May 052008

AFTER having jealously guarded the index level above the barrier of 15,000 points for the last several months, the KSE 100-share index broke through it last week as investors were not sure about the political scenario amid conflicting legal interpretations of the judges’ issue. The index quoted at 14,956.82 point last week, eroding 140 billion from the market capital and 478 points from it.

Stocks, therefore, fell throughout the week but erosion were generally creeping and seldom attained proportion of panic or hasty selling, analysts said and added that bulk of the selling was from foreign investors who wanted to get out of the market fearing confrontations between the power contenders.

However, most of the overvalued shares did pass through successive lower locks on selling without finding many buyers. The market showed guarded optimism to the reported break-though in Dubai talks on the issue of judges.

Earlier, the deadlock on judges’ issue between the PPP and PML-N adversely affected the trading and share values fell like the house of cards on selling triggered by fears of collapse of the coalition government at the centre.

The KSE 100-share index breached through the barrier of 15,000 after several months and was last quoted at 14,956.82 points, off 478 points or 4.5 per cent, eroding well over Rs140 billion from the market capital. The KSE 30-share index also shed 636 points at 18,011 points.

The market passed through another lean week as pruning operations were well sustained on the overvalued counters despite higher corporate earnings and payouts by most of the leading companies. Even sharp recovery staged by MCB, the market continued to erode ground in the absence of fresh support.

Some technical factors and negative reports from the political front contributed to the extension of the sell-off, although it was well-absorbed on certain leading counters.

The weakness of the rupee has a close relationship with the share business as both provide safe haven to each other at the time of an impending crisis, but when both are under pressure the weaker link suffers the most, said a leading analyst Hasnain Asghar Ali.

That was why the market failed to extend the early run-up as unofficial devaluation of the rupee against the dollar by about Rs5 inspired both the local and foreign investors to sell off their shares.

“We are trapped by the double-edged weapon of declining share values and depreciating rupee and the continuous erosion in the value of our savings compels us to sell”, said a leading stock analyst Faisal A.Rajabali.

The opening, however, was on the higher side on active follow-up support aided partly by higher dividend and partly to active foreign buying in the leading oil shares, reflecting that investors had ignored the reports of fresh probe into the market crash of March 2005.

An idea of strong early buying euphoria may well be had from the fact that the KSE index crossed the barrier of 15,500 and was close to breach through the next barrier of 15,600 at 15,595.13 before bears fought back.

The interesting feature was that unlike the price movements in normal trading, there were odd changes in some of the leading shares, mainly in Indus Motors which witnessed a rise of Rs16.59, PPL Rs.6.07 and BOC Pakistan Rs5.98.

The fact that the index had earlier sustained over the last couple of weeks, its newly established base above 15,000 points reflected that it could rise further to its new target supported by positive news from political and corporate fronts, but news from Dubai worked against it and it fell below the barrier.

“The budget is still five weeks away possibly in the first week of June, most of the feelings originating from the relevant quarters about taxing the share business, the investors’ morale was high”, said a leading stock analyst Ashraf Zakaria said.

The firm opening despite negative news including reopening of investigation into the March 2005 market crash, which wiped out Rs700 billion from the savings of small investors, by the finance committee, and delay in the announcement of restoration of superior judiciary to the Nov 3 position, investors seem to be inclined to go by the market fundamentals at least for the time rather than any other immediate depressant, analysts said.

Higher interim dividend by OGDC and Fauji Fertiliser at 22.5 per cent and 35 percent respectively and some others did encourage fresh buying, keeping the market in a good shape.

Working results and EPS of some leading banks including Askari, Allied and United Bank were on the lower side of the analysts, but they failed to have a negative impact on the overall market trend perhaps owing to higher return to its shareholders by Bank Alfalah.

Positive earning reports from some other leading companies are due and indications are that the market could sustain the current levels.

Forward counter: Barring MCB, Engro Chemical and others, which managed to on-balance higher, other leading shares on the cleared generally fell under the lead of Bank of Punjab, Nishat Mills, OGDC, Pakistan Oilseeds, and some others amid active two-way activity. –Muhammad Aslam
Source: Daily dawn, 5/5/2008

 Posted by at 8:26 pm

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