A host of negative rumours resulted in widespread selling at the Karachi Stock Exchange (KSE) and the index for the third consecutive sessions finished in a negative zone, where volume recorded further decline. The KSE-100 Index closed at 10,525 levels down 130 points from the last closing.
Volumes in the ready market were 200 million shares as against 212 million shares recorded on Wednesday. Moreover, volumes in the futures market were 54 million shares versus 48 million shares previously.
The index opened 31 points plus and after making a high of 10,719 (64 points plus), the selling-pressure continued in the market, said Rabia Hussain, research analyst at Jahangir Siddiqui Capital Markets Ltd.
News regarding the PTCL is going to slash its international calling rates brought the market down further. This pressure urged weak-holders to offload their positions pushing index to a low level of 10,326 points (329 points minus).
However, in the latter part of the trading session institutional buying was witnessed in banking stocks like BoP, NBP, and FABL. Top volume leader was NBP.
Standard Chartered announced tender offer for buying Union Bank''s 19.14 percent stake (64.8 million shares) from minority share holders at Rs 91. Askari Commercial Bank announced its half-year result of 2006 posting EPS of 5.58, a growth of 26 percent. On the other hand, Hubco announced its full year 2006 result posting EPS of 2.39 and cash dividend of Rs 1.85 per share.
A number of rumours which dented the interest of small investors, and brokers are facing problems to settle their dues after the investment limit at CFS has reached its peak of 24.5 billion rupees. Other institutions are hesitant to provide finances to investors as they fear that the index would go down further.
Another development which dampened the sentiment was an interview of a leading broker in local newspaper that the market has been artificially pumped up by the Lahore-based brokers and speculation from the upcountry is on the rise. He suggested the Securities Exchange Commission of Pakistan that this is the best time to get hold of the speculators and also check the insider trading in case of Pakistan State Oil, where the prices fluctuated wildly in the band of Rs 100.
The market remained ranged bound in the beginning, however, across-the-board panic selling in virtually every scrip plunged the index below the 10350 point level. Nonetheless, the market recovered 200 points on buying in notable scrips, especially banks. Notable banking scrips managed to close in the green despite heavy battering earlier.
An analyst from Atlas Capital Markets, said another dull session concluded as investors preferred to reduce their positions before long weekend. It was quite interesting that the market opened on a positive note, remained stable for almost two hours, but it failed to provide zeal to investors to hold their nerves.
Among the major reasons of the decline was the campaign initiated by Opposition parties to carry out "no-trust motion" against the Prime Minister on August 23, 2006. The E&P and cement sectors came under heavy selling pressure resulting in a sudden slump till 10326. However, support above the 10300 level helped the market recover towards the end of the day.
By the end, major banking companies managed to close above their previous closing levels, ie BoP, FABL, MCB, UNBL and NBP as they closed at Rs 88.60, Rs 64.45, Rs 288.75, Rs 88.05, and Rs 235.20, respectively.
Ahsan Mehanti, CEO of Shahzad Chamdia Securities, said overbought situation dragged the technical correction into second consecutive day. Leverage positions from weak-holders resulted in panic-selling. Reports of high badla rates in Lahore also made investors sluggish.
The decline in CFS investment from Rs 24.5 billion to Rs 22 billion, and hopefully it will go further down on the last session which might encourage investors to build fresh positions ahead of some major corporate announcements.