LSE remains under massive pressure

Share values on the Lahore bourse remained under massive pressure in early three sessions of the preceding week, losing heavily amid volatile movement and very low trade turnover.
Pressure continued building up in the market amid rumours of default of a number of brokers/members and their alleged involvement in unfair trade practices, which caused panic among the players.
The news of issuance of notices to brokers of all three bourses by Securities and Exchange Commission of Pakistan (SECP) and sending teams there to check and collect suspected trade data from various houses further aggravated the situation.
Since big players and small investors stayed on sidelines adopting and watch and see policy, volume shrank to record level, which the analysts and experts described as dangerous for the equity market.
The market, however, took a sudden turn on fourth day of the week under review, when the governing board of Karachi Stock Exchange (KSE) made certain changes in the trade rules, including banning short-selling on futures counters and revision of margins in case of lower circuit breakers to restrain further losses.
In early three sessions of the week under review, the market shed 591.84 points while in last couple of days it recovered 378.63 points, reducing the net loss to 213.17 points (4.91 percent).
Finally the LSE-25 index ended the week at 4,124.57 points compared with previous closing of 4,337.74 points. Volume declined to 35.729 million shares from 42.078 million shares.
On first day of the week, share values drifted lower under the lead of petroleum sector, with the index dropping by 1.86 percent amid a range-bound activity, following lacking of support from the potential investors. The LSE-25 index retreated to 4,257.04 points from 4,337.74, losing 80.70 points or 1.86 percent. Volume alarmingly came down to 18.378 million shares from 42.078 million shares, ending with a downward difference of 23.700 million shares or 56.32 percent. The market showed recovering signs in early session, but activity remained range-bound.
Initially, the index rose by around 90 points amid a very low volume, showing lacking interest of the investors. However, later in second half of the session, the trend changed and all those who bought in early hours opted for off-loading, leading the index to downward side, with all the key shares reaching their lower circuit breakers, leaving the market players highly disappointed.
The market registered declines across the board on second day amid sluggish trading trend, mainly on account of no interest from investors. The LSE-25 index fell by 238.17 points closing at 4,018.87 against 4,257.04.
Volume squeezed to 16.950 million shares from 18.378 million shares. All major scrips, including PSO, PPL, Engro Chemical, National Bank, MCB Bank, OGDC, Sui Northern, United Bank, Lucky Cement and D.G. Khan Cement suffered losses while only two-three companies could resist the downward slide.
Share prices also received losses on the third day while the LSE-25 index fell by 272.93 points or 6.79 percent to 3,745.94 from 4,018.87. Volume improved to 27.965 million shares from 16.950 million, posting a rise of 11.015 million shares or 63 percent. There was no let-up in the losing streak and the share values continued eroding under the lead of petroleum shares, with Pakistan Oil Refinery and PPL receiving heavy battering, in absence of support from the institutions.
In response to the changes made by KSE board in the trading mechanism, the market staged a smart recovery on Thursday, with the index gaining 5.21 percent. The LSE-25 index ended at 3,941.21 points compared with 3,745.94, registering a net rise of 195.27 or 5.21 percent. Volume slightly improved to 30.696 million shares from 27.965 million, posting an increase of 2.731 million shares. With the news of changes made in the trading rules by KSE board, almost all key chips opened with their upper circuit breakers.
At mid-session, the market fell victim to pressure emerging in National Bank and other banking stocks but then recovered and finally finished with upper circuit breakers. The market recovered on the back of the news of revision in exit mechanism for brokers and ban on short selling on futures counter. The KSE in its emergent meeting held on Wednesday decided to review the exit mechanism limit to 5 percent applied on third session from earlier limit of 20 percent to stem free fall of bourses.
Another step taken by the board was to ban short-selling on futures counters. The upward movement also continued on the last day of the week, and the LSE-25 gained another 183.36 points, closing at 4,124.57 points compared with 3,941.21 of the previous session. Trade turnover ascended to 35.729 million shares from 30.696 million, posting a rise of 5.032 million shares.
According to stock experts, the bullish trend returning to the market on amendments in the trading mechanism might not prove long lasting in absence of continuous support from the institutions. Active support from big players and institutions was now urgently required for a stable and sustainable bullish trend, an analyst said.
At the same time, the SECP and the frontline regulators will have to find out a permanent solution to all the problems leading the market to current crisis, which has not only caused colossal losses to investors but also sent negative signals abroad, he added. Now there is more need for enhanced co-ordination between the bourses' members and their governing boards as well as between the boards and the SECP so as to plug the ways of such crises in future, he maintained. Moreover, he suggested that all the bourses should activate their internal surveillance departments for timely checking of irregularities in their respective markets.