STOCKS received a massive battering during last week as bears were in a devastating mood to revenge their total rout during the last couple of weeks and played their cards exceptionally well.
The bulls were perhaps caught unaware as they witnessed helplessly the index breaching its successive psychological barriers from the peak of 2,900 to 2,600. Excepting a brief respite late in the weekend session, all exit roads started from the KSE as they led to it some weeks earlier, leaving behind bulls licking their massive financial wounds.
The situation on the forward counter was not different where most of the market leaders witnessed their successive downward circuit breakers under the lead of the PSO despite hefty interim profit of over Rs2 billion and 60 per cent cash dividend. Engro Chemical and Fauji Fertiliser managed to recoup, in part, their initial losses.
The KSE 100-share index plunged by about 12 per cent wiping out Rs72 billion from the market capitalization during the last week on massive unloadings by both the weak-holders and the financial institutions amid fears of a settlement crisis in the backdrop of a record carryover business and higher badla rates. Both closing at 2,609.45 and at Rs574.866 billion.
The sell-off gathered fresh pace after the Securities & Exchange Commission of Pakistan (SECP) warned, through official notices, of having stretched capital adequacy limits, which created crisis-like situation in the carryover market amid fears of default.
After opening higher, stocks plunged on heavy selling in all the pivotals triggered by reports of some exposure problems of capital adequacy in the backdrop of heavy unsettled carryover business.
There was panic all around as investors, notably the weak-holders, were out to get out of the market after indulging in heavy selling. Prices fell like of house cards across-the- board as most of the current favourites, notably in the energy and the chemical sectors, remained the target of panic unloadings.
“Share values are falling as did they rise during last couple of weeks buying euphoria, sending messages that the run-up was speculative rather real,” one broker said, adding fear of possible US attack on Iraq is there, but there is no change in the domestic financial front. Rather financial results of some mega issues are due next week and analysts predict they could be in line with that of the PSO, which posted an after tax profit of over Rs2 billion and announced cash dividend of 60 per cent for the half year.
More stimulating corporate news are due next week, which are expected to forestall further decline in prices after generating covering purchases at the current lows, brokers said.
Although all the leading shares both on the ready and the forward counters breached through their circuit breakers, there was no reports of default on the part of any of the badla participants.
Carryover business last week stood higher around Rs15 billion, but carryover rates fell to 36 per cent from the previous 48 per cent, claimed to be highest-ever reminiscent of similar problems as witnessed last May.
“I don’t think all the investors are sitting on the volcano at least at this stage,” one broker feels, adding “the rebound is around after the market meets its technical demands in due course as it has still to absorb a lot of floating liquidity.”
The KSE index fell by about 400 points at 2,575.03, breaching four psychological barriers of 2,900 and 2,800, 2,700 and 2,600 just in one go, a new record in the KSE trading history.
However, it was not the largest single-session or weekly fall in the index as it had fallen by 129.20, 128.76 and 132.57 points on Jan 23, 1994, June 1, 1998 and May 20, 2000, respectively, because of various negative factors.
The largest fall so far recorded in its trading history was 171.26 points on October 2, 1997, owing to Wall Street crash and its fallout on the Asian bourses.
“But the current fall is not as damaging as the previous ones had been as it came in a highly overbought market, massive carryover business and record rise in badla rates and could be best termed as an overdue technical correction,” some analysts said commenting on the market’s steep decline.
Some others also believe the market has shed its extra load and bears may not be in a position to prevail for a longer period as economic fundamentals are encouraging after the clean bill given by the visiting IMF team and its statement that “Pakistan no more needs IMF financial support.”
But on the floor there was a confusion all around after mid-session as panic selling virtually flooded the market and share values of the blue chips fell like house of cards in the absence of matching buying from any quarter.
Leading losers were led by BOC Pakistan, Unilever Pakistan, Pak Reinsurance Company, Wyeth Pakistan, Mari Gas, Bolan Castings and Tri-Pack Films.
They were followed by Adamjee Insurance, Javed Omer, Attock Refinery, National and Pakistan Refinery, Pak-Suzuki Motors, Glaxo-Wellcome, ICI Pakistan, Dawood Hercules, Engro Chemical, Fauji Fertilizer, Shell Pakistan, PSO, Fauji Fertilizer, Pakistan Oilfields, General Tyre, Al-Ghazi Tractors, Pak-Suzuki Motors, Abbott Lab, Hub-Power and many others.
Some of the leading shares, however, did not follow the general trend and rose under the lead of, notably Noor Silk, Faisal Spinning, Fatima Enterprises, Dawood Cotton, Lawrencepur Woollen, Shell Gas, Javed Omer, Honda Atlas Cars and some others.
Traded volume fell below the 2.3 billion share mark to 1.927 billion shares owing to mid-week slowdown caused by steep decline in prices and the absence of leading sellers.
Hub-Power and PTCL led the list of most actives and netted about 60 per cent of the total volume followed by PSO, Sui Northern Gas, FFC-Jordan Fertilizer, ICI Pakistan, Fauji Fertilizer, Engro Chemical, National Bank, KESC, Pak PTA, D.G. Khan Cement, Pakistan Oilfields, PIAC, Telecard and many others in the energy, chemical and auto sectors.—Muhammad Aslam