Recovery After Crash

After the index breaking the 9,900 level last month, started to rise gradually. When such a crash comes there is a level where short sellers start profit taking, so there is a slight change in the trend. Secondly the prices came on the lower level that they attracted the individuals to buy shares. As the future contracts for December were over and new month started so a fresh buying in Jan contracts was obvious. Another factor in my opinion which played the most vital role in supporting the index was the news that Prime Minister has postponed the decision to levy capital gain tax for next year. This made the institutions to come to the market for fresh purchasing. We saw that the index gained about 250 points in two days.

After Eid holidays the trading started on a neutral note and the volumes were very low. Volume of just 20 million on the first day of January trading though the market close in green zone. In late December and early January two reports come out. One was from Goldman Sachs: global investment bank. This report claimed Pakistan to be one of the eleven most fastest growing economies. Second report was from the State Bank of Pakistan. This report shows some recent figures of foreign investments in Pakistan from July to Nov. 2006, which are very handsome.

Another thing which happened was that the court gave decision against SECP and allowed CTTL shares trading to start.This gave a slight relief as people expected that CFS and Badla positions would get better

So the volumes started to generate and investors started taking new positions, which made the index to move up, and crossed the level of 10,000 points. The Prime Minister’s news boosted the confidence in the market and brokerage firms, institutions and investors start taking benefits of low share prices and made new positions. Daily traders and small investors also played their part. Last week on Monday and Tuesday market was bullish and crossed the level of 10,300.

MCB was on the level of Rs. 260, NBP which came down exceedingly attracted the investors most and started trading above 250 level. NBP with its performance also pushed the 30 index upwards. Oil sector performance was also good where PPL and POL alongwith OGDC gained momentum and made the index to move positively.

On Wednesday the market moved as it was expected. There was profit taking in the morning index was 48 points down. It gained back and also showed green figures but by the end closed with 37 points down. On Thursday market was the same going up and down creating almost no effect on the index by the end.

On Friday though the market showed ups and downs earlier. There came another news that the Government of Sindh has decided to remove stamp duty on electronic transfers of shares imposed in the budget. During the trading hours report issued by MERRILL LYNCH also came in the market. This report recommended a BUY for Pakistani Market and SELL for Indian Market. Remember that in MAY 2006 report from the same agency had recommended SELL for Pakistani Market and BUY for Singapore Market, and became the main cause of crash where Market lost about 4000 points coming form 12,400 level to 8,700.

These two news further boosted the confidence and market closed with 66 points up at 10,425 level. One significant factor seen in the market was that, on Friday after the news of removal of stamp duty; the shares of these companies with head offices located in sindh gained most.

So last week was overall positive where the index crossed 10,400 points and the value of shares increased by 69.70 billion. We can conclude the reasons for upward trend to be:
- Reports by foreign agencies.
- Report by SBP.
- Prime Minister’s decision .
- News that the Provincial Government of Sindh has decided to withdraw stamp duty on
shares transfer.
- Share prices being low and on attractive level.
- Fresh Buying by institutions.
- Court’s decision to allow trading of CTTL shares.