Sock market plunged by 41 per cent in FY09

KARACHI - Karachi stock market plunged by nearly 41 percent in FY09 which is the highest fall since FY98, The Nation has learnt. Previous years decline remained around 11 percent. The bearish trend of Pakistan capital market continues with KSE-100 index concluding another year of negative growth. This makes FY09 the second consecutive year of the bear-run. It is pertinent to mention that KSE had registered consecutive 6-year gains (FY02-07). On the broader canvas, during FY09, almost all the international stock markets also depicted downward pattern that was mainly triggered due to the global economic turmoil and financial crisis. While the market produced negative return of 52 percent in the initial half (Jul-Dec 2008) of FY09, the second half (Jan-Jun 2009) yielded 23 percent gain. It is important to note that due to the ultra-weak market sentiments, the regulator imposed a floor on KSE 100-index at 9,144 points level during 1HFY09. Resultantly, the trading activities remained almost halted in market during the floor period. Besides, the prolonged index freezing was also responsible for the exclusion of Pakistan index from the MSCI. Deteriorating economic profile, political uncertainty and global and domestic liquidity constraints were the major reasons attributable to this decline. With respect to sector wise performances, during the year, insurance, textile, commercial banks, autos and paper and board registered highest decline relative to KSE 100-index. Whereas, chemical, IPPs, E&P and fertilizer sectors posted relatively lesser decline than that of the broader market. This is also depicted in the accompanied chart. In the regional context, the Pakistans equity market remained the worst performer market during FY09. The performance of KSE was not even at par when compared with Asian Emerging Markets (as defined by MSCI). In FY09, Pakistan market under-performed both MSCI EM (30 percent decline) and MSCI EM Asia (down by 20 percent). The highlight of the year was declining quantum of dollar inflows in the local market. That said, against the net outflow of $232 million during FY08, Pakistans equity market lost approx $317m worth of foreign investment during FY09 with overall level reaching to negative $540m by the end of FY09. Due to subdued market sentiments on both local and global fronts, no GDR offering was witnessed during FY09. Float adjusted market cap of Pakistan market also reduced from 26 percent in FY08 to 24 percent by the end of FY09. And due to significant net outflows, foreign ownership in the float adjusted market cap dropped to 20 percent from that of 25 percent. Moreover, against the average daily volume of 242m shares (Rs25.6b or $409m) in FY08, trading volume on ready counter drastically reduced to 105m shares (Rs4.4b or $56m). Similarly, volumes in futures market also declined to 2.6m shares (Rs0.33b or $4.2m) in FY09 as against 53m shares (Rs8.9b or $143m), a year earlier. The overall weak market sentiments, placement of floor on the index and absence of CFS financing are considered to be the main culprits behind this momentous activity shrinkage at both the counters.

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