watch the volumes.
“Trading on Monday was witnessed in a staggering 165 million shares,” said one as he spoke with emphasis to let the point sink: “And don’t forget all of that is delivery based”.
‘Badla’ (buying on borrowed money) being banned for the time being, sum in the Continuous Funding System (CFS MK II) stood at around Rs1 billion compared with Rs12 billion at this time last month,” he said.
Speculation may be the spice of trading but at the moment day traders stood outside watching the proceedings from over the fence.The foreign equity investors, who were eager to seek an exit, had either shrugged off the thought on account of low valuations or they were on the look out for buyers that were not forthcoming.
“A particular foreign fund wants to get 160 million shares in OGDC off its back, but buyers are scant”, says an analyst. Most market participants put the quantum of remaining foreign equity portfolio at around $1.2 billion.
And that included strategic investment and controlling stake by foreign parent companies as well. “My guess is that shares worth Rs500 million may be out there on the table, put up by the foreigners for sale”, says an analyst.
If most institutional investors had decided to procrastinate, should NIT be expected to expropriate sums from Rs20 billion of the Market Fund and leap forward to pick up the eight identified stocks? NIT Fund, which began buying on Monday, was nonetheless, in no haste.
Manager of the Fund and chairman-MD NIT Tariq Iqbal Khan told Dawn: “I am not there to support their (foreigners’) exit. With as much as Rs65 billion under management including the Rs20 billion State Enterprise Fund, NIT was understood to be in a commanding position, perhaps to set the direction of the market, but Mr Tariq argues: “My paramount interest is to protect the contributors of the Fund and seek for them the best returns”.
Reliable sources suggested that the State Enterprise Fund had been cherry picking stocks worth Rs400 million on the first day of its entry into the market on Monday. Most equity strategist were calling for caution as things were still murky.
“The market may keep on to the rollercoaster ride until June”, said an analyst, “by which time, dust would have settled on political and economic fronts, affording investors a clearer sight”.
Would the State Bank of Pakistan raise interest rates, which would be a clear negative for the market. Would India tire of flexing its muscles, which would relieve one of the many investor worries?
But market participants were arguing about the investors who had been mauled by the stock crash. The question was not if, but when, they would lick their wounds, shed their fears and once again give way to greed?
Redemption
The worst fears did not materialise as unit holders were not noticed to be gatecrashing to redeem their units in the equity mutual funds. In the days of persistent market fall, issuance, redemption and pricing of the equity funds had been suspended and many feared that the lifting of the lid would result in evaporation of assets of equity funds.
That was not to be. The largest open-end fund, NIT with Rs45 billion of its own under management, had faced redemptions of just about Rs715 million, said the NIT chairman, who noted that on the other hand, in the last six sessions, the Fund had seen an inflow of a healthy sum of Rs30 to Rs50 million per day.
Another Fund manager in the know of things said that overall it was the same with redemptions in other equity funds. Some 30 funds that invest in stocks hold Rs100 billion of unit holders’ money. Investors in equity funds, who had not the luck to step out in April last, were left holding the dirty end of the stick.
With Net Asset Values (NAVs) down in the dumps, unit holders were probably bidding their time, said an analyst. He argued that investors here were “more loss averse, rather than risk averse”, which he explained meant that investors would rather avoid losses than be wary of the risks in the first place. “Intelligent investing demanded opposite to be the case”, he said.
