Influential and less fortunate brokers are facing two adversaries; one the opposition parties who don’t want to let go any opportunity to embarrass the Government and two, the broker community itself. It is understandable what the opposition parties in the National Assembly do for a living, but what is not understandable is why does the broker community not burry their hatchets that they are so fond of using against each other?

Truly speaking, the stock market of Pakistan is too big and the exposure rules too strong for anybody to manipulate the market. It was not the case in early 2005, but now one cannot make highly leveraged speculative buying, so the chances of manipulation are further limited. Indeed, every risk reducing measure has a cost, and the cost of lower manipulation risk in Pakistani stock market is low volumes. In fact, volumes have reduced to more standard ones, within the global perspective. But the no-love-lost relationship between some brokers is all too noticeable for everybody. Without taking names, there are brokers who appear on private TV Channels and falsely claim that the Task Report on March 2005 crisis did give a proof of some brokers’ manipulation and that the SECP should just penalise these brokers. The public just loves this kind of rhetoric. These brokers use their gifts of gab to dissuade the hosts of the TV programs not to argue with their illogical standpoints.

Like some of our country’s Supreme Court Judges, these brokers are also not in talking terms with each other. They do not realise that their petty differences results in embarrassing the whole broker community, many of whom are taking their funds out of the stock markets and putting them in the real estate. Just once more, the readers of this column are well aware of our standpoint that behind each stock market crash in Pakistan there are speculators who make highly leveraged and foolish buying decisions.

Last week, the KSE100 gained 114 points to close at 12092 points, which means it rose slightly less than 1 per cent. Our portfolio’s gains were capped at less than half a per cent. For a long time now, it has been the top three market capitalised banks in MCB, NBP and UBL who are sustaining the bull run in the stock market. We do not have any qualms in admitting that it is largely our stance on these three banks’ valuation that the market is falsifying, but we will also remind our dear readers that it is not the actual outcome but the expectations that make an investment risky.

The Karachi Stock Exchange management and Securities and Exchange Commission of Pakistan have given all indications to start trading of Options on Individual Stocks as well as Index Futures in Karachi Stock Exchange. Many people familiar with the complexities of these derivatives instruments feel that there is a huge knowledge gap existing in the stock market. This is not to say that the SECP and KSE management should not have introduced these derivatives but the fact of the matter is that the broker community and the sales people they employ must be educated on how to enable their clients to use derivatives for (a) hedging away the undesirable part of overall risk, (b) profiting from arbitrage opportunities, and (c) profit from short term trading opportunities. The media people; including reporters, stock market program producers and hosts; will all have to learn these complexities too, otherwise the already existing knowledge deficit they have will grow further.

One big question that arises in the minds is, who was behind the move to introduce derivatives at Karachi Stock Exchange? The SECP for sure does not possess the knowledge, which means there was indeed somebody outside the SECP who conceived the idea.

OUR PORTFOLIO - LAST WEEK’S CLOSE

Symbol Last rate Shares Value Weekly Rise/fall

gain/loss in share

price

ABL 100 120 12,000 (456) (3.80)

ACBL 91.25 150 13,688 203 1.35

AICL 209.35 0 - - 6.85

ANL 27.35 0 - - 3.20

BAFL 54 0 - - 3.90

BOP 102.85 0 - - 3.65

CTTL 48 0 - - 1.00

DGKC 99.9 100 9,990 440 4.40

FFC 109.95 500 54,975 (800) (1.60)

HCAR 69 100 6,900 (110) (1.10)

HUBC 33.55 0 - - 1.60

ICI 146 0 - - 2.05

INDU 307.95 100 30,795 2,995 29.95

KAPCO 61.7 0 - - 0.80

LUCK 101.2 100 10,120 - 3.70

MCB 285.5 0 - - 1.75

MLCF 20.4 0 - - (1.05)

NBP 246.75 0 - - 1.00

NCL 40.4 0 - - 1.45

NML 101.5 110 11,165 (330) (3.00)

OGDC 121.75 500 60,875 (700) (1.40)

PKGS 227 100 22,700 (1,150) (11.50)

PNSC 65.3 0 - - 7.80

POL 336.5 300 100,950 1,800 6.00

PPL 264.05 100 26,405 215 2.15

PSMC 391 0 - - 7.00

PSO 361 0 - - (3.00)

PTC 50.05 0 - - (1.65)

SHEL 392 100 39,200 (1,400) (14.00)