The Karachi share market, after witnessing a bull run for six consecutive years (FY02-FY07), posted a negative annual return in the outgoing fiscal year as the benchmark KSE-100 index declined by 10.77 percent or 1483.43 points in the fiscal year 2007-08 (FY08) to close at 12,289.03 points level on June 30, 2008 against 13,772.46 points at the end of previous fiscal year (FY07).
The market had witnessed an average return of 42 percent in the last four years (FY04-FY07). On the other hand, the parallel free float market capitalisation based KSE-30 index declined by 16.18 percent or 2766.84 points to close at 14,326.27 points level at the end of FY08 against 17,093.11 points at the end of FY07.
"Though KSE-100 index touched its all time high level of 15,676.34 points on April 18, 2008, however the index could not sustain its upward momentum and closed at 12,289.03 points due to uncertain political situation and weak macroeconomic fundamentals," Umer Ayaz, an analyst at JS Global Capital Limited said.
However negative returns in most regional markets persisted, KSE's performance remained more unimpressed as MSCI Emerging Asia (ex Japan) fell by only 6.6 percent during this period. But it still outperformed peers such as Taiwan, Malaysia, China and Philippines, he added.
The average daily volume in ready market increased by 14 percent on year-on-year basis to 241.6 million shares in the period. However the average turnover in futures market fell by 10 percent to 53.6 million shares. On week-on-week closing basis, the market witnessed 27 positive closings with remaining weeks ending in red zone throughout the year.
Among key sectors, fertiliser and E&P sectors remained top performers with returns of 18.5 percent and 5 percent, respectively. Performance of two index heavyweights was more than offset by dismal performance by banking and telecom sectors.
Banking sector came under pressure after the removal of Forced Sales Value benefit, which resulted in higher NPL's for the sector. Moreover, continued tight monetary steps by the central bank, which increased discount rates by 250bps during FY08, also cast an adverse effect on the sector's performance.
Similarly, telecom sector's under performance was mainly attributed to one off huge VSS cost of Rs 23 billion borne by the sector's giant PTCL. Analysing the market's performance on half-yearly basis, the market gained a meager 2.2 percent in the first half (July-December 2007) as against a negative return of 12.7 percent in its second half (January-June 2008).
This unimpressive performance was mainly attributed to prolonged political uncertainly, coupled with steep deprecation in rupee against US dollar amid unfavourable balance of payment position.
Moreover, rumours regarding implementation of Capital Gain Tax before the budget and SBP's continued tight monitory policy to curb soaring inflation also hampered the market's performance. During the FY08, total outflow of foreign portfolio investments was recorded at $221 million as of June 27, 2008, as against net inflows of $978 million recorded in FY07.
While the country witnessed an inflow of $39.8 million during the first half of FY08, uncertain political environment coupled with liquidity crisis in international markets led to an outflow of $261 million in the second half of the year. From the beginning of 2008, NCCPL started releasing foreign investment data. According to latest data released by NCCPL (as on June 27, 2008), net foreign selling in the local markets during second half of FY08 stood at $251 million.
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