Stock market activity drops to 13-year low

KSE members hold meeting to discuss the massive fall in trade volumes and lack of participation.

KARACHI: Investors seem to have parked their funds in other avenues or taken a break as activity at the stock market dropped to its lowest level since 1998 in November.

Average daily volumes plummeted by 51% to 45 million shares in November on a monthly basis, according to a JS Global Capital research note.

Karachi Stock Exchange (KSE) members also held a meeting on Friday to discuss the massive fall in trade volumes and lack of participation. It was observed that volumes have fallen to 13-year low after the imposition of capital gain tax.

Foreigners also continued to take out their money as they were net sellers of $4 million in November. While the lack of an investor friendly leverage product continues to be blamed for a lacklustre market, increasing noise on the domestic political front and mixed global economic news added to the drag.

Domestic politics was at the centre of attention for the better part of the month with the NRO review application being turned down by the courts, controversy over an alleged memo written to the US by the civilian govt which led to resignation of ambassador to the US Hussain Haqqani and the NATO air strike that killed over 20 Pakistan soldiers.

Eyeing these factors, the State Bank of Pakistan also opted to keep discount rate intact at 12% despite half of the market participants expecting a 50 basis points cut.

Macro economic vulnerabilities became apparent with CPI inflation standing at 11% against consensus expectations of 10.5% for October. Current account deficit also widened 187% to $1.6 billion on a yearly basis in the first four months of fiscal 2012.

Meanwhile, the KSE-100 declined by 2.8% in November against 10-year November average return of 1.6%.

The oil and gas sector outperformed its peers owing to sizeable oil and gas discovery at Nashpa-2 along with expectation of another huge discovery in Zin block, says the note. The banking sector underperformed the index due as non-performing loans grew by Rs38 billion in the third quarter of 2011.

Published in The Express Tribune, December 3^rd, 2011.