Panic grips bourse as index plummets

Benchmark index drops 4.1%, settles at 33,100.24

KARACHI:

Panic selling on Monday amidst a worldwide stock downturn led to the steepest one-day fall in the benchmark index of the Karachi Stock Exchange (KSE) in over a year.

The KSE-100 Index went down 4.1%, or 1,419.4 points, to settle at 33,100.34 points on the week’s first day of trading.

After falling 3.9% week-on-week at the end of August 21, Monday’s decline of over 1,400 points plunged the benchmark index to the 11-week low.

Speaking to The Express Tribune, Topline Securities CEO Mohammad Sohail said the sell-off was triggered by a panic that had gripped global stock markets for many days. “Going forward, the stock market is expected to react in accordance with the global trend,” he said.

The KSE-100 Index is heading south in line with nearly all global share markets that have been bearish amidst concerns over the slowdown in the Chinese economy and political instability in Greece.

According to Bloomberg, more than $5 trillion has been wiped from equity markets in the last two weeks following the devaluation of the yuan.

Small investors are panicking and selling their holdings in haste, a Karachi-based stock analyst said. Their reaction is prompted purely by foreign selling, he added. “Foreign investors have been booking losses in (emerging) equity markets plus commodity derivatives elsewhere. They have to make up for those losses by selling profitable stocks in their portfolio elsewhere,” he said.

In other words, selling Pakistani stocks at a profit helps foreign investors cover the losses they have incurred during the last few days in other emerging markets.

With holdings of about $7 billion, foreign investors control roughly 10% of market capitalisation and own nearly 30% of the KSE’s free-float. Any major selling by foreign investors invariably induces panic among domestic investors as well.

Foreign institutional investors were net sellers of Rs603.1 million during the day, according to data maintained by the National Clearing Company of Pakistan Limited (NCCPL). They were buyers of Rs580.1 million and sellers of Rs1.1 billion worth of shares, NCCPL data shows.

Foreigners have offloaded about $44 million of Pakistani stocks in the last week, which marks the biggest weekly outflow so far in 2015, according to Bloomberg.

In an exchange of views with journalists last week, KSE Managing Director Nadeem Naqvi had said the exchange was far from being ‘overvalued’. Naqvi said the market capitalisation now equalled only 32% of the gross domestic product (GDP) as opposed to 42% at the onset of the stock market crash of 2008. “This proves the market is not overvalued,” he said.



Trade volume clocked in at 322.5 million shares on Monday, with the value of shares traded during the day clocking up at Rs12.5 billion.

Shares of 386 companies were traded during the day. Prices of only 24 stocks rose while those of 357 declined. Share prices of five companies remained unchanged.

K-Electric was the volume leader with 63.9 million shares, losing Rs0.76 to clock up at Rs7.15. It was followed by Lotte Chemical with 18.9 million shares, losing Rs0.99 to close at Rs6.72 and PTCL with 12.7 million shares, losing Rs1 to close at Rs18.51 per share.

Published in The Express Tribune, August 25^th,  2015.

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