The stock market last week recorded substantial declines owing to negative rumours related to budgetary measures due to be announced on Monday. This badly dampened the investors' mood, which forced the seasoned and institutional investors to stay away from the ring.
Early in the week, bearish sentiment continued at KSE as 314 points or 3 percent eroded from the Index to close at 10,346 points level. Uncertainty regarding the approaching Budget FY07 remained the primary reason as both retail and institutional investors sidelined the market creating low volumes at the KSE.
In the early part of the week, due to weak market sentiment and depreciating stock prices, weak holders in order to meet their margin calls reduced their exposure and the Index broke its crucial 10,000 points level and went as low as 9,800 points level.
However, in the last two trading sessions, with stock prices coming at very attractive levels and statement from the Prime Minister that no new tax would be imposed at the local bourses in the Budget, institutional buying was witnessed and the market recovered 546 points.
Other positive news that helped the market recover during the later part of the week included OGDCL being granted four new licences to explore oil & gas reserves in Pakistan, and NIT inviting potential bidders for due diligence by opening its data room.
Average daily turnover during the week also remained low at only 191 million shares.
The market commenced the week on a dreadful note and the index tumbled 860 points in the first three trading days making an almost five-month low of 9801. The tumult was a result of apprehension over negative announcements expected in the Budget FY07, which is scheduled for announcement on June 5, 2006. The most worrying features included doubling of CVT from 0.01 percent to 0.02 percent on the bourses and imposition of CED on financial services offered by banks.
In addition, the SBP's directive to check misuse of securities held by banks and DFIs which had been classified as 'held-to-maturity' and news on Chinese cement hitting the market at Rs 30-50 per bag less than domestic cement prices with more to come next month also weakened the market sentiment. This was followed by a healthy recovery of 546 points in the following two days taking the market to 10346, down 314 points on cumulative basis.
This upturn was due to the news of OGDCL being granted four licences for exploration and production coupled with possibilities of a 5 percent reduction in import of textile sector machinery to nil. Average daily volumes remained thin at 191m shares. Though analysts were bullish on the market for the long run due to an attractive PER, but refrained from giving a short-term stance until the announcement of the budget on Monday evening.
An analyst from KASB Equities said that the budget was expected to be a non-event for the market. "However, market sentiment will continue to be driven by budget related news. Further taxes on financial services would prove to be a sentiment dampener. At the same time, cut down in corporate taxes could essentially prove to be sentiment booster.
"We expect the market to remain range-bound in the near term, as it still lacks catalysts. Earnings season, expected to begin towards the end of July, remains the only trigger on the horizon, which is still two months away. The KSE-100 is trading at 9.8x CY06E earnings and offers an attractive dividend yield of 6 percent. We advise staggered accumulation at current levels," he said.
Comments
Comments are closed.