Market watch: Bourse rallies to six-week high as volume doubles

Talk of foreign selling did not perturb local investors.

KARACHI: Stocks jumped 2.5 percent on Monday as investors were boosted by the central bank's surprise decision to slash interest rates at the weekend, dealers said.

The State Bank of Pakistan cut its benchmark rate by 150 basis points to 12 percent as it looks to kickstart investment.

The reduction was beyond expectations as the bank lowered the rate by 50 basis points in July, experts said.

The Karachi Stock Exchange's benchmark KSE-100 index gained 300.16 points, or 2.5 percent, to reach 12,154.00.

Shares have suffered heavy losses recently due to concerns over tensions between Islamabad and Washington.

"The cut in the interest rate on Saturday was phenomenal, which has boosted the market and thrilled investors," analyst Mohammad Sohail of Topline Securities told AFP.

"This cut shows the central bank's focus is on economic growth," he said.

The bank has, however, warned that fiscal weaknesses and shrinking foreign financial inflows are haunting macroeconomic stability in the country, which has been plagued by a severe energy crisis and weak law and order.

Updated from Print version (below)

Market watch: Bourse rallies to six-week high as volume doubles 

The stock market on Monday rose 314 points in just 15 minutes to cross 12,000-point mark following central bank’s surprise rate cut at the weekend.

However, investors opted to sell later in the day as long-term economic outlook remained a major threat, said JS Global Capital analyst Ahmed Rauf.

At the end of the day, the Karachi Stock Exchange’s (KSE) benchmark 100-share index closed at a six-week high after a gain of 238.48 points or 2.01 per cent to 12,092.32 points.

The State Bank of Pakistan on Saturday cut its benchmark interest rate to 12% from 13.5%, a move that surprised market experts.

Majority of analysts had expected a rate cut of up to 100 basis points to 12.5 per cent due to lower inflation, according to a poll conducted by Reuters.

Trade volumes jumped 160% to an astounding 183 million shares compared with Friday’s tally of 70.4 million shares.

Talk of foreign selling did not seem to worry local investors as foreign institutional investors were net sellers of Rs190 million worth of shares, according to data compiled by the National Clearing Company of Pakistan Limited.

Shares of 376 companies were traded on the first trading session of the week. Of these, 194 stocks closed higher, 89 declined and 93 remained unchanged. The value of shares traded during the day was Rs6.94 billion.

Pakistan Telecommuni-cation Company Limited was the volume leader with 40.1 million shares, gaining Rs0.76 to finish at Rs12.46. It was followed by Hub Power Company with 13 million shares, gaining Rs0.83 to close at Rs42.57 and Fatima Fertiliser Company with 12.15 million shares, increasing Rs0.73 to close at Rs20.36.

Published in The Express Tribune, October 11^th, 2011.