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Market capitalisation down by Rs450 billion

KARACHI - The KSE 100-share index last week was again massively battered. At one stage, it appeared that the index may breach through its base level of 10,000 points as selling pressure continued unabated on the still overvalued counters.

The small investors who had lost everything they had put in the share business awaiting the launching of rescue operation by the institutional traders watched the slaughter of the capital market for the eight week in a row.

The fall over the week was well over 1,500 points or 16 per cent, which eroded another Rs450 billion from the market capital or about $33 billion since the current market decline, which gripped it some two months back.

"It was a tragic story of the market fall from the peak of index level of 15,976 points to 10,300 points or well over 65 per cent since January this year and no one could precisely predict where the end will come," analysts said.

Foreign investors are out of the market after liquidating their long positions both at the fall and the rise, the local ones are groaning under the weight of persistent sell-off awaiting miracles to happen, they said.

Stocks, therefore, suffered fresh widespread fall as despite some corrective steps taken by the SECP and the KSE to put the market back on the rails, there was no change in the bearish investor psychology.

What seems to taken steam out of the market and panic selling was reports of building up of Nato forces on the Pak-Afghan border and fears of attack on the tribal areas.

"The perception of country security risk appears to be now not a loud whispering and continued to have negative impact on the investor mind who tried to get out of the market rather than opting for short-covering," an analyst said. A galore of lower locks followed on the blue chip counters, he added.

He said the market witnessed a massive outflow of heavy amounts to other safe havens, notably the US dollar and the gold as was reflected by all-time higher attained by the both. Gold at above Rs22,200 per 10 grammes and dollar Rs73 plus.

The restoration of previous lower and upper locks to provide the needed exit facility to the trapped leveraged investors and the debut made by the CFS MK-2, ensuring massive liquidity as well as transparency to the foreign investors, political uncertainty, and law and order situation did not allow investors to resume covering purchases at the attractively lower levels on most of the counters.

Expectations that the massively battered share market will resume trading under the new funding regime on the higher side, CFS MK-2, ensuring enormous liquidity yesterday failed to put the market back on the rails owing to investor worries over the sensitive external fronts.

The new funding regime did provide safe exit for the leveraged investors with no risk management issues, but investors were not inclined to go for fresh investment even at the attractively lower rates owing to prevailing law and order situation, weak rupee and slow down in the economy, analysts said.

Under the CFS Mark-2 funding system, investors will have an access to Rs85 billion and up to Rs100 billion on 10 per cent margin, which became effective from Monday (July 14) on the KSE. The new system also ensure transparency in the share transactions as demanded by the foreign investors. The lower and higher circuit breakers were also restored to the previous levels of five and seven per cent.

"External political factors may not allow the return of the bull market soon but the new funding regime would put the market back on the track after peace return to FATA, law and order situation improves, and the rupee is back to its sustainable level against the US dollar," analyst Hasnain Asghar Ali predicts.

Another analyst Ahsan Mehanti hold the same view and says investors are staying out of the market owing to the political uncertainty and until peace returns in the country, many may not put money in stocks.

The market decline was led by the overvalued oil sector, which came in for active selling as investors found safe exits after the restoration of previous lower and upper locks.