Share Market Remains

The Karachi share market remained lacklustre during the week ended on June 14, 2008 mainly due to uncertainty on political front in the country, the lawyers long march, and rumours related to negative budgetary measures, as a result of which the KSE-100 index lost 193.00 points to close at 12,941.56 points level from 13,134.56 points of previous week.

The KSE-30 index also declined by 210.01 points at 15,239.55 points against 15,449.56 points of previous week.

The market witnessed dull trading activity and the average daily volume of ready market declined by 28 percent to a 63-week low of 125.987 million shares as compared to 175.750 million a week earlier.

The average daily turnover of futures market declined to 42.452 million shares against 45.554 million shares. Market capitalisation declined by Rs 58 billion to Rs 3.988 trillion from Rs 4.046 trillion.

The market started on a positive note on Monday. However, it failed to continue its momentum due to uncertainty among investors over federal budget, and the KSE-100 index witnessed a decline of 226.33 points to close at 12,908.23 points. The KSE-30 index lost 419.23 points and settled at 15,030.33 points.

On Tuesday, the market remained under heavy selling pressure due to uncertainty regarding budget and judges issue and reports on declining GDP growth and the KSE-100 index witnessed a decline of 220.83 points to hit 12,687.40 points intra-day low. However, late buying, mainly in banking, E&P and cement sector stocks, supported the index to reduce its losses, and the KSE-100 index closed at 12,878.04 points, down 30.19 points. The KSE-30 index, however, managed to close in positive at 15,035.74 points, up by 5.41 points.

On Wednesday, the market took an upward trend due to buying on attractive levels, and the KSE-100 index recovered 138.34 points to close at 13,016.38 points. The KSE-30 index increased by 210.41 points and settled at 15,246.15 points.

On Thursday, the market opened on a positive note, welcoming the budget. However, selling pressure in banking sector forced its momentum and the market slipped into the negative zone. After witnessing a volatile session the KSE-100 index closed at 13,025.64 points level, up by 9.26 points. The KSE-30 index gained 52.88 points and settled at 15,299.03 points.

On Friday, selling pressure continued due to lawyers long march and political uncertainly and the KSE-100 index declined by 84.08 points to close at 12,941.56 points. The KSE-30 index lost 59.48 points and settled at 15,239.55 points.

Umer Ayaz, analyst at JS Global Capital, said that the week started off with a dull note and weak investor confidence, mainly due to lack of clarity on the political scene and long march announced by the lawyer community. Moreover, rumours related to negative budgetary measures such as cut in OMC margins, reduction in deemed duty of refineries, increase in corporate tax rate for banks and hike in NSS rates kept investors on sideline.

Higher oil prices in the international market and neutral budgetary impact kept some investors interest in the E&P sector, which gained 0.9 percent during the week. Similarly, fertiliser sector increased by 0.5 percent on the back of expectations regarding increase in government focus towards agriculture in budget FY09. On the contrary, banking sector remained under pressure due to rumours of increase in corporate tax rate on banks. Though the tax rate remained intact in the budget, increase in NSS rates and changes in tax treatment of NPL provisioning were viewed as negative measures for the banking sector.

According to latest data issued by National Clearing Company of Pakistan Limited (NCCPL), net foreign selling stood at $24.2 million during the week. On year to date basis, cumulative selling in 2008 to date stood at $176.4 million.

Saad Arshad at Invest Capital & Securities said that the index fell by 1.5 percent as the FY09 budget failed to impress market participants. On the positive side of the budget, a higher than expected fertiliser subsidy, coupled with maintenance of status quo in the oil and gas sector, provided some relief. However, the rise in NSS rates by 200bps did not auger well for the index as a higher risk-free return would reduce the appeal of relatively riskier securities. This was reflected in the falling volumes during the week, as the investors interest in the market remained lack lustre. Business Recorder, 2008