The local bourse took a different path than the global markets and continued its upward trend as investors focused on local triggers and shrugged off news coming from other side of the globe.
The benchmark Karachi Stock Exchange 100-share index jumped 253 points or 2.2% during the week ended September 23 to close at 11,606 points.
Investors were overjoyed and bought scrips across the board after the Federal Bureau of Statistics released substantially lower than expected inflation numbers for August, which led to a 500-point jump in two consecutive sessions.
The government’s plan for the resolution of the never-ending circular debt through issuance of Pakistan Investment Bonds also kept investors sentiments upbeat.
An estimated $1 trillion was wiped off the value of US stocks this week, amid heightened fears that the world economy is heading for another recession.
After a string of warnings that Europe and the United States must do more to put their economies in order, the Federal Reserve on Wednesday provided the straw that broke the market’s back.
The bank’s warning, that there are “significant downside risks to the economic outlook,” sent stocks into a tailspin with the Dow Jones industrial average losing nearly 800 points over the next 24 hours.
For the week, the Dow dropped 6.4 percent for its worst weekly performance since October 2008 and the Nasdaq lost almost 5.3 percent.
Average traded volume at the local bourse rose 45% to 72 million shares on a weekly basis while average traded value stood at jumped 53% to $47 million.
Consumer Price Index, key indicator of inflation, stood at 11.56% in August against market expectation of 13.20%, according to analysts. The lower-than-expected divergence is mainly attributable to the change in base year from fiscal 2001 to fiscal 2008 among addition of more cities.
Furthermore, investors turned quite optimistic about a bigger cut in discount rate than the already expected 50 basis points in the upcoming monetary policy, according to an InvestCap research note.
Foreign activity was in the green as inflow of $1.7 million was witnessed during the week compared with outflow of $0.97 million last week.
Monday, September 19
The stock market ended flat as investors seemed to be taking a longer weekend than usual as trade volumes stood at dismal level of 31.2 million shares.
Tuesday, September 20
Surprisingly lower-than-expected inflation numbers for August triggered an across-the-board rally at the Karachi bourse. Bulls took over the market as inflation stood at 11.56% against market consensus of 13.20%, according to analysts.
Wednesday, September 21
Investors pushed the stock market to a six-week high with massive buying across the board as expectation rose of a cut in discount rate following lower-than-expected inflation data. Index heavyweight Oil and Gas Development Company National Bank of Pakistan, ICI, Pakistan Reinsurance and Adamjee Insurance contributed heavily to market gains by hitting their upper limit of the day.
Thursday, September 22
The Karachi stock market followed the global bearish trend after the Federal Reserve said the economic outlook remains grim. Heavyweights led by the oil sector lost considerable grounds with Oil and Gas Development Company and Pakistan Petroleum Limited contributing more than 50% to the index decline, according to Elixir Securities.
Friday, September 23
Selling was the focal point of trade at the Karachi Stock Exchange as investors offloaded stocks ahead of the weekend break. US threatening direct action against terrorist network in Pakistan along with severe meltdown in global equity markets led to the fall.
Published in The Express Tribune, September 25th, 2011.
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