Corrective steps pay rich dividends

KARACHI — Pakistani stocks last week staged a smart recovery from the previous lows on active short-covering on selected counters aided partly by the attractively lower levels and partly to some corrective steps taken by the official authorities to put the market back on the rails.

By Kse Weekly

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Published: Mon 26 Jun 2006, 10:34 AM

Last updated: Sat 4 Apr 2015, 1:12 PM

But massive weekend selling followed by rumours that the apex court's verdict could go against the sell-off of Pakistan Steel and fears that short-selling may be allowed the market to finish with clipped gains.

Apart from these measures, what seems to have arrested the market decline was lowering of the circuit breaker from the previous 20 per cent to 5 per cent and 100 per cent increase in exposure limits. As the fears of further decline were allayed investors covered positions in a highly oversold market at attractively lower levels.

As a result, the KSE 100-share index recovered 200.42 points or 2.5 per cent during the sessions following the corrective steps taken by the KSE and some leading analysts say its upward drive halted at the end of the week. It finally finished below the benchmark of 10,000 points at 9,807.53, adding Rs69 billion to the market capital at 2748 billion.

Analysts said indications are that its future sailing may be smooth as leading base shares are still ruling at attractively lower levels and ensure a lot of capital gains and investors may not miss an attractive bait of capital appreciation. Any price appreciation in them would significantly add to the index in the coming sessions.

The year-end portfolio adjustment by the financial institutions is yet to make a debut. Indications are that the next week could be very crucial for the future market direction but analysts ruled out the possibility of any major shakeout as corrective steps are well in place. Moreover, speculative forces and bargain hunters will try to repeat the episode of early June. The index, therefore, maintained its upward drive followed by strong short-covering in the leading base shares aided by still attractively lower levels in the backdrop of last weeks massive fall and perception of continuation of the current bull-run in the coming weeks also.

But some doubt whether or not it would be able to sustain the level above 10,000 points in the coming weeks, while some others claim it could rise to its pre-reaction level of well above 12,000 points apparently basing their perception on the rebound of other regional markets.

An idea of investor scramble for the leading shares, notably OGDC, Pakistan Petroleum, National Bank, PTCL, Pakistan Oilfields and some others, which together hold weight of about 60 per cent in the index ended in the upper circuit breakers, well above the session's ceiling rates.

"It was literally the number game of some big ones including financial institutions to outwit rivals but small investors scared by the previous week's massive decline played mostly safe," stock analyst Hasnain Asghar Ali said. "Most of them are still nervous fearing another major reversal."

Previous week's massive fall has knocked out a good number of big players, some of them are still licking their financial wounds sitting on the sidelines and so are some of the genuine investors. They may keep away for some more sessions awaiting price stability.

"The oil and bank sectors at the current lower prices could provide enough manoeuvring to any shrewd investor and that is the crucial point behind the market's 10 per cent rise in just three sessions," another stock analyst Faisal Abbas said adding "but there no set rule that the market would always rise without technical correction".

Previous week's top gainers include Attock Petroleum and Pakistan Oilfields, up by Rs15.10 and 15.95 respectively while losers were led by Unilever Pakistan and Arif Habib Securities, down by Rs24.00 and 26.60.

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