Thursday, January 22, 2009

Karachi Stocks hits four-year low as foreign funds exit emerging markets

The continued distress-sale of shares by the foreign portfolio investors and irresolution of debt issue at Karachi bourse between brokers and banks pushed market down to new low of four-year on Wednesday.

With another notable plunge of 121.80 points or 2.32 per cent in this session, the KSE 100-share Index depreciated to 5,136.48 points. The day closing level is the lowest one after September 28, 2004 closing of 5,128.13 points.

The parallel running junior 30-Index slashed 152.04 points or 3.08 per cent and concluded at 4,782.97 points.

Hasnain Asghar Ali at Aziz Fidahusein observed that although private and government sector funds did stay prominent buyers in various main board stocks many even succeeding in trading above lower locks, foreign downpour strengthened further as it joined hand with selling by local participants thus never allowing the buyers to resist the high tides, and the KSE benchmark was yet again pushed to deep-red. Analysts said that foreigners were offloading their holding for one reason or the other. They withdrew another over $8 million in this session only.

“Perhaps, overseas investors know what are the true vales of each stocks and they would indulge into buying from those pre-supposed levels or they are reshuffling their portfolios in accordance with the new stocks market orders,” commented a leading analyst.

He maintained that in the newly emerging era - post economic recession period or recovery phase - some tier two stocks would occupy the place of leading stocks in top of the actives list and vice-versa. This phenomenon is, at present, in the making and become visible when every thing would have been settled, he added.

The unresolved issue debt, which brokers owe to banks, is not allowing bulls to show their muscles. Otherwise, bulls are ready to overcome the crisis and waiting for the green signal, other analysts said. With the massive correction in international oil prices and decline in demand of other commodities as well at world level, the oil and food inflations have started easing down in the country. Amid the trade and current account deficits have also started reducing in the last couple of months. These are the good signals for the local economy and would encourage equity investors to stage come back once the local issue of debt at bourses are resolved, they added.

Ahsan Mehanti at Shahzad Chamdia Securities said besides massive foreign selling and debt issue, the rupee depreciation and turmoil in the international equity markets also discouraged investors to remain on the sidelines.

This session, therefore, witnessed sharp decline in many of the stocks prices and recorded low turnover too.

The day turnover dropped down to 90.769 million shares as compared to 143 million shares changed hands yesterday - showing a decline of over 34 per cent on day-to-day basis. Activities in future market remained shunned.

Another outflow of Rs38 billion from the overall market capitalisation shrank it to Rs1,639 billion.

Out of total 270 actives, 198 stocks declined, 60 advanced, while the value of 12 stocks remained unchanged.

Oil and Gas Development Company remained the volume leader with 9.340 million shares closed at Rs44.29 with a loss of Rs2.17, followed by National Bank with 6.612 million shares closed at Rs51.94 with a loss of Rs2.73, Pakistan Telecommunication Company with 6.119 million shares closed at Rs12.96 with a loss of 58 paisa, Zeal Pak with 4.192 million shares closed at 47 paisa with a loss of one paisa and Hub Power with 4.036 million shares closed at Rs14.77 with a loss of 41 paisa.

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