Share prices at KSE tumbled last week ending on July 23, 2005, as the investors were hesitant to make fresh deals anxiously waiting for the ''Shaukat Tarin'' report on badla financing and its outcome to be presented to the government for final approval.
The KSE-100 index fell 1811.96 points, or 2.4 percent, to 7353.85 from 7535.81 of previous week. The average volume traded was lowest for the month of July at 133.71 million showing hesitant investor sentiment.
The hesitancy was primarily motivated by the uncertainty in the market over Badla/COT issue. There was nothing of note that came out of the meeting that took place last Saturday between the stockbrokers and Dr Salman Shah. A committee headed by Shaukat Tarin, comprising top bankers and KSE board was formed to look into the ongoing crisis of Badla / COT phase-out.
Lack of concrete developments on the Badla issue was the dominating force in the market and unnerved the investors. Commencement of the result season and increase in NSS rates failed to generate any significant response either way and volumes remained dull throughout the week.
Results season did fuel some excitement in Faujis but no spillover effect on other stocks could be seen. The announcements of monetary policy and trade policy, too, proved to be non-events for the market.
The week began on a bearish note with the market taking a downward slide of 97 points on the first day. Low volumes were witnessed showing investors'' helplessness in taking fresh positions due to lack of credit. The trend continued and the market took yet another nosedive of 117 points with bears ruling over and above. With the 7300 level about to be breached the bulls regained ground amid a rally of fresh positions. The fresh buying put some bulls in action, but the momentum could not be sustained for the week and the market ended on a bearish note.
FFBL announced a healthy result, as expected, but very soon became a target of profit taking by investors. It closed down 0.55 points lower than the high achieved when the stock crossed the Rs 30 mark inching up 30.6. FFC moved up along with the healthy result posted by its subsidiary (FFC has 51 percent holding of FFBL).
A number of mutual funds announced their results as well. Meezan Islamic Fund announced a stock dividend of 35 percent. The final dividend posted by Picic Investment Fund was Rs 2 per unit. Picic Growth Fund (PGF) posted a dividend of Rs 3.5 per unit (EPS PKR 9.39) but fell by 2.29 percent to Rs 53.5. Other major losers included Dewan Farooq Motor Limited (DFML), touching its lower cap (Rs 19.15) due to government''s relaxation on import of reconditioned cars and spare parts.
The monetary policy was formally unveiled last week. The SBP wants to control the spectre of inflation in the coming six months and would be ready to increase interest rates to tackle any contingency. Banks are expected to profit from the current tightening cycle as their lending rates are expected to go further up by 100 basis points in 1HFY06.
MCB and NBP are to benefit the most due to their low deposit rates owing to their huge customer base.
Furthermore, China finally decided to appreciate its currency by 2.1 percent, which will give rise to expectations of a decreasing US trade deficit and a reduction in the global imbalance. The textile sector in Pakistan stands to benefit out of the Chinese revaluation since its exports to US and Europe will become more competitive.
Haseeb Ahmad, research analyst from Alfalah Securities, said that the coming week outlook was from neutral to negative. The market would be waiting for any substantial news on the Badla / COT issue. Until then it would remain directionless and range-bound at 7350-7400. The textile sector and banks might make up for some interesting pickings.
According to an analyst at KASB Equities, results season should see interest in the respective stocks. Engro (July 27), FFC (July 28) and PSO (July 28) should all see some stock-specific activity on the back of speculation about results and possible payouts.
"On overall front, we believe that pending resolution of Badla the market should keep volumes dry and market range-bound. However the news flows, any change regarding Badla issue should generate interest in the market. In times of confusion, focus on fundamentally sound scrips. Our top picks are FFC, FFBL, Callmate Telips, POL, and National Bank of Pakistan."
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