Following the tumbling global equity markets, the Karachi share market witnessed panic selling during the week ende on August 6, 2011 due to investors' concerns over US debt situation and the threatening law and order situation in Karachi, investors said.
The KSE-100 index registered a massive decline of 815.28 points, or 6.68 percent, the highest fall in 23 weeks, and closed at 1,375.09 points.
Interestingly, the foreign investors emerged as net buyers of shares and took fresh positions on dips and a net inflow of $4.661 million was recorded during the week.
Trading remained on low side and the average daily volume at ready counter stood at 52.35 million shares as compared to previous week's 51.81 million shares. Market capitalisation declined by Rs 213 billion to Rs 3.007 trillion.
On Monday, the market opened on a positive note and the index gained 63.02 points to close at 12,253.39 points with the volume of 38.935 million shares.
On Tuesday, the investors opted for selling and the index lost 27.06 points, closing at 12,226.33 points, with 14.941 million shares.
On Wednesday, the index underwent a heavy fall of 284.61 points and closed at 11,941.72 points with 46.108 million shares.
On Thursday, the index lost 95.56 points to close at 11,846.16 points with 48.579 million shares.
On Friday, the market witnessed heavy selling pressure and the index declined by 471.07 points to close the week at 11,375.09 points with 113.170 million shares.
Khurram Schehzad, head of research at Invest Cap said that the global equities had been going through one of the toughest selling through a number of economic issues prevailing in the developed world i.e. US and Eurozone, with respect to ballooning of their overall debts attached with big question mark on their repayments, resulting in back to back rating downgrades and the ultimate impact on the dua of the biggest world currencies, dollar and euro. Thus, the sell-off in equities across the globe made sense with commodities gaining the pace.
On the other hand, Pakistan equities despite its relatively loose or at times no relation with global markets, as it seems, has also shown one of its deadliest crashes of all times, which has taken place only in the last few trading sessions.
The KSE-100 index recorded sharp falls for a number of times in its trading history, with biggest single-day decline of 711 points that it absorbed back on December 31, 2007
"The reason for the latest market crash is not completely visible as yet as the foreign investors at the KSE have not yet shown their muscles to initiate or intensify this market crash", he said. This is due to the fact that Pakistan equities, since the start of the month of Aug-11, have observed net inflows of over $4.661 million, and $5 million year-to-date (YTD), after having recorded a net outflow of $29.671 million last month (Jul-11), where market saw only 2 percent month-on-month decline.
"On the other hand, if we look through the Asia Pacific region, emerging as well as frontier markets combined have seen net foreign outflows of $2.0 billion MTD from net foreign inflows of $2.3 billion in Jul-11 - lost a massive $4.3 billion by far in Aug-11", he said.
This has put Pak equities into the green zone as far as foreign flows are concerned. Locals are therefore on the selling mode as per NCCPL data, which mainly include banks and corporate while foreign investors have been net buyers, he added.
"One major concern could be that local investors may have started selling off their positions before the foreign investors actually take out their funds from Pakistan markets, in line with their exit strategy in the emerging as well as frontier markets", he observed.
While Pak equities have observed one of its severe market crashes only in a few days time now, it provides an equally attractive investment opportunity at current levels as the entire corporate result season is left with high double-digit earnings growth (22 percent in 2011) and better payouts (6.6 percent in 2011) from the listed corporate sectors, he said. At current levels, Pak equities are trading at a PE of 7x at 2011 earnings while now offering huge discounts on a number of low-beta high-earnings potential blue-chip sector companies including Oil & Gas, Fertiliser, Power and Chemicals. "We maintain our year-end index target at 13,500, which provides an upside of around 18 percent from current levels", he said.
Sana Hanif at JS Global Capital said in spite of SBP unexpectedly announcing a 50bps cut in the policy rate over the weekend, market witnessed broad based selling pressure during the week.
The investors' interest was clouded by precarious debt situation of the US and threatening law and order situation in Karachi. In the final session of the week, market lost 4.0 percent - highest single day drop since October 19, 2009 - following sharp declines in regional market.
The KSE-100 index opened on a positive note; however, market failed to sustain the positive mood and underwent massive selling, mainly led by local banks which were net sellers of $11.6 million.
Key results released during the week were LUCK and ABL and both the results were in line with expectations. However, owing to the prevailing uncertainty in the global markets, the stocks of these companies failed to maintain their pre-result levels. ABL ended the week with a 4.9 percent WoW decline, and LUCK plunged by 2.8 percent on week-on-week basis.
Comments
Comments are closed.