Stocks ease as investors stay away

The stock market edged lower on Friday as investors held off investments and trading while awaiting news on the introduction of a new leverage product for bourses.

The benchmark KSE-100 index fell 33 points to close at 9,698. The broader market also remained stagnant. Total volumes stood at a paltry 22.47 million shares compared with an 18-month low turnover of 20.83 million shares on Thursday. During the day’s trade, 168 stocks gained, 155 declined and 23 remained unchanged.

Analysts said that institutions have remained inactive over the past two days due to annual financial closings while other investors are wary of the newly implemented Capital Gains Tax.

“Besides apprehensions about the new tax and leverage product, deteriorating law and order situation, fall in global capital markets and limited foreign interest played a role in negative activity,” said CEO Shehzad Chamdia Securities Ehsan Mehanti. Foreign portfolio investment registered a net outflow of $0.34 million.

A committee including KSE members, officials and SECP representatives is expected to meet on July 8 to finalise a draft of the proposed form of financing. Experts said that although the actual implementation of the product may take weeks, a consensus in the meeting will help revive investor interest in the market.

“Launch of a user-friendly leverage product will keep the market balanced,” said senior analyst Hasnain Asghar Ali at Aziz Fida Husain Securities. But he advised investors to “exercise caution” and make “selective investments” in days leading up to a final decision on the introduction of a new leverage product.

Bank of Punjab (KSE: BOP) was the volume leader of the day as 2.77 million shares were traded. Investors were attracted to the scrip on the back of an announcement that the bank has increased its authorised share capital from Rs10 billion to Rs50 billion.

Javed Omar Vohra and Company (KSE: JOVC) stood second in terms of volume with 2.25 million shares traded. Investors rushed to buy the stock after a KSE notice declared that Arif Habib Securities (AHSL) has increased its stake in JOVC to 24.75 per cent.

Published in The Express Tribune, July 3^rd, 2010.