THE share market turned extremely sluggish at the fag-end of the last week as rumours about the president in the backdrop of lawyers’ long march and attack by Nato forces inside Pakistan territory killing about two dozen persons, weighed heavily against investors’ mind compelling them to play safe.

What worried investors the most was the US threat to launch more attacks on the border areas despite Pakistan’s strong protest over the missile attack and its impact on the share market in the coming days.

“The post-budget buying euphoria may not have run its course, investors certainly had an overview of the developing political situation and fears of other negative developments adding to the prevailing political uncertainty,” brokers said.

The post-budget trading on the stock market was, however, fairly brisk as investors welcomed new fiscal relief to the corporate sector, mainly the two-year exemption on the Capital Gains Tax (CGT) and status quo on Capital Value Tax (CVT), being one of the major demands of the brokers.

After fluctuating either-way, the KSE 100-share index finally ended at 12941.56 as compared to previous weeks’ 13,134.56, off 193 points, reflecting the weakness of some of the leading base shares.

Although initial post-budget buying euphoria could not be sustained on late profit-selling triggered by fears of law and order situation after the participants of the long march arrived in Islamabad possibly on the weekend session (Friday).

Analysts said investors were still in the process of having fuller view of the new taxes and relief and their inter-sector impact on stock trading, the market’s full reaction is expected by next week.

“The direction of the market will be set if all goes well on the judges’ issue followed by their restatement,” they said. “Budget is very good as far as bourses are concerned, but it needs calm on the political front and a consensus among contenders of power to reinforce the shattered confidence of investors in the share business,” some others said.

“President’s refusal to resign and the talk of his impeachment is another immediate market depressant which may halt any budget-inspired rally in the coming sessions,” they added.

The pre-budget snap rally had demonstrated that leading investors had already found the cue to some of the ‘fiscal leaks’ and had initiated a major covering operations at the prevailing lower prices, brokers said.

Earlier, stocks fell across a broad front on near-panic selling triggered by fears of violence as lawyers launched their march on Islamabad on June 10 after the government’s failure to restore the superior judiciary within the deadline.

Most of the leading shares including heavy weights such as MCB, National Bank, Pakistan Petroleum, Attock Refinery reacted sharply lower from their recent highs, some of them even facing lower locks. But in post-budget trading they recouped most of the earlier losses under the lead of oil and banking shares followed by fertiliser sector on strong short-covering at lower levels.

The early reversal was attributed to developing political scenario but as far as news from budget is concerned is very good, analyst Ahsan Mehanti said.

“The renewed political tension followed by conflicting statements by leaders about the status of the presidency was also a bearish market factor leading to political uncertainties”, said a leading analyst Hasnain Asghar Ali.

“What seems to have aggravated the political tension is the president’s talk to some senior journalists and his veiled threat to react if his powers were curtailed by parliament, he said.

Budget uncertainties were there in the backdrop of tax relief and new corporate taxes, but the reported Saudi assurance to the prime minister to supply oil on deferred payments would certainly relieve pressure on fiscal measures on some counters, analyst Faisal A Rajabali said.

Forward counter: The activity on the forward counter was modest as investors did not go for all out kill at lower prices. The on-balance close was mixed amid alternate bouts of buying and selling. MCB remained in strong demand and finished higher and so did National Bank, Engro Chemical, Pakistan Oilfields, Pakistan Petroleum on active follow-up support. The provisionally listed Engro Polymer Chemical on the other hand ended lower from its opening rate and was last quoted at Rs38.50 after opening around Rs48.—Muhammad Aslam