The Karachi Stock Exchange (KSE) last week received tremendous tremors, which resulted in heavy casualties and a number of scrips closed on lower circuit breakers, ending the winning streak of almost three months.
The local bourses experienced some 'tremors' and 'aftershocks' of their own, as a wild ride during the week culminated with the first weekly decline in 11 weeks for the KSE-100 Index. The KSE-100 closed the week with a decline of 6.5 percent (574 points) to end at 8290. This included a 6.6 percent (582 points) decline in just last 2 days of trading.
The average daily volume stood at 300 million shares (Rs 33 billion), down by 15 percent in shares and 4 percent in value from previous Friday.
Market capitalisation at the weekend also showed weakness reaching the level of Rs 2.4 trillion ($39.7 billion) from Rs 2.5 trillion ($42.3 billion) on Friday, thus declining by 6.2 percent. Rising leveraged positions and unconfirmed reports of selling by foreign investors affected the share values last week.
The decline in the Index forced a few leveraged buyers into offloading their positions, with stock futures open interest and CFS investment both seeing a slight decline.
A much-awaited correction took place during the week, causing a huge slump, as investors preferred to book profits at inflated levels that converted into a panic-selling later on, sending the market into hot water. The market may rebound as some blue chip companies are expected to announce their September-end results.
Banking and cement sectors would remain in limelight and are expected to generate buying activity on account of likely improvement in their bottom lines.
THERE WAS ONE MAJOR REASON FOR THIS HEAVY FALL: the alarming open interest position at futures counter on the onset of rollover week. This is why the market witnessed selling pressure as investors reduced their open position in the futures market, due to the coming rollover week (from October to November futures contract). It has been observed historically that the market mostly remains weak during the last week of futures market, ie, rollover week.
An analyst said he did not expect any immediate hike in domestic oil prices since the government desires to keep inflation rate under 9 percent. He said the market was expected to remain a bit shaky this week as a strong support is anticipated at the 8000 points level coupled with uncertainty over the PTCL's handing over on October 28. Investors have been advised to remain cautious with strict stop loss strategy.
The week saw a showering of some key corporate results. During the week Faysal Bank, Attock Cement, Maple Leaf, FFBL, NRL, Hubco, Engro, Picic Commercial Bank and ICI Pakistan announced their results for the periods ended September 30, 2005. Most of these companies posted significant earnings growth. But due to weak market sentiment and mounting tension ahead of rollover week the results could not maintain the bullish trend positive rally in the market.
A tidal wave of corporate results will flow into the local bourses in this week, with several big-name results each day. Apart from speculating on PTCL's privatisation, investors are likely to reward/punish companies' stock prices based on the positive/negative deviation of these results from expectations.