Barring the week-end snap rally, stocks received massive battering during the last week, as combination of negative news halted the market’s upward drive amid fears of political uncertainty.

What seems to have worried investors was an apparent change in the US external policy on the role of Pakistan for its alleged nuclear links with other countries, and the threats of economic sanctions. Despite repeated denials by Pakistan, the situation could not change, which worked as a serious anti-market development, brokers say.

But reports that the PML-Q leader met the MMA leadership after the withdrawal of the MQM support to Jamali government has raised some hopes. “We will cover the deficit of votes to Jamali government in case of defections,” said a leading MMA member and the statement “worked as a morale booster for the shaky investors, resulting in an instant week-end rally”.

Earlier, the US threat of sanctions on Pakistan for its alleged nuclear links with North Korea, and the withdrawal of the MQM support to the newly-formed Jamali government in the centre triggered panic-selling from all and sundry, halting mid-way the market’s journey to the index level of 2,500 points.

The rally allowed the index to retrieve a good part of its earlier losses, by about 125 points at 2,286, as compared to last week close of 2,346 points. But the outlook appears bearish as there is no major change in the political scenario. The market capitalization also fell by Rs11 billion at Rs519 billion.

The last week, therefore, witnessed a quick retreat of market from eight-year high and what is in store for coming weeks is pretty difficult to predict, at least in near-term.

“Negative news followed in quick succession after mid-week, and the market being highly sensitive to psychological depressants finally gave in to the bear onslaught”, brokers say.

But the prevailing panic and mounting selling offers reflect that even strong financial support at this juncture may not be able to reverse the trend. Investors will not like to hold long positions even on blue chips counters until dust on the political front settles down, and normalcy returns to the corporate sector.

“The US friendship is a double-edged weapon as it works on both sides of the divide in typical conditions”, one broker jokingly say adding, the “psychological benefit of the US support, on which the recent sustained rally above the 2,000-point index level had build-up, has now turned into a veiled threat”. It took away over 125 points or six per cent and Rs25 billion from the market capitalization just in three sessions, creating panic-like conditions in the rings.

The current price flare-up was not entirely speculative, it has the support of higher corporate announcements, brokers say adding perceptions of a political peace in post-election era reinforced the idea of its sustainability.

But the US warning on nuclear issue and the MQM’s U-turn altogether changed the future market perceptions and investors are seldom wrong, they add.

The sell-off was more pronounced on the forward counter where the ICI Pakistan, the Engro Chemical, the MCB and the PSO received massive battering, falling sharply lower in each session on heavy selling at higher levels.

How would bulls react to the latest threat to dominance is unclear. Whether or not they will allow further price erosions or halt the decline will be witnessed during the next couple of sessions.

Opinions are,however, divided over the US threat, says an equity leader adding, “technically speaking the market was in an overbought position and needed a correction and it was hastened by the perception of a weak government at the centre”.

Being a frontline country in the US war against terrorism, Pakistan has denied its nuclear exchange linkage with North Korea — press-driven campaign against the most trusted ally of America continues to coin new theories about an alleged tie.

There was a confusion all-around in the backdrop of the US threat and as trading resumed, investors sold in a bit haste to get out of the market fearing a fresh sell-off.

“The threat is not genuine, bears have been on the look-out for an excuse to over-run the bulls and they have found one in the US threat”, claims a broker.

Leading stock analysts also term the threat a psychological move aimed for public consumption in the US and as far as sanctions are concerned they may not be around in the current typical political relations between the two countries.

“Pakistan has gone an extra mile to oblige the US and support its global war against terrorism, and Islamabad may not be repaid for the services, including the logistic support it has rendered during the last one year or so to Washington”, they say.

But the MMA threat after assuming power in the Frontier Province to stop current drive against the Al-Qaeda and to vacate the Pakistani air bases could upset the current norms of close relationship between the US and Pakistan in coming weeks, they fear.

The overvalued shares in all sectors, notably energy and chemical groups, led the market decline on active selling. The PSO and the Shell Pakistan were leading among the losers, followed by the Pakistan Oilfields, the Pakistan Refinery, the Unilever Pakistan and many others. Most recovered the major portion of losses suffered during the mid-week sell-off.

Bulk of alternate bouts of buying and selling remained confined to energy and chemical sectors, while banks and textile shares generally rose on active short-covering.

Some leading shares managed to finish modestly higher under the lead of Punjab Oil, Blessed Textiles, Faisal Spinning, Dawood Hercules and the Shell Gas.

Trading volume fell to 657 million shares from the previous over a billion shares, because of the absence of leading sellers and buyers in the backdrop of political uncertainty.

The Hub-Power, the PTCL, the PSO and the Sui Northern were, however, actively traded followed by the National Bank, the Fauji Fertiliser,the Engro Chemical, the FFC-Jordan Fertiliser, the Dewan Motors, the Nishat Mills, the Adamjee Insurance, the D.G.Khan Cement, the Pak-Suzuki Motors, the Pak PTA and several others.

FORWARD COUNTER: Speculative issues also came in for massive selling under the lead of the PSO, which fell sharply and so did the Engro Chemical, the Fauji Fertiliser, the MCB, the ICI Pakistan, although the week end covering purchases allowed them to finish partially recovered.—Muhammad Aslam