AFTER confidently breaching through the psychological barrier of 10,000 to hit the all-time career-best level of 10,509.13 points, the Karachi Stock Exchange’s 100-share index finally gave into the mounting selling pressure from all sides to finish well below that level, at 9,499.42. News of dividend and bonus shares by the Unilever Pakistan, the Pakistan Gum and Chemical and the Reliance Insurance were in line with the market thinking but short of investor-expectations of a cash dividend of 15 per cent plus bonus shares at the rate of 20 per cent by the National Bank of Pakistan. The mid-week sell-off, which often assumed alarming proportions, created panic among investors. The day-traders and short-term dealers hastened to get out of the market after unloading their positions at falling prices.
The KSE 100-share index in the process shed about 800 points or eight per cent and closed well below its all-time best level of 10,5009 points — at 9,499.42, eroding about Rs200 billion from the market capital.
Technical reaction was overdue in a highly overbought market but it was terribly short and came just at the heels of a record increase in the index, giving a little breathing space to investors. The buying euphoria turned into panic selling.
“A typical Pakistani investor-mindset was always on higher side, no one thought that the rising market had its own limitations and could take breather any time”, some analysts said. “Any snap reaction creates panic-like conditions and everyone abandons the arena leaving behind a long list of casualties”.
Stock prices should fall after each flare-up as the process adds to their inherent strength rather than working against them in technical terms. I don’t think this was the end of the market’s current rise, commenting on the snap retreat an analyst said adding, “it will resume an upturn after passing through consolidation phase as leading bulls were now eyeing the index level of 12,000 on short-term basis”.
Despite negative comments on the persistent rise, notably after the breach of 8,000 and 9,000 barriers, the index did not look back and finally allayed the fears of a massive shakeout anytime in an artificially propelled rise but it proved to be a major breakthrough based on some financial facts.
“It was a judicious blend of both foreign and local buying on the selected counters which in turn evoked heavy sympathetic buying on other counters, intensifying the bull-run”, analysts said.
The Merrill Lynch’s M.D. visit to the KSE and discussions with the high-ups seemed to have sent positive signals among local brokers amid reports that it had already entered the market and was making selective buying.
The other positive development was the market depth measured by its capital, which was now around $50 billion and provided a level-playing ground to the foreign investors. Recent comments of the chief of the New York Stock Exchange on the performance of the KSE and its capital base had been another pointer for the advent of foreign fund buying, some others said.
The breach of 10,000-point level was significant in more than one ways. On one hand it ended the speculations whether or not the current unprecedented rise was genuine while on the other it provided bait to foreign investors.
“The Pakistani stock market was a typical example where investors opt from dividend yields to price-earning multiples, which now, were in the driving seat”, analysts said. And that could lead the way to new records in coming months, some technical corrections here and there, notwithstanding, as all indicators point to a continued bull-run.
“Since January, the market had risen by about 61 per cent and it appeared pretty difficult to jolt it down from current peaks”, said a leading broker.
Mid-week retreat of the market from its all-time peak levels was led by leading energy shares, notably, the PPL, the OGDC, the Shell Pakistan, the PSO, the National Refinery, the Attock Petroleum and blue chips such as the Wyeth Pakistan, the Unilever Pakistan, Dawood Hercules, the Engro and Fauji Fertilizers, the Pakistan Oilfields, Javed Omer and many other. Although on-balance closing was not that alarming as only extreme gains were trimmed.
Leading gainers included the OGDC, the AKD Securities, Treet Corporation and the Aventis, followed by the Clariant Pakistan, the ICI Pakistan, the Indus Motors, the Engro Chemical, the PPL, and the IGI.
Losers were led by the Attock Petroleum, the OGDC, the PPL, Colgate Pakistan, the Unilever Pakistan, the Grays of Cambridge, and the Nestle MilkPak. The largest fall was noted in the Wyeth Pakistan, which was marked down by Rs118. The Gadoon Textiles, the PNSC, International Industries, the Attock Refinery and the Gatron Industries also suffered fall.
FORWARD COUNTER: Barring the PTCL and the PPL and some others in the fertilizer sector which suffered sharp decline on active selling, the largest decline of Rs33 was in the PPL. The OGDC and the PSO managed to finish with good gains but the National Bank suffered sharp pruning in post-dividend trading.—Muhammad Aslam