Peer pressure: Stock market nosedives amid global sell-off

KSE benchmark index falls 4%.

KARACHI:

As global markets witnessed the worst day in trading since 2009, the Karachi Stock Exchange (KSE) also followed its lead and witnessed panic selling. The stock market’s benchmark 100-share index dropped by 471 points or 4% to end at 11,375.09 points. Friday’s decline is the highest single day fall in the past three years, according to Aziz Fidahusein and Company research head Hasnain Asghar Ali.

The reasons for the global slowdown have been widely cited to the American economic slowdown, and growing fears over Europe’s debt crisis, said Elixir Securities equity dealer Sibtain Mustafa.

Widespread capitulation hit global equity markets as growing anxiety over the global economic outlook spurred a flight to safe-haven bonds and sent stocks crashing to fresh lows for the year. Impending debt crisis that had engulfed the US Congress over the past few weeks damaged confidence in US markets further, triggering Thursday’s drop in the Dow Industrials index, plunging most global markets, including KSE, downwards.

All index heavyweights including Oil and Gas Development Company, Pakistan State Oil, MCB Bank and Engro closed at their lower limit of the day, highlighting a drop across the board.

Only 16 companies saw their shares rise while 301 companies declined and 60 remained unchanged. Only two companies – New Jubilee Insurance and Standard Chartered Bank – witnessed an upward trend in the KSE-100 benchmark index.

Despite the decline, volumes rose significantly, with 113.2 million shares traded compared with the preceding day’s 48.58 million shares. The total value of trade on Friday was worth Rs4.46 billion.

The number of shares traded kicked up as investors came to sell at the bourse on the last trading session of the week, said Invest and Finance Securities Research Head Khalid Iqbal Siddiqui.

The top losers, however, had all hit double digits with Karachi Electric Supply Company (KESC) taking the biggest fall of 25.36%, or Rs0.53 to end the day at Rs1.56. KESC was also the third most traded company, with 6.4 million shares.

While all the volume leaders’ share values declined the most traded company was Lotte Pakistan for the third straight day. It had 11.93 million shares traded at Rs10.69 after a fall of Re1. Second on the volumes chart was Fauji Fertilizer Bin Qasim with 7 million shares traded at Rs45.14 after a decline of Rs0.93.

Mustafa was cautious in his outlook, saying “it will take a while” before confidence is restored. He also said that any hopes of a bull run in the short term have been quashed.

However, foreign institutional investors were gross sellers of Rs202 million and gross buyers of Rs244 million worth of shares during the trade session, according to data compiled by National Clearing Company of Pakistan Limited.

The road ahead

The market will again follow the trend of Asian and US markets after the weekend break, said Siddiqui.

The US market got off to a good start on Friday but fell later in the day, added Siddiqui.

US stocks tumbled in midday trading on Friday in a turbulent session as investors continued to fret about the state of the global economy.

The Dow Jones Industrial Average was down 203 points, or 1.8%, to 11180, in volatile trading Friday morning. The blue-chip index rose as much as 171 points in early trading, but lost all of its gains within the first half hour of trading. The index fell more than 200 points just before noon Eastern time.

The US economy added 117,000 jobs last month, more than economists were expecting. The better-than-anticipated jobs report wasn’t enough to convince investors worries about the economy are over.



Published in The Express Tribune, August 6^th, 2011.