Stocks passed through another lean week as investors were not inclined to take up new positions even on blue chip counters. This was despite above-the-market-dividend announcements made by some leading companies , notably the Fauji Fertiliser, the PSO and the Rafhan Maize Products.
However, the market is now ripe for a technical rebound at low levels. Most leading shares could attract any amount of short- covering by putting the market back on rails. "An attractive bait at low levels was there but all will depend on leading investors to gain from it by next week", some analysts said.
However, as speculated, the dividend-driven rally failed in manifesting itself in a bigger way on the Karachi bourses last week as institutional traders played on both sides of the fence.
Though, it was the turn of a bull market - possibly by next week. The bear onslaught was so aggressive that the KSE 100-share index breached through two psychological barriers, falling by 119.45 points at 5,289.92.
But indications show the bottom had already been touched and it will bounce back by next week on the strength of higher dividend by the PSO, Fauji Fertiliser, Clariant Pakistan, and on a high 90 per cent interim dividend by Rafhan Maize Products.
The market capital also suffered sharp setback of Rs32.454 billion at Rs1,428.698 billion as compared to 1,461.152, a week earlier as heavily-capitalized shares received massive battering.
A 75 per cent cash dividend by the Pakistan State Oil (PSO) making the total for last year to 175 per cent (previous 160) was on the higher side. But its management had omitted the widely-rumoured bonus shares of 20 per cent which worked against the cash payout as was reflected by the post-dividend selling and steep fall in its share value.
The PSO management may have skipped bonus shares followed by reports that the Privatization Commission intends to reinvite bids for its sell-off sometime in October. The Fauji Fertiliser, on the other hand, came out with a surprising interim payout of Rs4.75, Rs.3.25 per shares already paid plus the bonus shares of 15 per cent on an interim profit of Rs1.56 billion and the EPS of Rs6.09 per share.
An interim cash dividend of 25 per cent by the Engro Chemical and the Fauji Fertiliser despite higher sales was also on the lower side of the market, brokers said. "The crucial and an eagerly awaited week passed without causing ripple in the market but it accelerated the pace of selling on selected and overvalued counters", they said.
A second thought on the payouts by leading companies could trigger lot of covering purchases at current lows and they could lead the market's upward drive anytime. Some others said apart from pressure on the liquidity as massive funds were still tied to the IPO of Pakistan Petroleum, the other inhibiting factor was higher carryover rates. Until the market shed its extra weight, any recovery movement may falter halfway, they added.
However, none could deny the fact that there was nothing wrong with the market's basic fundamentals and there were reasons to believe that there could a rebound anytime after the financial institutions decide to re-enter into the market.
A steep fall in turnover figure indicated that investors were in two minds and could not precisely decide either to take new positions at dips. Higher carryover rates around at 13 per cent and a volume at 45 million shares dominated the trading as none was inclined to go beyond the pre-determined price limits and made guarded buying on undervalued counters.
"I don't think bears could push market further low", said a leading broker, adding, "it has entered a crucial week as board meetings of half a dozen mega companies were due and there were talks of higher interim dividend and bonus shares".
"There was a talk of liquidity crunch as massive amounts of cash found their way into the IPO of Pakistan Petroleum, and until it was back in the market the activity may remain sluggish", analysts predicted.
According to market sources about Rs20 billion have been invested in the PPL share offer and those having enough liquid funds fear panic sell-off any time because of overbought carryover market.
An idea of sluggishness may well be had from the fact that the traded volume fell to a year's low figure of 126 million shares as compared to 164 million, last weekend. Many may not have the idea of negative fallout of the IPO issue on stock trading, analysts said adding but what seems to had further aggravated the situation was the absence of financial institutions from the market for good reasons, too.
"There was a shared perception that bulls were planning to resume their upward march to the index level of 6,000 points, but before this prices of leading shares, notably the index-based, may be pulled down further for making purchases", brokers said.
As a result, the PSO, the OGDC, the PTCL, the Engro Chemical, the Hub-Power, the Fauji Fertiliser whose board meetings were due by the end weekend, fell sharply lower.
Some second liners managed to attract a modest support from genuine investors and managed to finish with modest gains under the lead of energy, cement, and bank shares.
Decline was widespread and covered the entire list. Leading losers were the Lakson Tobacco, the Siemens Pakistan, the Haroon Oil, the EFU Life Insurance, the Shell Pakistan, the Dream world, the Thal, the Arif Habib Securities and the Glaxo-SKF.
Some leading shares managed to finish on the higher side, prominent among them being Ahmed Hassan Textiles, Gadoon Textiles, Nishat Chunnian, the IGI Insurance, Nestle Milk Pak and Feroz sons Lab.
FORWARD COUNTER: Leading shares, notably the Pakistan Petroleum, the OGDC, the PSO, the PTCL and the Hub-Power also followed the lead of their counterparts in the ready section and fell, major losers being the PPL and the OGDC. The F.F.Bin Qasim Fertiliser, the Engro Chemical and some others came in for active support late and finished above their early lows.