Bearish trend witnessed

Bearish trend was witnessed at the Karachi share market during the outgoing week ended March 18, 2011 despite implementation of Margin Trading System (MTS). The benchmark KSE-100 index declined by 3.6 percent on week-on-week basis mainly due to heavy selling by foreign investors.
The index closed the week at the level of 11,606.61 points, down 438.64 points from previous week's closing of 12,045.25 points. "Despite implementation of MTS, the market remained under pressure during the week mainly due to selling by foreign investors on their concerns over the negative impact of Japanese disaster on the global economy", analysts said.
After an absence of two years, the market saw the launch of the new leveraged product of Margin Trading System (MTS) during the outgoing week. The MTS investment (Mon-Thurs) stood at Rs 25.7 million, whereas average rate stood at 19.94 percent.
Trading activities however improved as the average daily volumes at ready counter increased by 27.2 percent on week-on-week basis to 112.44 million shares as compared to previous week's average of 88.43 million shares.
The overall market capitalisation declined by Rs 128 billion to stand at Rs 3.111 trillion.
The market witnessed a mixed trend on Monday and the index closed flat at 12,045.38 with meagre gain of 0.13 points with total volume of 77.050 million shares.
On Tuesday, the market witnessed heavy selling pressure and the index declined by 216.14 points to close at 11,829.24 points with 135.072 million shares. This trend continued on Wednesday and the index lost another 34.67 points to close at 11,794.57 points with 107.940 million shares.
The index recovered 63.70 points on Thursday and closed at 11,858.27 points with 117.023 million shares. On Friday, the market once again remained under heavy selling pressure and the index declined by 251.66 points to close the week at 11,606.61 points with 125.132 million shares.
Asad Siddiqui, an analyst at Invest Capital and Securities said that another eventful week ended on bearish note as market lost 252 points on its last trading session despite positivity springing on economic front.
During the week, a lot happened on local, regional and global fronts. Ties between USA and Pakistan took turn for the better, as the lingering "Raymond Davis" fiasco finally reached its climax. On local façade, government finally took the brave move to increase revenue by implementing one time "flood tax" along with increase in other taxes as well as removal of exemptions.
However, pressure of Middle Eastern crisis and Japanese calamity carried enough magnitude that above mentioned positive events failed to have a reviving impact. Sentiments at the bourse remained negative to such extent that even marginal trading system (MTS) could not conjure up enough positivity.
As a result, market went down by 4 percent on week-on-week basis. Foreign investors remained on the selling front on net basis with cumulative outflow standing at $16.415 million, with $8.830 million worth net selling witnessed on the last trading session alone. Meanwhile, impact of MTS implementation was yet unseen, as average daily turnover still remains at thinner levels.
Sana Hanif at JS Global Capital said that the market endured another week of bearish spell, similar to regional markets due to the catastrophe in Japan (and the nuclear radiation emerging thereof). Moreover, the launch of the much awaited leveraged product and the release of Raymond Davis could not even elevate investor sentiments. Additionally, the government's decision to impose new taxation measures to curtail the fiscal deficit at 5.3 percent (as agreed with the IMF) further acted as a dampener.
Besides the fallouts of the earthquake in Japan, market was continuously eyeing implications of the new taxation measures announced by the government, particularly their impact on the upcoming monetary policy, which kept investors cautious. As per our economist, these measures will be inflationary in the short term, but would stabilise macros in the long run. As a result, the central bank is expected to keep the policy rate intact at 14 percent in the upcoming policy review.