KSE-100 in­dex plum­mets by 1,400 points as in­vestors panic

The Pak Banker - - FRONT PAGE -

The ex­change rate of US dol­lar in the in­ter­bank mar­ket ap­pre­ci­ated by Rs2.10 on Mon­day to reach a 17-month high of Rs104.10.

The re­port said that dom­i­nant ex­porter groups are try­ing to cre­ate in­sta­bil­ity in the mar­ket by buy­ing US dol­lars in huge quan­tity. Ex­perts are of the view that the de­crease in value of rupee un­der the cur­rent cir­cum­stances will cause in­fla­tion in the coun­try.

Cur­rency deal­ers, how­ever, em­pha­sised that Haj pil­grims were the big­gest buy­ers of for­eign cur­ren­cies, in­clud­ing Saudi riyals and US dol­lars. The State Bank has re­cently al­lowed cur­rency deal­ers to bring dol­lars from Dubai di­rectly in their ac­counts in Pak­istan in­stead of sur­ren­der­ing dol­lars to a bank and then get­ting them within a week's time. The step was taken on de­mand of cur­rency deal­ers and for speedy sup­ply of dol­lars in the open mar­ket.

Since max­i­mum Saudi riyals are be­ing con­sumed by pil­grims, less for­eign cur­ren­cies are avail­able to sell in Dubai for buy­ing and re­mit­ting dol­lars into the coun­try. Since the im­po­si­tion of with­hold­ing tax (WHT) on bank­ing trans­ac­tions, anot her group of buy­ers ap­peared in the open mar­ket. Traders protest­ing against WHT are buy­ing dol­lars, mak­ing pay­ments through it and sav­ing it in their bank lock­ers.

Mean­while, Panic selling led to a ma­jor drop in the bench­mark in­dex of the Karachi Stock Ex­change (KSE) on Mon­day. The KSE-100 In­dex went down 3.97%, or 1,370 points, to reach 33,149.6 points at 1:03pm on the week's first day of trad­ing. It had de­clined by as much as 1,492 points, but gained more than 100 points af­ter­wards.

The drop in the bench­mark in­dex since the be­gin­ning of trad­ing at 9:30am is equal to the week-on-week de­crease in the KSE100 In­dex recorded at the end of Au­gust 21. The KSE-100 In­dex is head­ing south in line with nearly all global share mar­kets that have been bear­ish amidst con­cerns over the slow­down in the Chi­nese econ­omy and po­lit­i­cal in­sta­bil­ity in Greece. Speak­ing to media, a stock an­a­lyst said small in­vestors are pan­ick­ing and selling their hold­ings in haste. Their re­ac­tion is prompted by for­eign selling, he added.

"For­eign in­vestors have been book­ing losses in (emerg­ing) eq­uity mar­kets plus com­mod­ity de­riv­a­tives else­where. They have to make up for those losses by selling prof­itable stocks in their port­fo­lio else­where," he said. In other words, selling Pak­istani stocks at a profit helps for­eign in­vestors cover the losses they have in­curred dur­ing the last few days in other emerg­ing mar­kets. So far the largest turnover has been recorded in real es­tate in­vest­ment and ser­vices stocks (19.6%), fol­lowed by chem­i­cals (15.3%), ce­ments (11.8%) and tex­tiles (10.3%).

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