The first trading session of the week at the Karachi bourse was ruled by the bears as selling continued despite an interest rate cut of 50 basis points to 9% by the State Bank of Pakistan in its monetary policy announcement for the next two months. Across-the-board selling was witnessed as investors sold positions in every sector listed at the country’s largest stock market.
This is the largest drop in 2013, beating the previous dip of 525.29 points (3.16%) on January 15 to 16,107.89 points when Tahirul Qadri’s million-man march and rally in Islamabad coupled with Supreme Court’s orders to arrest the then prime minister Raja Pervez Ashraf over possible corruption charges enthused a bloodbath in the Karachi bourse.
The Karachi Stock Exchange’s benchmark 100-share index has shed 4.9% of its value in the last three successive sessions.
The Karachi Stock Exchange’s (KSE) benchmark 100-share index nosedived 650.27 points (3%) to end at 21,048.08 point level, where more than 30 stocks hit their lower circuit. Trade volumes fell to 323 million shares compared with Friday’s tally of 277 million shares.
“The sell-off was triggered after the news started circulating that General (retd) Pervez Musharraf was to be tried in court. Alongside this, clarification on the wealth tax issue remains a concern for investors,” said Fahad Ali, analyst at JS Global Capital.
“Foreign investors were rumoured to be net sellers in the market, adding further pressure,” Ali added.
According to Topline Securities Head of Equity Sales Samar Iqbal, selling was led by foreign investors, as pressure across the regional markets affected their sentiments. Bourses in all the emerging markets across the region have not been able to sustain bullish momentum after the US Federal Reserve signalled it might rein in its quantitative easing policy and comments from Chinese central bank – People’s Bank of China – to adjust monetary policies in Chinese economy and boost further easing as recent cash squeeze threat the nation’s economy and deepen economic slowdown. This is what ticked the foreign investors to pull their money out of the emerging and frontier markets.
Markets are shaken whenever thoughts of easy money ending are mentioned. Talk of shutting off the spigot unnerves investors.
Banks led the early hit with MCB Bank closing at its lower lock, while other index heavy foreign-driven names followed suit. Reports of prop books off-loading and foreign dumping of shares kept investors nervous with a few select institutions taking advantage as lows, said Faisal Bilwani, analyst at Elixir Securities.
Shares of 368 companies were traded on Monday. At the end of the day 45 stocks closed higher, 291 declined while 32 remained unchanged. The value of shares traded during the day was Rs10.54 billion.
Fauji Cement was the volume leader with 41.26 million shares losing Rs0.28 to finish at Rs13.25. It was followed by Maple Leaf Cement with 24.62 million shares falling Rs1.06 to close at Rs22.52 and Pakistan International Airlines with 21.57 million shares climbing Rs0.81 to close at Rs9.97.
Foreign institutional investors were buyers of Rs984 million and sellers of Rs699 million, according to data maintained by the National Clearing Company of Pakistan.
Published in The Express Tribune, June 25th, 2013.
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