SHARES on the Karachi stock market remained under pressure as the mid-week attempted rallies failed to get through in the absence of strong follow-up support both from the genuine investors and the institutional traders.

The suspension of trading in the shares of Hub-Power Company followed by the reports of a forged fax message claiming that “its lenders have approved the recently declared 22 per cent final dividend”, worked against the underlying sentiment followed by the panic-selling in most of the pivotals. Although the dividend approval came at the weekened but the damage has already been done. The KSE 100-share index showed a fresh decline at 1,358.82 as compared to 1,381.71 a week earlier, eroding about Rs8 billion from the market capitalization.

The Hubco episode seems to have taken steam out of the perfectly sound market as investors withdrew to the sidelines, awaiting the outcome of probe ordered by the Karachi Stock Exchange high-ups in the affair.

The big question before the probe committee was, among other things, to name the brain behind fake faxed message and what to do with the share transactions followed by it. Whether or not to allow clearing of the deals transacted after the report of approval of the final dividend appears to be a tricky question, which worked against the underlying sentiment.

The market, which was eyeing the index level of 1,450 after the end of Afghan war followed by a stable government in Kabul was pushed into the reverse gear.

An allegedly fake fax message to the Karachi Stock Exchange authorities in the name of Hub-Power company claiming that its lenders have approved the recently announced 22 per cent dividend was the chief villain of the game. After the Hubco management denial, the KSE high-ups swung into action to find out the truth and the master-mind behind the sinister move, which worked against the interest of small investors.

There could be market chaos until the probe is completed and the falling volume tells investors will await the resumption of trading in Hubco shares, suspended after its management declaimed the fax message.

The KSE 100-share index fell to 1,348.50 points from the previous highs of 1,381.00 as the Hubco episode jolted the entire market at least for the near-term.

Earlier, the announcement of an interim cash dividend at the rate of 20 per cent by the ICI Pakistan toward the fag-end of the session generated a good bit of short-covering in it and some other blue chips, putting the market back on the rails. The ICI Pakistan board, which met here on Wednesday gave a pleasant surprise to even most well-informed brokers after declaring an interim dividend at the rate of 20 per cent. The announcement was welcome as it came in the backdrop of a previous blank year and 60 per cent right shares in 1999.

“The separation of the Pakistan PTA from the principal company shows that the ICI Pakistan is heading to attain the required financial viability and will soon resume its role of a market leader”, analysts at the W.E. Financial predict.

Continued losses in the PTA business after the withdrawal of a foreign joint venture partner a couple of years back has strained the ICI Pakistan’s financial position but the interim dividend tells it is all set to regain its past glory, they add.

The news was well received in the market as was reflected by a smart rally of 55 paisa to close at Rs45.30. During the last about two weeks it has risen to its recent peak level of Rs50 apparently on an anticipatory buying ahead of the interim, they added.

The record rise in forex reserves to well over $4bn and 45 per cent increase in the remittances was another aiding factor, indicating the strength of the rupee and the confidence of those sending money through formal channels.

“The strength of the local currency could well be an envy of the foreign investors as it ensures that the value of their dollar investment may not erode”, some leading stock analysts believe hoping a medium-term rally on the blue chip counters.

Stock analysts at the Finex Securities also hold the same view about the direction of the market as a record rise in forex reserves could prove an attractive bait for foreign investors in the coming weeks.

“With Afghan war losing relevance investors are having a second thought on the post-war economic realities and their likely impact on the stock trading”, says floor broker adding “the post-war scenario will be clear soon”.

Cement shares came in for renewed support under the lead of D.G.Khan Cement on reports that its management along with some others have converted their production process from furnace oil to coal, billed most cheaper. It could add significantly to their profits after cutting overhead costs.

The bulk of the support originated from the institutional traders who have sold earlier, followed by some jobbers but floating stock in some major shares still remains unabsorbed. However, a part of it has been lifted at the dips.

Most of the price changes were fractional, reflecting the absence of big ones. However, among the major gainers, which rose by Re1 to Rs2.50 Balochistan Wheels, the PSO, Shell Pakistan, and Clover Pakistan were leading.

Losers were led by the Colgate Pakistan, which came in for renewed selling followed by some adverse comments of sales, off another Rs4.40 followed by the Burewala Textiles.

Trading volume showed a sharp contraction partly because of suspension of trading in the Hubco shares and partly due to the advent of the holy month of Ramazan and curtailed business hours falling to 340 million shares from well over half a billion shares a week earlier.

Among the actives, Hub-Power, the PTCL, the ICI Pakistan, Sui Northern, the PSO, the MCB, Adamjee Insurance, Engro Chemical and Nishat Mills were leading followed by the Fauji Fertiliser, Japan Power,the D.G.Khan Cement, Lucky Cement, WorldCall Payphones, the FFC-Jordan Fertiliser and several others.—Muhammad Aslam.