KARACHI, Aug 21: Investors at the Karachi Stock Exchange dumped shares on Tuesday, pulling KSE-100 index down by 4 per cent, mainly on the scare of “something” sinister that might happen on the political front.
“The market has been jittery since March, ignited by the judiciary-government confrontation,” said a senior broker, adding that all the market needed was just a slight shove to make it fall over the precipice.
Taking the 4 per cent drop into account, the index has dipped by 15 per cent from its 14,202-point high this year. The index closed at 12,245, down 448 points, on Tuesday.
The value of all listed shares combined (market capitalisation) decreased by Rs130 billion. This was the second time this month that the market had taken such a huge plunge. On Aug 9, the index had dipped by almost an equal of 432 points intra-day, when the market was rife with rumours of imposition of ‘emergency’ in the country by the dawn of next day.
Reasons for bloodbath at the stock market are too easy to find: The global stock meltdown in the last three weeks, which eventually had its effect on the Pakistani market; the SECP decision that now requires 50 per cent cash margin on trades in Continuous Funding System (CFS) which brokers say curtails their ability to do business, and finally selling by foreign investors.
The markets in Europe, the US and Asia have made at least a show of recovery, which has not travelled down to the country’s bourses. Most analysts still think that foreign outflow of portfolio investment has little to do with the market taking a steep fall.
“I am absolutely certain that there has not been any kind of panic selling by foreigners,” said Nadeem Naqvi, an investment guru and CEO at AKD Securities. He believed that the foreign investors were not actually withdrawing money as much as making portfolio adjustments: Switching from more volatile stocks to value stocks.
He even mentioned that CALPERS, which was California’s Public Pension Fund and one of the world’s largest institutional pension investors, had put Pakistan on its approved list last week.
Another equity trader also brushed aside the blame on foreign investment outflow: “How much has been the foreign selling?” asks this all-time bull. “Just around US$150 million since the beginning of current fiscal year.” He says and compares it to the huge sum of US$1.2 billion that the country saw as inflow into the equity markets last year.
