'Floor mechanism' drags stock market down

On Monday, the market witnessed a volatile session with the KSE-100 index ranging from 9,189.40 to 9,215,70 intraday high & low respectively mainly due to lack of interest of investors. The KSE-100 index closed in the positive at 9,210.15 points.
On Tuesday, the market witnessed another dull session with record volumes, closed at 9,229.51 points, with a gain of just 19.36 points. The market again observed a volatile session on Wednesday as the index only gained 9.64 points to reach 9,239.15 levels.
The KSE-100 closed fractionally plus at 9,239.26 levels on Thursday, up 0.11 points.
On Friday, the market remained sluggish but just an hour before the market closed the index gained 102.93 points to reach at 9,342.19 levels. The average daily turnover declined by 67.5 per cent to 22.78m compared to 69.64m registered last week.
During the week, oil prices moved lower this week after exaggerated worries about hurricane Gustav damaging Gulf of Mexico oil facilities were thwarted. Oil dropped over USD6.0 a barrel on Tuesday moving below the USD 110 mark after over three months. Over the near term oil prices have decline by more than 25 per cent from its all-time high.
This is positive development for the Pakistani economy as it will help contain the import bill, reduce inflationary pressure and limit FX reserve depletion. Moreover the price differential claims that the government owes to oil companies should further reduce easing the pressure on the budget deficit.
Our calculations project that with oil at current levels, international petroleum prices which have already eased substantially will reduce further and bring the oil subsidy within the governments targeted level for 2008-09.