Market down 3pc amid political turmoil (KSE weekly review)

KARACHI - Karachi Stock Exchange (KSE) has shown another monotonous week on account of political uncertainty, as the both mainstream political parties decided to go ahead with the impeachment of President Musharraf, resulting KSE-100-index touched its 2-year low of 9,678 points level on August 6, 2008.

KSE-100 index, however, recovered strongly in last two days of outgoing week on the back of upward revision of wellhead gas prices and SECP's indication to accommodate listed companies to buyback shares provided much needed support to the market and closed the week at 9,909 points, reflecting decline of 3 per cent on weekly basis.

On weekly basis, average daily volumes in ready market rose by 12 per cent to 112mn, whereas volumes in futures stood at 14.7mn shares, up by 10 per cent on week on week basis.

KSE 30-index fell by 285 points or 2.5 per cent and wrapped up at 11,162 points.  The market capitalization declined by Rs.85 billion on week on week basis and stood at 3.093 trillion at the weekend.

thick cloud of uncertainty was hovering on the political horizon, after the general elections, seems to be settled down very soon as the both main stream political parties have finally shown their firm intentions to move ahead with the impeachment of President Musharraf but the major cloud on the horizon is still political uncertainty because no body knows that who will be succeeded in surviving the challenge, brokers said.

Investors will remain on tenterhooks till the out come of the impeachment motion, analysts said.

The Political outlook is still uncertain and if the tussle between main political parties and president persists for a longer period, it will badly affect the morale of investors, analysts said.

Analysts were of the view that investors will closely watch the future political course which would drive future market behaviour.

In addition to the political woes, economic indicators further weakened with continued rupee depreciation, while forex reserves fell by US$328mn during the outgoing week. This aggravated foreigners concern over the country's economic stability as they remained net sellers of US$3.8mn, analysts added.

Despite 4 per cent decline in oil prices, MSCI EM Asia went down by 2 per cent as financial sector concerns and worsening global growth outlook hurt investor sentiments.

 China's SSEA composite index was down 4 per cent whereas Thailand, Malaysia stock indices were down 2 per cent and 1 per cent, respectively.

Open position in futures is at 38 months low as it was recorded at Rs5.2bn with a spread of 0.02 per cent. Previous low of Rs4.9bn was recorded on Jun 7, 2005. Similarly, CFS investment stood at Rs21.1bn, its lowest level after 23-months and down by 18 per cent on weekly basis. Average CFS rate in the week also took a dip of 67bps to stand at 13.74 per cent.

Analysts were of the view that the recent developments on the political front may weigh down market sentiment.

However, key oil companies' results coupled with the recent move of the SECP to encourage listed companies for buying their own shares (treasury stock) at current levels may lend support to the market.