KARACHI, Aug 2: The special trading session at the Karachi Stock Exchange held on Saturday proved to be a resounding success as the bids received for purchases were as much as Rs2 billion more than the offers amounting to Rs5 billion received from investors in ‘distress sale’.
An announcement made by the KSE in the evening said that the total amount of bids received for purchase amounted to “over Rs7 billion”. Offers were received in 42 scrips eligible for CFS and future markets.
Major financial institutions including National Investment Trust (NIT), Equity Market Opportunity Fund (managed by NIT), National Fullerton Asset Management Limited (Nafa), Arif Habib Group, JS Group and many other prominent financial institutions and members of the exchange were said to have participated as buyers in the special trading session.
The Exchange was obviously pleased with the results of the special trading session, which gave “relief to general investors” and the “objective of providing investors an opportunity to exit the market” was achieved.
Even when major market participants pull in their strength and energy in making such efforts to provide relief to investors trapped under the ‘lower locks’, there have been detractors asking unsavory questions, the most pointed of them being: Why did the purchasers show so much interest in buying stocks in the special trading session, when those scrips were earlier available at the same price in the regular market? And there are more: Would the buyers hold on to the stocks bought at the low KSE-100 index level of 10,171 prevailing today, or would they dump them when the market takes a say 1,000 points leap?
Unconfirmed reports suggest that a big chunk of purchases worth Rs4.3 billion in the previous special session held on July 18, finally found their way back into the regular market. But surely in a buyers market, those who purchase cannot be compelled to retain stocks for any specified period.
Some market pundits, who viewed the process with skepticism, said that the trouble with the session was that if buyers in the special session would hold on to the stocks for a short time until they attract some value and sell them in the market, to be picked up by investors who later turn into “distressed sellers” and the regulators step in to bail out such investors through a special session convened through the National Clearing Company and not the regular market, the process can go on and on and on.
But even those detractors agreed that until a more acceptable alternative was found, there could be no better way to provide exit to investors trapped behind ‘lower locks’.
A learned market participant suggested that the best way was to educate buyers of stocks particularly in CFS market not to give way to greed. The rule of ‘caveat emptor’ (buyer beware) applies.
Market strategists admit that when investors throw caution to the wind and bite more than they can chew, the inevitable result is a series of lower locks; fantastic sums in losses; pelting of stones at KSE door and windows and a final succumb to the pressure of selling their holdings at what appears to be throw-away prices.