A SNAP weekend rally pulled the market out of bearish mood as investors were back in the arena and made active covering purchases at the lower levels allowing the KSE 100-share index with a clipped loss.
Massive short-covering both by local and foreign investors on the oil counter followed by reports of higher local oil production above six per cent and a fresh increase in the world oil prices above $112 per barrel was the chief factors behind the market’s rebound.
The weekend rally generally paves the way for its extension to the trading to resume next week, which in normal trading sessions is billed as a vehicle to shed an extra load by the weak holders and short-term dealers.
However, at the weekend session there was no trace of Wednesday’s city violence which had jolted a stable stock market, and investors had hastened to liquidate long positions fearing further deterioration in the law and order situation.
But it went to the credit of its inherent strength that strong buying at dips absorbed bulk of the selling followed by strong rebound led by oil, cement, banking and insurance sectors and the blue chips on other counters.
The KSE 100-share index, seeking a level of 16,000 points after having crossed the barrier of 15,500, was intercepted by incidents of violence and political tension. It finally closed with a fall of 38.85 points at 15,430.89 as compared to 15,469.74 a week earlier.
Meanwhile, the KSE 30-share index also fell modestly at 18,792.76 as compared to previous 18,859.86, off 67.10 points.
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Apart from negative background news, the market sentiment was also weighed down by talk of taxing share business, withdrawal of capital gain tax facility and some changes in other taxes by the new government.
It was in this background that the MK-II made its debut on April 7, ending ceiling of Rs55 billion on the CFS funding. Its financing limit under the MK-II was raised to Rs85 without any deposit margin but beyond it 10 per cent.
The new CFS made enormous liquidity at the disposal of prospective investors but it failed to have a positive impact on the share business owing to some ugly political events including manhandling of some ex-ministers. Trading, however, resumed on a higher note as investors continued to build up long positions on cement, insurance shares and some blue chips amid market talk of strong presence of foreign buying.
The early week buying euphoria was also well-reflected in the KSE 100-share index, which maintained its weekend run-up and soared to the highest level so far at 15,589.32. The strength of leading base shares, notably MCB, OGDC, Engro Chemical Pakistan, Arif Habib Securities and Bank Alfalah contributed to the initial robust opening.
But the closing was on the lower side as it ended with a sharp fall on snap technical selling by some of the leading punters. Its junior partner also followed it.
“The snap reaction may have been caused by some negative developments in the Sindh Assembly session followed by walk out by MQM on reports of maltreatment of the former chief minister and federal minister Sher Afghan”, said analyst Ahsan Mehanti adding, “essentially I will call it technical correction in an apparently overbought market”.
There was nothing wrong in the background corporate news to which the reaction could be attributed, he said. “A 37.5 per cent cash dividend by Lakson Tobacco Company, whose management has decided to close local production facilities following massive losses caused by Dec 27 burning of the factory as a reaction to Benazir Bhutto’s assassination, shows that sharing of profits with shareholders is the chief priority,” he says.
“Foreign investors are in the market in a big way and may have a long-term planning and sound portfolio building though on selected counters”, another analyst Faisal A. Rajabali said. “The picking up of stocks, mainly in the banking and oil sectors show that they mean business”, he added.
Dividend season for the financial quarter ended March 31, was just around and indications were there that corporate earnings of most of the companies would show payouts on higher side and in line with analysts’ predictions, which would push the market higher in coming weeks, he said.
MCB, Bank Alflah, Arif Habib Securities, OGDC, Engro Chemical, Nishat Mills were in the forefront of the rising shares, which ended with sharp gains even at the highly inflated levels. But late selling allowed them to close with clipped gains.
Forward counters: After midweek decline caused by the city violence, speculative share on the cleared list managed to finish with modest to good gains under the leading oil shares, maily Pakistan Oilfields, Engro Chemical, Nishat Mills, OGDC, D.G. Khan and Lucky Cement and some other blue chips amid active trading.—Muhammad Aslam
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