KARACHI, Oct 5: Karachi stocks did not escape unhurt during the post-Sept 11 turmoil on the world stock and financial markets and shared the massive toll followed by panic liquidation from all and sundry.
“In the similar situations as the prevailing ones, investors seek safe heavens in the trio”, says a leading stock analysts a the W.E. Financials.
The trio, in market parlance is defined as stock, gold and dollar markets as huge cash amounts interflow in them depending on the external factors. As an old adage says “money will go where it is safe and could grow”.
But the subsequent positive developments including lifting of sanctions, end of standoff on the foreign aid front, rescheduling of foreign credit lines for a longer period and strong feelers of write off of a substantial portion of foreign debt of $32bn lured investors back in the market, leading the way for a strong recovery.
The perception that fresh strong relationship with the US may not open the floodgate for the dollar but Pakistan’s willingness to go with the US thinking on terrorism, Afghanistan and Osama bin Laden will certainly benefit it after the dust on the entire issue settles down, some analysts believe.
But what seems to have reversed the market trend was the perception of economic revivals and major breakthrough on the export front after the current Afghan situation eases.
However, the market received massive battering in between amid fears and hopes as investors were not inclined to stay in the market seeking safe heavens somewhere else.
And in the process, the KSE 100-share, the barometer of the national economy breached through two psychological barriers of 1,200 and 1,100 but finally managed to end around 1,142.00 points and recouped a major portion of the market capitalization at Rs287 billion after at one stage having fallen to Rs272 billion.
During the initial stages of the crisis amid fears of an immediate retaliatory US attack on Afghanistan, it appears that the market will collapse below the 1,000 index level but the situation was saved by some official corrective steps including the closure of the market for a week ban on foreign selling and raising the exposure limits of brokers.
COTTON: But the cotton market could not be save from the fallout of the Afghan situation and fears of US attack as foreign buyers of textiles withheld LCs and physical shipments under the previous LCs. That caused a tremendous pressure on the liquidity of spinners who curtailed their daily purchase of cotton.
The consequent panic selling owing to large unsold stocks caused the market crash as the lint is now available at Rs1,500 per maund lower from the last year’s average price of Rs2,000 per maund official support price of Rs1,866 per 40 kg.
