Index ends 15-day slump with slight recovery (19072008)

LEADER REPORT
KARACHI: After the violent reaction of the investors in the last regular trading session, a special evening session decided to hold an emergency meeting of the KSE and its members. The shares on sale in the last trading session of CFS was purchased by a fund (around Rs.4 billion) formed on emergency basis.
The buying in the evening session absorbed the selling pressure, due to the restricted exit in the last sessions.
On Friday, market opened with a fresh start but a bearish note, and made an intra day low of 220 points. B Later on recovery was witnessed and the market made an intra day high of 243 points, while at the end selling pressure made the market close with a slight gain of 22 points at 10,235 points.
The flight of foreign investment continues as outflow of USD 1.2 million in foreign investors portfolio investment was witnessed. The government needs to set up policies to regain the investors' confidence, specially the foreign investor, which will provide support to the macro economic indicators.
Pakistan's foreign reserves fell $292 million to $10.83 billion in the week ended on July 12, due to heavy outgoings for import payment. The rupee, however, recovered on Friday; the recovery may be attributed to the gain in the stock market as foreign selling was remained nil.
Oil sector remained in the lime light, while the extremely neglected sectors, banking and cement, were also under the investors interest. Fertilizer sector did not perform as expected. Telecom sector showed a decent performance.
SBP has made crop insurance mandatory for the borrowers, at a maximum premium rate of 2 percent. The government had allocated Rs.200 Billion for Agri Loans in recent budget. This huge allocation will contribute approximately 4bn premium to the leading insurance companies. Agri insurance is a new segment for the insurance companies, so the claim ratio chemistry is still unclear. Last year Rs 160bn was allocated in FY07-08 for agri insurance but just Rs 93 billion was availed.
Other than the political, economic and law and order situation, the major threat to the capital market is the monetary policy. While the market has discounted the impact of further increase in discount rate to a extent. The market support fund is expected to enter the market by next week, which will provide a firm support for recovery. Thus, investors are advised to invest in fundamentally strong sectors.