Karachi bleeds while Mumbai ready to flourish

Analysis: some of what's been happening around Pakistan this week.

Mustafa Nemat October 20, 2010

KARACHI: It is ironic (for lack of a better word) that while commercial activity in the financial capital of the country has been held hostage to the string of violence that seems to be rippling out of control, our two mighty neighbours seem to be quite busy on the economic front.

The largest initial public offering in next-door India’s history kicked off on Monday and within three days has been oversubscribed 10 times. The offering of what also happens to be one of the biggest producers of coal in the world, Coal India, has invited more than enough investors to be referred to a whopping success.

“State-run Coal India’s IPO to raise as much as $3.5 billion was covered more than 10 times on the third day of the issue’s launch, exchange data showed, as large investors crowded in on the final day for institutional order,” read a Reuters report on Wednesday.

The only people not happy with the privatisation of the mammoth organisation seem to be its employees – who fear a cut in jobs. The share of the offering set aside for them has been severely undersubscribed but interestingly, private investors are more than happy to gobble up this share of the pie as well since most research houses have given a clear go-ahead for putting money into the company.

Meanwhile, our trusted ally in the north decided to go and increase discount rates in a surprise move on Tuesday – a similar stunt to the one pulled by the State Bank of Pakistan in its last monetary policy review. The first increase since 2007, which according to some has been executed to cool down the economy, takes one-year deposit rate to 2.5 per cent and one-year lending rate to 5.56 per cent.

Like in Pakistan, concerns have been expressed in China that the hike will be counter-productive in the fight against inflation. Albeit, there is one key difference between the situation in China and Pakistan – although interest rates there are still much lower than what we have to offer, the recent increase is expected to result in an inflow of foreign capital into the country which may result in appreciation of the yuan.

A clearer picture, however, will emerge after finance ministers of the G20 major economies meet in South Korea on Friday to discuss currency-related issues.

Back home, Karachi remained at a virtual standstill on Wednesday after the death toll on the back of target killings rose to 66 in a period of just four days.

Despite the relatively better performance of the benchmark KSE-100 index at the local exchange over the past few days, turnover remains low reflecting a general lack of interest in local equities. Even the sporadic buying by foreign heavyweights has failed to lift up average daily volumes at the Karachi Stock Exchange above the 100 million mark.

The only excitement in financial circles seems to be the Term Finance Certificates (TFCs) put up on the retail market by Engro Corporation on an attractive annual return of 14.5 per cent.

Published in The Express Tribune, October 21st, 2010.


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TheRighteousFrenchman | 10 years ago | Reply I have never been to Pakistan and the first time I really got to see India was when their Prime Minister (or is it the President?) became the guest of honor at Bastille Day. We Frenchmen are a bit naive when it comes to world affairs and didn't understand what was the big deal in calling India to an important occasion like Bastille day? Its only after that I started seeing the amazing progress done by India. China is still much farther ahead - but couple of months go - I got a chance to visit Bombay (I cannot pronounce Mumbai - I like Bombay better too :D) on the way to Colombo in Sri Lanka. Bombay is an amazing city - and so full of life and colors. I saw a lot of slums but they were for the most part peaceful. The beauty was that all faiths live equally and in harmony there. The city itself is growing like crazy - construction cranes everywhere - I have no doubt that in 10 years it will start looking like Dubai!! I wish all countries in South Asia - indeed the world would learn from Bombay! Despite the crowds and pollution - Bombay is a truly world class city. Even Paris can take some lessons and bring peace to its suburbs the way Bombay does!!!
SKChadha | 10 years ago | Reply @ Sandy, My father, before his death few years back, used to consider small town of Dingi (near Sialkot) as a better living place in comparision to New Delhi ....??? Nothing wrong, it is individual's perception .... !!!
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