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Market saved from a total collapse

KARACHI - PAKISTANI stocks last week witnessed the outflow of huge funds to other profitable outlets, notably gold and the US dollar as investors were near-mad in search of safe havens terribly worried over the creeping decline amid falling demand.

The KSE 100-share index was off 391.53 points at 11,961.66, from the previous 12,353.19, eroding Rs105 billion from the market capital at Rs3,690 billion. Its junior partner the 30-share index suffered a fall of 596.62 points at 13852.52.

As a matter of fact the market was saved from a total collapse thanks to timely corrective step taken by the Security and Exchange Commission of Pakistan (SECP), which reduced the lower cap from the previous five per cent to one per cent, to limit the daily fall.

An idea of the market's nervousness and lack of support may well be had from the fact that the daily volume figure hit an eight-year low at 11.117 million shares and analysts said it could fall further as investors are not inclined to cover positions even at the current lower levels.

Price changes were, therefore, mostly fractional but the cumulative loss over the week in most of the leading shares was fairly sharp, reflecting the exit of stray foreign interest probably at a loss.

The investors were already worried over the outcome of security forces operation in FATA.

The turmoil on the currency markets after the rupee fell to 70.00 a dollar further accentuated the situation in the share market as investors played safe awaiting some of official intervention to forestall fresh price erosions.

The single-session trading volume fell to an all-time low level of 5.349 million shares amid slack demand owing to investor worries over the security forces operation in the tribal areas and fears of its negative fallout elsewhere, analysts said.

The previous single-session turnover was hit at 15.141 million shares on September 3,2001 after the implementation of T-3 trading system on the KSE.

But the terrible sluggishness reflects the market is heading for a major crisis in the coming weeks if the law and order situation did not improve and investors sought other avenue of investment sans stocks.

Stocks, therefore, ended the last financial year on a subdue note as leading investors remained conspicuous by their absence owing to the presence of more than one psychological depressants no positive news.

After opening unchanged at the previous weekend level, 12,353.19, the KSE 100-share index steadily declined to hit the week's low of 12,035.21 and after that despite stray late covering purchases in some of the leading base shares including MCB, OGDCL, pushed it to close at the lowest of the week.

"Although leading investors kept to the sidelines most of the time for obvious reasons but there was no panic selling from any quarter," analyst Ahsan Mehanti said. "Everyone is awaiting some good news, which are not around in the backdrop of more than one negative news," he added.

It was in this background that the KASB Securities made a firm provisional debut at Rs77.17 (face value Rs10 at a premium of Rs57.50 per share), but ended lower at the week's low of Rs67 on late selling owing to prevailing uncertain conditions.

"In the backdrop of ongoing operation in the tribal areas, tight money supply position, and a weak rupee investors think twice to go for fresh stocks," said an analyst Hasnain Asghar Ali.

He said the lowering of low cap to one per cent seems to have protected the market from a total collapse in the unfolding geo-political scenario and the absence of financial support.

"If all goes well on the political and national security fronts, the market could rebound from the current low on the strength of higher corporate announcements for the financial year ended on June 30, another analyst Ashraf Zakaria predicts.

But for the time being the market lacks even normal support as investors are out to get out of it instead of making fresh commitments even at the current lower levels, he added.