KARACHI, Aug 17: In three weeks since July 23 when the global stock market turmoil began, Karachi Stock Exchange index of 100 shares has plunged by seven per cent.Relative to the Morgan Stanley Composite Index (MSCI) of world markets, which dipped by 11.2 per cent and the MSCI of emerging markets, which plummeted by 17.7 per cent, the drop in equity prices on the KSE is a thud rather than a bang. Nervous investors have, nonetheless, been dumping stocks mainly on the fear of an imminent large-scale foreign selling.

That, luckily, has not come about. The State Bank’s figures of outflow of foreign portfolio investment since the start of the current financial year, up to Aug 15, are just $124 million. “Compared to that the inflow in the previous financial year was $970 million,” says an equity dealer. Foreign investors hold stocks worth $4.3 billion in the Pakistani equity market.

The four-year bull-run witnessed by world markets came to an abrupt end in July when shares worldwide began sliding on fears of global credit crunch, sparked by US housing loans crisis. Investors feared that banks could suspend lending which would make credit for investors and companies inaccessible.

The Asian markets worried of a possible US economic slowdown which would impact greatly on consumption. As distress spread, the markets in Asia, Europe and the US posted their heaviest losses in years.

For several days now, investors in the KSE have seen the market open with red splashed all across the screen. Political uncertainty in the country has been cited as one more cause of stocks downturn in the Pakistani capital market. But the major fear remains global foreign sell-off.

Many brokers and analysts put up a brave face. Mohammad Sohail, director equity sales and research, JS Global, says: “It has been observed that in times of bearish world market, the KSE takes lesser beating.” The reason is of its smaller size and lack of economic co-relation, such as ratio of export-to-GDP at just about 12 as compared to 50 per cent in other markets.

Tariq Iqbal Khan, chairman of the state-owned National Investment Trust (NIT), which has Rs100 billion under management, thinks that part of the cash dividend of Rs10 billion that the NIT had distributed this month could find its way into the market. The value of NIT portfolio had declined by two per cent in the current stock meltdown. Some other big private equity funds lost on average five per cent.