- File Photo
- File Photo

KARACHI: Stock prices have come reeling down for the second day on Wednesday at the stock market, resulting in KSE-100 index taking a dip of another 287.38 points or 1.28 per cent; the cumulative fall from late last week going up to around 7 per cent.

The worries over the impending US-allies military strike on Syria, has caused rout in the global equities. Markets and currencies across Turkey, Dubai, Indonesia, Japan, Hong Kong, Philippines, Thailand and India have been badly battered.

The sell-off in shares has brought MSCI’s index of Asia-Pacific, outside Japan down 1.7pc to its lowest level since July 9. Emerging markets have already been under pressure for weeks, over fears that the United States Federal Reserve would start tempering its stimulus effort and a slow down in Fed’s bond buying spree. The Syrian crisis has added fuel to the fire.

The repercussions have prompted investors’ rush to the safe haven of bonds and gold. Across the world, investors are concerned not so much on the attack over Syria, but by the retaliation, which could spiral the conflict out of control and cause a strong upheaval in international oil prices. Brent crude already hit six-month high at $117 a barrel. Some economists fear a dash up to $125 a barrel.

Some of the concerns that dog the Asian economies are also relevant to Pakistan: The upward spiral in international oil prices would translate in fattened import bills. According to an economist, as oil and petroleum products have 33pc share in the country’s total imports, a jump of $10 increase in oil price would go to inflate the annual oil import bill by $1.5 billion.

That in turn would threaten to fuel inflation and starting all over again the controversy over the State Bank of Pakistan’s discount rate rise in the upcoming Monetary Policy on Sept 13.

But the most relevant number that the investors in equities at the local markets are watching is the inflow/outflow of foreign portfolio investment.

According to some analysts, around $44 billion has flowed out of the emerging markets and back to the developed economies; the search for higher yield has been overpowered by other disconcerting concerns.

Pakistan has not yet seen a worrisome trend. In the last 12 months, the country has witnessed net foreign buying of $406 million worth stocks. To a large extent the great bull-run at the local equity markets which began in Jan 2012 has been led by foreign fund managers.

Only for the past two days, overseas investors have sold stocks in small amounts. The data released by the National Clearing Company of Pakistan showed that foreign outflow stood at $0.79 million on Wednesday.

“Like most of the global equity markets, Pakistan stocks have dropped in the last two days amid uncertainty on likely war in Syria,” said analysts at local brokerage Top line Securities in a note on Wednesday.

In the heat of the moment, the equity markets totally ignored the happier news flow on trend of local interest rates. The finance minister hinted at no change in monetary stance, yields on benchmark 1-year T-bills fell 45bps on Tuesday, which stock market players set aside.

In sympathy with global markets, uncertainty and confusion was sitting pretty on investors’ minds.

The Topline analysts were however positive on Pakistan stocks in medium term, based on the underlying issues. The ‘business-friendly’ PML-N government’s fiscal and energy sector reforms are hoped to help in revitalising the economy that grew by only 3pc a year on an average in last 5 year,” they hoped.

Yet, unlike past, there is no visible fear at the Karachi stock market. There may be traces of concern on the faces of brokers and investors, but no widespread worries. And there is a reason for the cool attitude of the market participants in the face of the market fall.

The Pakistan equities have rallied 49pc in 2012 and 33pc so far in 2013, taking the total gains at a whopping 82pc.

“Loss of even 10-15 per cent, which I would like to term as ‘correction’, is not likely to ruffle the feathers of stock investors who will have much wealth left to enjoy,” a stock broker gladly affirmed.


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