Stocks last week fell like the house of cards on massive selling originating from all quarters. The bewildered bulls failed to absorb the mounting selling and allowed the blue chips to erode a substantial part of gains netted during the last two weeks’ persistent rise.
There was a near-panic in the market after the KSE index lost 202 points and the market capitalization a hefty Rs42 billion in two sessions, signalling the setting in the overdue technical correction in a highly overbought market.
Higher carryover business and fresh notices to the KSE members to reduce their exposure limits after collecting margins from their clients appear to be chief destablilizing factors. This was done to avert any possible default and heating up of the political scene behind the massive reaction.
The future direction of the market is evenly balanced but some leading bulls are not inclined to entertain bearish ideas as in their opinion, the best is still to come.
“Owing to persistent run-up during the last two weeks, the market was in a highly overbought position and needed a correction and that came in the form of unloading at inflated levels”, market sources said. “Only extreme gains were pared off on blue chip counters, while they managed to hold on the steep gains netted during the last couple of weeks”.
After setting new records both in terms of the index and the capitalization, the stocks tasted their maiden shock as bears moved in and indulged in near-panic selling to halt the market’s sustained upward drive of the previous two months.
The KSE index, which had hit its so far all-time peak level at 4,346 points after breaching successive psychological barriers and the market capitalization at Rs962 billion or about $17 billion, made the local stock more attractive to foreign investors. Some are claimed to be moping the floating stock of the PTCL and the Hub-Power.
It, however, failed to maintain its best level and fell by 80 points or 2.25 per cent on late profit-selling and finished the week at 4,142.46 points as compared to 4,322.93, a week earlier eroding about Rs43 billion from the market capitalization.
The technical reaction was long overdue in a highly overbought market but a chain of positive news, notably higher corporate dividend delayed it as investors held on to their positions rather than taking profits to have both dividend and capital appreciation.
“I don’t think the current run-up is overdone”, predicts a leading stock analysts”, the market is expected to resume its upward drive after meeting its technical demands”.
Some good companies, notably the Pak-Suzuki Motors and the Shell Pakistan — whose board meetings are due next week — are still on the cards and both could keep the market in a good shape, he said.
Below market expectations of the final dividend of 70 per cent by the PSO — making the total for the last year to 160 per cent minus the bonus shares which investors have been expecting — halted its upward drive on heavy post-dividend selling.
The final bidding for its sell-off was also announced in October but the exact date was not disclosed which analysts fear could lead to further postponement and shed an extra load in it, pushing its price down from the peak level of Rs322 to 279.35 for its 10-rupee share.
Although minus signs managed to force a strong lead, the prunings were modest in a highly overbought market and did not reflect bulls could loosen their grip on the price line at least for near-term.
However, the negative fallout of the rumoured failure of the MMA-government talks on the LFO is still to come as investors are carried over by other positive developments — notably higher corporate results and dividends.
“I don’t think bears could have a field day before the index touches it new chart point of 4,500 points”, leading stock analysts predict,”Bears should line up massive amounts of hard cash, which they possibly could not to overrun the bull market”.
The weakness of the broader market and heavy selling in the overvalued stocks reflect that the correction is still far away, they add.
Some others say that no one could deny the fact that the market is in a highly overbought position and is sitting on the volcano, which could explode anytime.
“How the market will react to the opposition’s Independence day rallies and further developments on the LFO and their fallout will set the future direction for the market to follow”, he says.
The opening was, however, on the higher side as the KSE 100-share index early was up by 18 points but the mid-session saw heavy alternate bouts of buying and selling as bulls were not inclined to leave the arena and absorbed the bulk of unloading at the dips.
Over the last two weeks, it has risen by about 16 per cent, after breaching the successive barriers above the 4,000 points level adding about Rs65 billion to market capitalization at Rs958 billion and needed correction on technical grounds alone.
But the bear onslaught was, too feeble to cause major dents in the price structures as the bulk of the selling was directed against the volume leaders — the PTCL and the Hub-Power.
Leading shares maintained their upward drive under the lead of Attock Refinery, Nestle MilkPak, Javed Omer, and some others including Gatron but the largest rise and fall was noted in the Shell Pakistanis on heavy buying and selling at the inflated levels ahead of its board meeting.
Other good gainers were led by the Adamjee Insurance, Askari Bank, Burewala Textiles, Pak-Suzuki Co, HinoPak Motors, Fauji Fertiliser and the Pakistan Cables which posted gains. But the largest rise of Rs85 was noted in the Wyeth Pakistan.
The PSO and the Treet Corporation led the market decline, off sharply on selling followed by the Sapphire Fibre, Pakistan Oilfields, Pakistan Refinery, Honda Atlas, Dawood Hercules, Glaxo-SKF, Atlas Battery and the Unilever Pakistan.
Trading volume was maintained on the higher side above 2 billion share mark — thanks to the two-way activity in the Hub-Power, the PTCL, the PSO and some other pivotals. Other actives were led by the FFC-Jordan Fertiliser, the Fauji Cement, the PIAC, the Sui Northern Gas, the Pakistan Oilfields, the Nishat Mills, the KESC, the Maple Leaf, the D.G.Khan Cement and others.
FORWARD COUNTER: Weekend selling clipped most of the gains in the pivotals, notably the PSO, the Hub-Power and the PTCL and so did others under the lead of the Sui Northern, the MCB, the Fauji Fertiliser, the Engro Chemical and some others. Bulk of the selling originated in sympathy with the ready counter.—Muhammad Aslam