The physical activity may further slow down when trading resumes next week with the advent of Ramazan but those who had suffered massive losses during the current downward drift may have to await for some positive developments on the political front and return of the bulls in a highly oversold market.
The price-freeze imposed by the Karachi Stock Exchange authorities, though has halted fresh erosions, investors were still undecided how to react to official moves to put the market back on the rails.
“The price decline after a massive fall of about 40 per cent during the last two months was checked but it took away steam out of the market at least for the near-term”, analyst Tabish Hassan said.
Over the week, the KSE 100-share index suffered a massive fresh fall of 785.55 points at 9,208.26. The KSE 30-share index also fell by 1,157.04 points at 10,198.05.
This signals that the liquidity-starved market needs heavy cash injection and confidence-building measures as well as return of sanity to the political front. But no one could deny the fact that the market is now in a highly oversold position and share values are in attractive range of buying.
Those who could take financial risks and had enormous funds at their disposal could certainly opt for fresh buying backed by the current price-freeze, which has eliminated the chances of losses, some analysts said.
Split in the coalition after the PML Nawaz parted ways with the ruling Pakistan People’s Party also had its toll pointing to an alarming political polarisation ahead of the presidential election on Sept 6, which may prove to be a market depressant.
The next week could be crucial for future direction of the market amid hopes that further price erosions may not be there owing to freeze, but how investors would behave will finally count, analysts said.
Early last month, the KSE had opted for corrective steps to forestall further price erosions and revised upper and lower locks to 10 per cent and one per cent but they failed to lure investors as weaker rupee, political uncertainty and judges’ issue did not allow consolidation forces to play their roll.
“What ails the market is yet to be fathomed”, said a leading broker adding “restore sanity on the political front and investors both foreign and local will be back in the market”.
Earlier in the week, trading was resumed on a higher note amid active early short-covering in leading oil shares by institutional investors but the weakness of the leading bank shares weighed heavily against the sentiment.
The initial run-up was attributed to reports that a resolution leading to the restoration of judges will be tabled in the National Assembly, pushing the index to well over the base-level at 10,066.10 points on the perception that sanity will return to the polarised political scenario, analyst Hasnain Asghar Ali said.
But it failed to sustain the early run-up on reports that the PML-N leadership was in session to decide whether or not to stay in the coalition if the judges were not restored by Tuesday.
“For the last couple of weeks, the market is dancing to the tune of news from the coalition partners, analyst Tabish Hasan said and added “until dust raised on various issues by the contenders of power settles down investors are not that fool to put money in stocks”.
However, no one could deny the fact that based on the performance of the corporate sector, including higher cash payouts and bonus shares, the current attractively market could attract any amount of covering purchases if there is peace on the political front, he added.
Active foreign selling in the leading base shares, mainly MCB, National Bank, Engro Chemical and some others further dampened the investors’ buying enthusiasm, analyst Ahsan Mehanti said.
Although instances of selective buying on a number of counters did not want conflicting reports about the fate of the coalition at the centre as the PML-N parted ways on the judges’ issue did not allow the consolidation forces to play their supportive role, he added.
Forward counter: Speculative issues on the cleared list also followed the lead of their counterparts in the ready section and fell in unison despite smart rallies early in the week. While leading shares mostly ended further lower under the lead of oil and banking shares and blue chips, such as Engro Chemical, Dawood Hercules, Pakistan Petroleum and Pakistan Oilfields, EFU Insurance and others, some of them managed to recover a good part of initial losses after the price freeze under the lead of MCB, Pakistan Petroleum National Refinery, Shell Pakistan and Clover Pakistan.—Muhammad Aslam