KARACHI – Karachi Stock Exchange bucked a hitherto robust trend in February-2011 where 1Q has historically been a strong period for the KSE, but 8.7 percent MoM decline for KSE-100 is the worst February showing in last 20 years and is only the 6th negative MoM February reading since 1992. While domestic and international politics remained noisy, ongoing MENA tensions triggered rally in commodities, raising concerns on follow through impact on Pakistan macros.
More importantly, it fuelled concerns on continued foreign investment outflows from emerging markets spilling over to Pakistan. February-11 inflows for KSE were positive at $5.5 million (-91 percent MoM) but at their lowest since December-09. Underperformance versus region in February means KSE is among the region’s Year To Date laggards now (-6 percent YTD).
Usual post results lull crept in (evident in 50 percent decline in ADTO to $44mn). Individual stock interest fizzled out post announcement as payouts again upstaged earnings in driving investor interest. In addition, tensed Pak-US relations over diplomatic immunity or otherwise for a US national currently in custody for killing two people in Lahore had concerned investors over potential follow through impact on sovereign flows.
On the regulatory front, the finer details of both leverage product (MTS) and capital gains tax (CGT) remained elusive resulting in an uncertainty regarding their impact on the market going forward.
