KSE may drop to 4,500 points if sell-off continues: analysts

[Naveed Yaseen]

By Salman Siddiqui
KARACHI: The continued massive foreign selling and irresolution of debt issue between brokers and banks pushed the Karachi bourse to fresh lows during the week ended January 23.

With a fresh decline of 10.6 per cent or 582.38 points the KSE 100-share Index has dropped below 5,000 points level to a 52 months low of 4,929.55 points.

Analysts said that NIT-State Enterprise Fund (NIT-SEF) remained engaged in buying eight eligible state-owned securities and Fauji Fertilizer Bin Qasim announced higher than expected earnings and dividends. However, the uninterrupted huge foreign selling and no settlement of leveraged positions of brokers with banks kept the market in freefall this week.

Atif Zafar at JS Research said that selling pressure from offshore investors continued to haunt the market as foreigners bought shares worth only US$4.6 million & sold US$40.8 million, resulting in net selling of US$36 million this week alone.

As a result, cumulative net selling for the month of January has now reached US$99 million. Moreover, since the lifting of price floor from December 15, 2008 the foreigners have sold shares valuing US$116 million on net basis. This means an average daily selling of US$4.3mn, he calculated.

Ahsan Mehanti at Shahzad Chamdia Securities said that no news regarding settlement of leveraged positions of brokers with banks remained a major reason for investor pessimism. Besides, high discount rate and lack of CFS availability were some other disturbing issues.

Analysts said that though some investors have liquidity in hands including NIT-SEF, but they were not buying shares as aggressively as they can, as most of them have calculated as to what extent the market would drop. According to Hasnain Asghar Ali at Aziz Fidahusein, the market might test 4,500-4,700 point levels in the ongoing bearish rally.

Owing to this phenomenon, the turnover has turned down at the bourse with notable outflow of funds from the overall market capitalisation.

Therefore, the average daily volumes of the outgoing week saw a decline of 23.2 per to 98.8 million average turnover from already low levels of its previous week. While, overall market capitalisation reached Rs1,557 billion to a 60 month low, down 9.7 per cent or Rs166 billion from last week.

Muhammad Saqib Sajjad at KASB Securities endorsed the interest shown by both long-term and momentum investors has taken the back seat due to continuing news of foreign selling and banks’ margin calls. Amid the panic, even the newly established NIT-SEF seems to lack the teeth to support the market.

On the macro front, all attention is focused on the upcoming monetary policy due on January 31. While market participants largely expect a flat discount rate, fears of another policy rate hike continued to weaken investor sentiment, however, he said.

As expected, domestic political noise seems to be growing. News flow on the upcoming Senate Elections and the faith of Punjab government has picked up, he added.

Fauji Fertilizer Bin Qasim, Pakistan Petroleum, KESC, Unilever Pakistan and Siemens Engineering were major gainers while Faysal Bank, Bank Al-Falah, Saudi Pak Commercial Bank, Pioneer Cement and Meezan Bank were major losers at the KSE this week, according to KASB.

Movement in weekly volume leaders

Symbols Opening on Close on Difference

Monday (Rs) Friday (Rs) (Rs)

Bosicor Pakistan 5.27 5.44 0.17

Fauji Fertilizer Co 77.96 73.06 -4.9

FFBQ 12.75 14.71 1.96

Hub Power 15.99 15.02 -0.97

Mybank Ltd 4.33 3.96 -0.37

NBP 60.56 46.89 -13.67

NIB Bank 4.54 4.42 -0.12

OGDC 49.40 41.14 -8.26

PPL 131.17 144.60 13.43

PTCL 14 12.48 -1.52

TRG Pakistan 2.23 1.67 -0.56

Worldcall Tele 3.38 3.22 -0.16

Zeal Pak 0.47 0.41 -0.06

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