KSE Review: COT dispute keeps KSE under pressure, index down by 2.3%

KARACHI: The Karachi stock market remained under pressure throughout the last week due to dispute over carryover trade, said analysts.

The Karachi Stock Exchange 100-share index closed at 7,178.93 points, declining 174.92 points, or 2.3 percent, from previous Friday’s level of 7,353.85 points.

Average daily volume in ready market declined by 16.4 percent to 112 million shares from 134 million shares, during the last week. Total capitalization declined by 0.4 percent to Rs 2.04 trillion from the previous level Rs 2.05 trillion on the last trading day of the previous week

Fiaza Naz, an analyst at Jhangir Siddiqui and Company, said the market movement was in line with the expectations. Equities at local bourses lost their value during the outgoing week as desperate selling in the July future was witnessed.

Even the arrival of healthy corporate results could not support the market, which kept declining during the week and reached its 8-week low of 7,179 points levels.

Market capitalization in dollar term was recorded at $34.3 billion levels. The ready market saw low trade volume throughout the week, touching 15-week low on last Monday. The average daily ready market volume declined further with the reluctance of the investors to buy.

Tanvir Abid, head of research at Live Securities, said by the end of the week the investors gained hope that the meeting of the advisor to the prime minister on finance, Dr Salman Shah, with the committee headed by Shaukat Tareen, president Union Bank, would reach a conclusion and solve the liquidity problem for the investors.

However, despite detailed discussions the meeting failed to reach any clear conclusion regarding the fate of carryover trade and other means of share financing.

Ms Naz said in the derivatives market, the transition from July to August contract was in line with historical trend.

It was observed that in the last two to three months around 70 percent and 80 percent of open interest is transferred to new futures. This time also 70 percent of July’s open interest was transferred to August futures during the week.

Similar to previous week, leverage buyers in the ready market were unsure whether they would be able to arrange badla financing. The market witnessed selling pressure, as investors reduced their open position in the future market.

In prominent stocks share value of the telecom sector giant, Pakistan Telecommunication Company Limited, inched down by Rs 1.30 or 2.1 percent and closed at Rs 60.40 on the last trading day of the week, from Rs 61.70 on the previous weekend. OGDCL lost Rs 1.95 paisas or 1.88 percent to close at Rs 101.75, from Rs 103.70.

Pakistan State Oil (PSO) closed at Rs 373.35, declining by Rs 4.65 or 1.23 percent from Rs 378.00. Pakistan Petroleum Limited (PPL) fell by Rs 16.05 or 8.7 percent to close at Rs 168.40, from Rs 184.45. Share value of National Bank of Pakistan (NBP) lost Rs 1.90 or 1.7 percent by the end of the week to close at Rs 105.65 from Rs 107.55.

The analyst said the depression started in the previous week with the directive of the regulating authority to the KSE on the very first day wherein it capped value traded on the COT market at Rs 12 billion minus unreleased quantity, which can be availed on first come first serve basis.

COT session will be suspended immediately after badla amount reaches its cap. The decision by the regulating authority after receiving recommendations by the ministry of finance would determine the market’s future direction. Until then, no major recovery by the market is possible.

The stocks of oil marketing companies may attract buyers in the coming week, if the government raised the prices of POL products in fortnightly review to be held on July 31, said an analyst.

Besides, he said, shares of those companies would also invite buying, which are scheduled to announce their financial results. staff report

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