Rumours rule share market

Rumours made the shares market investors hostage last week as several punters deliberately infused negative developments creating panic among traders, forcing them to offload their portfolio undergoing a colossal loss of 3.6 percent.
The market fell 3.6 percent during the week with normal volumes. The market started falling on rumours of Etisalat's default (PTCL's acquirer) circulating in the market. Resultantly, the scrip witnessed immense selling pressure and declined by 5 percent, to close at Rs 61.4 per share on the weekend.
Moreover, rumours of notices to brokers, alleged to be involved in March crisis, and margin calls to some market participants caused panic-like situation in the market.
Another set of rumours, circulated in the rings which dragged the share prices down, was that a number of big brokers were selling their stakes as they felt that SECP would not increase the badla investment limit.
There were rumours that two brokers of Lahore Stock Exchange and one in Karachi Stock Exchange had defaulted and the SECP had issued directives, dismissing the board directors of the KSE and SECP would issue more notices to members.
Despite strong rebound on the last trading day, the Index closed at 7151 points, down 3.6 percent, over the week, and ended at 11-week low on weekly closing basis.
In the first four sessions of the week, KSE Index crashed by 448 points, just based on these rumours, with no change whatsoever in valuations and fundamentals.
Market capitalisation further declined by 3 percent and reached Rs 2.0 trillion, or $34.1 billion. Average daily volume in the week was 153 million shares (Rs 13.5 billion) compared to 190 million (Rs 16.3 billion) of last week.
Fiaza Naz, research analyst at Jahangir Siddiqui Capital Markets, said that in the light of recently announced Task Force report investors feared that the regulator might issue notices to brokers and may conduct new investigations, which caused uncertainty in the market. Besides this, various other rumours, like delay in payment by Etisalat and margin calls to some brokers, also kept on circulating in the market.
During the week Askari Commercial Bank, MCB and Adamjee Insurance announced their half-year 2005 results.
MCB posted healthy growth in its profitability during 1H2005 on account of higher spreads. The bank's net income grew by 135 percent, to Rs 3.0 billion (EPS Rs7.21), against Rs 1.3 billion (EPS Rs3.06), during 1H2004. During the period, net interest margin of the bank stood at 84 percent as against 76 percent, up by 800 bps.
Adamjee's 1H2005 profitability depicted an unprecedented increase of 157 percent and reached Rs 455 million (EPS 5.52) as against Rs 177 million (EPS Rs2.15) a year earlier.
Major contribution came from underwriting business, which posted a massive growth of 249 percent, to Rs 294 million, as against Rs 84 million previously. Investment income at Rs 323 million also fuelled bottom line on the back of capital gain income.
Askari's earnings for the first half 2005 registered a decline of 27 percent to Rs 864 million (EPS Rs5.73) from Rs 1,179 million (EPS Rs7.82), previously. The decline was due capital gain of Rs 520 million (per share impact of Rs 3.44) booked in 1H 2004.
Irrespective of the fact that there was little headway regarding the ongoing liquidity crisis which is hitting the bourses due to the looming badla phase-out on August 26, 2005, the said upsurge in share values on the closing day of the week had all to do with some rumours that few heads would roll in the coming days on the directive of the Federal Government.
Most of the carryover investment levels were revolving around PTCL and OGDC, which would also drive the index and overall sentiment of the market.
Going forward, analysts continued to reiterate the fact that the market had been held hostage owing to serious liquidity issues from miscalculation on the part of the regulator to phase out badla without properly enunciating frame work for implementing margin financing and also members unwillingness to accept the latter with an open mind.
An analyst from KASB Equities said that Badla remained the bone of contention for market participants and unless the issue was resolved, sentiment and rumours would continue to hold centre stage. Valuations, however, have turned attractive due to the rundown in prices.
"We re-iterate our stance to remain focused on fundamentally sound scrips. Fauji Fertiliser, Pakistan Oilfields, Fauji Bin Qasim, Packages, National Bank and Callmate Telips would be our preferred stocks while Kapco should also not be ignored at current levels."