Nerve wrecking volatility is back at the stock market as the benchmark KSE-100 index swivels around the 50,000 points barrier. Last Friday, the market from a high of almost 700 points went into negative territory, shredding about 1,000 points.
On Monday again, the market opened higher with 300 points plus and then sellers took over. It was like slow poison being given to the investors. After a drop of few hundred points, there came a slight bounce and then selling resumed. The investors waited desperately for some recovery but there was none. From its peak, the index lost close to 1400 points while ending around 991 minus.
The main reason for this panic in the market can be attributed to a couple factors. Firstly, Mr. Trumps theatrics over the weekend regarding the Muslim ban has got everyone worried globally. Pakistans name was not on the banned list, however, according to some news sources, White House Chief of Staff suggested that this ban could be extended to Pakistan.
Secondly, according to market participants, the SECP has sent out show-cause notices to various brokers for not complying with regulations related to in-house financing. This led to some of the non-compliant brokers asking their leveraged clients to shred some of their positions. The buyers in the market run off at even a slight sniff of someone selling in desperation. Who doesnt like a discount?
The SECP over the last few months has been trying to make sure that risks within the system are minimized and a crash-like situation is averted. The intentions of SECP are noble but they should provide adequate legal financing products to market participants so that they dont resort to other means.
Trading wise, the volume was down while many stocks ended the day on their lower circuit breakers. PSX: OGDC closed positive as news of its stake sale deferment emerged over the weekend. Apart from that selling could be witnessed across the board. Good result announcements were hammered while bad result announcements were taken to the cleaners.
Technically speaking, the KSE-100 index has breached its 10 and 20 day exponential moving average. The index can find support 48,500 level and we can see sharp bounce as early as tomorrow. Word on the street is that mostly individuals who were over leveraged sold today. Institutions such as banks who are sitting on good amount of cash are expected to do some value picking at these levels.
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