LSE Equities Stay Range-Bound

LAHORE:The decision of the Karachi Stock Exchange (KSE) board of directors to cap the market at August 27 level badly affected the trading volumes on the Lahore Stock Exchange (LSE) where equities remained range-bound amid lacking interest on the part of investors and institutions because of the rapidly changing political situation in the country.

The LSE-25 index marginally improved by 29.60 points and closed at 2901.61 as compared to previous Friday’s closing of 2872.01, while transaction volume significantly reduced to 7.686 million shares as compared to 31.914 million shares of the last trading session of the previous week.

The unabated foreign selling discouraged the investors, who kept themselves at distance throughout the week, while the KSE board’s decision to cap the market also contributed to the market sluggishness. The bearish sentiments remained intact during the entire week and investors adopted ‘wait and see’ policy to avoid any loss.

On Monday, the market witnessed a record dull trading day and the index could just show a marginal gain of 1.69 points while shares volume also declined to considerably low of 1.237 million shares. All the shares were closed with marginal loss or marginal profit at the end of trading. The sentiments remained upset also because of the rising outflow, which can be evident from the depleting special convertible rupee account that registered a withdrawal of $213 million by the end of August 2008. The experts believed that artificial measures could not rescue the market for long-term and it has to move according to the market mechanism.

On Tuesday, the market remained once again under the grip of foreign sellers who kept on putting their offloading on sale at every level. However, the artificial measures adopted in a bid to check free-fall helped restrict market in narrow range that also resulted in low trading volumes. The deteriorating law and order situation, worsening balance of payment, and rapid decline in the rupee’s value were among the negative factors that kept the market under pressure. The investors also started eyeing on the results of the presidential elections so as enable to take their position in future.

On Wednesday, the market took start on positive note and kept on moving in the green zone throughout the day. Because of the artificially introduced measures, the market was forced to stay in green zone but it kept on moving around the opening level. Majority of the investors remained at distance and did not take interest in buying.

The market amid bullish sentiments fractionally improved by 0.23 points with slight increase in trading volume to 1,032 million shares. Among other factors, the rising interest rate also encouraged the investors to get out of the market, which did not remain more attractive for them as compared to banks’ profit.

The market kept on moving down on Thursday with insignificant increase in transaction volume. All the prime shares, including MCB Bank, Engro Chemical, PSO, Allied Bank, Kot Addu Power, Pioneer Cement, Bosicor Pakistan, and Pakistan Cement Company remained under pressure and closed with losses. The experts were of the view that market is unlikely to take direction till September 6 and its future mainly depends upon the post-election scenario.

The political instability has shattered the investors’ confidence very badly while the foreign investors have been persistently offloading their holdings since the worsening of the political situation. The investors were expecting that after the presidential election, the government would focus on improving the economic situation and also ensure political stability.

On the last trading session - Friday, the changing situation helped market recovery by over 36 points with marginal improvement in the trading volume. The market after opening on positive note kept on moving in narrow range due to lack of interest on the part of investors. The equities suffered losses for a short time, but aggressive buying in selective shares dragged the market into green zone during last 45 minutes’ trading.

The sentiments are likely to change in the current week mainly because of Asif Ali Zardari, who has been elected as 12th President of Pakistan. The experts were of the view that the single party government would be in a better position to evolve business-friendly policies and ensure their implementation. The Friday closing has also reflected the expected upward move on Monday.

Besides, the KSE board is also expected to hold its meeting on September 8 to review its earlier decision under which market was capped at August 27 level. Because of the celebration of presidential election, the market is expected to continue Friday’s bullish sentiments on Monday.