The last week of the year finished on a terribly bearish note as the KSE 100-share index received massive battering owing to panic-selling triggered by fears of war with India amid reports of massive troop build-up on borders.
Added to it was quick but negative diplomatic moves by India including banning all overflights and recalling back its high commissioner and Pakistan moving in with tit-for-tat feeling. All these moves were negative to an essentially sensitive market, which abhors war or tension on the borders.
The KSE 100-share index, which has breached through the psychological barrier of 1,400 points last week plunged by 12 per cent or 135 points at 1,269.21 as the leading base shares, notably the PSO, the PTCL and Hub-Power fell to their year’s low.
During the year, the index has touched the peak at 1,550.42 on Jan 3, and the lowest at 1,075.16 on Oct 2, and finally at year-end stood at 1,269.21.
The total market capitalization soared to the year’s highest level of Rs392.903 billion on January 3, touched the lowest at Rs272.608 billion on Oct 2 and finishing the year at Rs295 billion mark.
“It was an eventful year the post-Sept 11 period activated the US-led coalition war on Afghanistan against terrorism, which inflicted a serious setback to the Pakistan economy”, stock analysts said.
The removal of economic sanctions, credit rescheduling, removal of tariff by the EU and steady inflow of foreign assistance boosted the market sentiments but temporarily, as the fears of war with India triggered panic-selling. Investors ended the year with these apprehensions.
There was an uncertain confusion all around as everyone was in a bit haste to get out of the market, as rumours of an imminent Indian attack dominated the trading.
Both Pakistan and India appear to be heading for a major showdown as the progressive political moves indicate. But how would the US react to this situation will essentially decide “whether or not they should go for a war”.
However, no one could deny the fact that the war euphoria is there and the recent decline of the Mumbai Stock Exchange could well be a prelude to an imminent conflict, most leading floor brokers predict.
The opening itself was terribly nervous followed by the reports of early week skirmishes along the international borders and massive Indian troops build-up trickled in selling from the weakholders and the jobbers intensified.
Many leading brokers claim the market should have collapsed if the KSE authorities had not applied the rule of circuit-breaker under which a fall or rise beyond Rs1.50 in a single session is not allowed to protect the interest of small investors as well as market manipulation by the “big ones”.
However, this was not the largest single-session fall as it has dropped more than once in late 90s above 100 points, the largest being 129 points on various negative news including the dismissal of elected prime ministers and no confidence moves against them.
“There were sellers all around but not many buyers allowing the prices to drop like nine pins across the board under the lead of heavily-capitalized shares such as the PTCL, Hub-Power, the PSO and the ICI Pakistan, having a formidable weightage in the index”, stock analysts at the W.E. Financial Services said.
An idea of war fears followed by massive panic-selling on the local market may well be had from the fact that it battered the index by 81 points, while its Indian counterpart Mumbai Stock Exchange index showed only a modest decline of 12 points in a single session, they added.
“The steep decline just on reports of massive Indian troop build-up and border tension, speaks of the vulnerability of the KSE and weak footing on which it is operating and the strength of its Indian counterpart”, stock analysts at the Ali Hussain Rajali Securities said.
“It also reflects that war with India may not be around despite reports of war phobia as there is no panic among the investors there”, they say.
What seems to have created panic in the market was the rumour that the foreign investors are getting out of the market in a bit haste, which the locals have taken as a prelude of an imminent war. Foreign investors generally resort to panic-selling in war-like conditions.
“Unlike the previous market destabilizers, the money did not outflow to dollar, although it ruled strong on some other counts and so did the gold”, brokers said.
It was in this background that the broader market showed widespread losses, while the pivotal, notably the index shares received massive battering under the lead of the major base shares, the largest decline of Rs2.70 and 6.35 being in the ICI Pakistan and the PSO.
Minus signs dominated the list under the lead of energy and some foreign shares under like the PSO, Shell Pakistan, Al-Ghazi Tractors, the BOC Pakistan, Engro Chemical, Adamjee Insurance, Fauji Fertiliser and Glaxo-Wellcome Pakistan, largest decline being in Shell Pakistan, the PSO and some other pivotals.
But the largest decline of Rs20 was recorded in the Grays of Cambridge off Rs20 followed by the Lever Brothers, down Rs11. All other leading shares also fell in unison.
Among the gainers, Dewan Mushtaq Textiles, Abbas Engineering and Wah Noble Chemical, Bata Pakistan, Ferozsons Lab, Elite Publishers and some others were leading.
Trading volume was maintained on the higher side thanks to large daily turnovers which rose to 246m shares despite a closure on account of the birthday of Quaid-i-Azam.
About 70 per cent of the total volume was netted by the two pivotals, the PTCL and Hub-Power, followed by the PSO, the ICI Pakistan, Fauji Fertiliser and Engro Chemical.
Other actives were led by the Sui Northern Adamjee Insurance, the MCB, Nishat Mills, Fauji-Jordan Fertiliser and similar trading pattern was witnessed on the forward counter where bulk of the speculative activity remained confined to the Hub-Power, the PTCL, the MCB, the PSO and Engro Chemical.—Muhammad Aslam