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