LAHORE - Foreign selling pressure continued to haunt the equity market during the outgoing week as the benchmark KSE-100 Index fell by 10.6 per cent due to lack of investor's confidence, absence of leverage and foreign selling. Market experts were of the view that selling pressure from offshore investors continued to haunt the market as they bought shares worth only $4.6 million and sold $40.8 million, resulting in net selling of $36 million. As a result, cumulative net selling for the month of January has now reached $99 million. Since the lifting of price floor from Dec 15, 2008 foreigners have sold shares valuing $116 million on net basis, implying an average daily selling of $4.3 million. An analyst from Live Securities observed that in the downward journey, the index also breached the psychological barriers of 6000 and 5000 level. Market capitalization also significantly declined by 18.52% to PKR1.6tn. The rapid erosion of the index is chiefly due to heavy foreign selling. This can be gauged from the fact that during this period net foreign selling at the bourse amounted a hefty Rs3.6bn or USD45.4m. Another factor for the drop in the index was the selling stance from the banking institutions as they offloaded shares pledged by brokers for their financing needs. Amidst all the above mentioned selling pressures the performance of the State Enterprise Fund (SEF) was not highly noticeable as only SNGP and PPL managed to stay in the green while the remaining six prescribed scrips all closed in the red. Impact of the result season was also felt during the second week of the fortnight generated from the results of two key fertilizer companies FFBL and ENGRO. While there was a positive response from investors upon announcement of FFBL, a contrasting sentiment was felt upon the announced results of ENGRO on account of less than expected payout. Atif Zafar from JS Capital Market said that due to lack of investor's confidence, absence of leverage and foreign selling, weak sentiments prevailed at the bourse despite slow and gradual buying by the NIT managed fund. Average daily volumes in the ready market stood at 98.8mn shares (US$29.2mn) versus 128.7mn shares (US$45.1mn) showing a decline of 35.3% WoW. On the CFS counter also limited activity was witnessed. CFS investment ended the weekend at Rs0.5bn with average annualized rate of 19.7%. Index closed below 5,000 points after a gap of 52 months. Amid lack of investor's confidence in the market, the average daily volumes of the outgoing week saw a decline of 23.2% from already low levels of its previous week. Market capitalization of the bourse as a result, reached $19.9bn to a 60 month low, down 9.7% from last week. Coming towards the economic situation, there was an improvement in key indicators. Inflation measured by CPI index eased to 23.34% in December 2008, compared to 24.68% in November 2008. Another major boost was the improving balance of payments position of the country as depicted by the current account deficit, which fell by 43% amounting to USD458m in December 2008 against USD800m in November 2008. Moreover, the government also announced a new petroleum policy 'PP09'. Under this policy the profit margins of OMCs and dealers have been increased and it also decided to review petroleum prices on monthly basis rather than fortnightly. The margins approved for OMC and dealers on per litre petrol and kerosene are 4% and 5%. It is believed that this policy would be beneficial for OMCs. Moreover, SECP has issued draft of the "The Companies (Buy-Back of Shares) Regulations, 2009," to elaborate the procedure for the listed companies to buy back/repurchase their own shares, although the draft is awaiting the viewpoint from the respective stakeholders. Indications from the government officials lead that there would be no more hike in interest rates. Hence a market friendly monetary policy would significantly boost investor sentiment and revive the stock market. " Salman Abduhoo