THE Karachi stocks received massive battering for the second week in a row due to clearing problems in matured March contract amid reports that some leading brokerage houses have crossed their exposure limits. This was followed by panic-selling by all and sundry. But late on Friday, there were reports that the settlement of outstanding positions have been agreed between the affectees and the sanity was expected to return to stock trading possibly by March 28. It was satisfying to note that no member defaulted which in turn may defuse the panic and confusion.
Analysts had said that the bears targeted the leading base shares as they did to push the index to a new peak level of 10,355 points – the PTCL, the OGDC, the PPL, and the PSO, being in the forefront of falling blue chips.
Opinions were divided over the future direction of the market. Some say that the index level of 7,000 could be a sustainable level, while others claim that the market may resume recovery operations on the strength of leading base shares, which have reached attractively lower levels and ensure capital gains by next Monday.
On Thursday, small investors resorted to violence and police and rangers had to intervene to protect the cars and property of brokers and members but the trading activity remained far below.
In the process, the KSE 100-share index shed another 1,534 points or 18 per cent and eroded the market capital by Rs290 billion, leaving analysts guessing whether or not the index could regain its lost glory.
The stocks resumed trading on a terribly bearish note as leading bulls continued to liquidate their positions amid fresh panic-selling followed by reports of tension in Balochistan with fears of fresh clashes.
However, buyers kept to sidelines and did not make fresh covering purchases in an uncertain market as was reflected by a steep decline in the volume figure at 154 million shares.
Fears of a big clash triggered fresh sell-stops in the overvalued energy shares, notably the OGDC, the Pakistan Oilfields, the PPL and some others. These together hold a weightage of over 50 per cent thus pulling the index sharply down.
At one stage it hit the low of 7,900 points. Later it averted further fall on short-covering in some pivotals at the falling prices.
Analysts at the weekend session said that the bulls would be back in the market, and vowed to reverse the trend by next Monday signalling that enough was enough. However, new negative developments on the Balochistan front kept them at bay to manifest their presence in a bigger way.
Opinions are now still divided over the futures market outlook in the backdrop of massive reaction of 1,500 points during the last week. Some claim further erosions are still on the cards as bears have proved in more than one ways that the current run-up to the index level of 10,000 was not genuinely backed by the market fundamentals.
But others said that in a typical Pakistani market conditions there was no perception of massive retreat after prices set new all-time high records as they again crept back, though progressively, to those levels.
Energy shares led the market decline on heavy selling at the inflated levels followed by the cement, auto, fertiliser and chemical sectors.
Prominent losers were the Lakson Tobacco, the Pakistan Oilfields, Javed Omeer, Arif Habib Securities, the Bhanero Textiles, the National Refinery, the Aventis and the Wyeth Pakistan. Higher dividend and bonus shares by some other leading companies failed to motivate the investors in a falling market.
They were followed by the Pakistan Cables, the Rafhan Bestfoods, the Pakistan Refinery, and the Shell Pakistan, the OGDC, the PPL, the Pakistan Oilfields, the PSO and many others. Gainers were few and consisted of secondliners.
All was not bad with the broader market as a good number of shares managed to finish higher leading among them being the PICIC, the Fazal Textiles, the Clover Pakistan, the Bata Pakistan, the Glaxo-SKF, the Indus Dyeing, the Habib Insurance after a higher cash dividend of 30 per cent plus shares of an identical amount, and the Ferozsons Lab which posted gains.
FORWARD COUNTER: Owing to the settlement problem of the outstanding due in ruling March contract a section of the investors indulged in panic-selling in an apparent bid to bail them out from the fears of a possible default and in the process. Leading shares fell like the pack of cards and under the lead of energy sector.
The echoes of sell-off on this counter were judiciously picked by many in the ready section with an unprecedented fall on all counters.
—Muhammad Aslam