The death of al Qaeda chief Osama Bin Laden at the hands of US forces in Pakistan has reverberated on local money and equity markets posing, what the analysts foresee as, ‘likely’ but ‘temporary’ effects.
On the second day of the killing of Bin Laden, while seeing the US dollar gaining some, as the analysts called, ‘short-term’ strength in the international market, the greenback weakened in Pakistan.
The local money market reacted, however, not very strongly to the demise of most-wanted international fugitive with the rupee marking a slight gain of 20 to 30 paisas against the greenback on Tuesday.
The impact, however, was more visible on local bourses with Karachi Stock Exchange (KSE) showed a ‘head-on’ plunge in the benchmark 100-share index and already thin volumes that, respectively, registered a decline of 100.65 points and 59 million shares ever since news broke of Osama’s killing on Monday morning.
Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan said, though nominally, the rupee had strengthened against the dollar due to Osama factor.
“The rupee stabilised by 20 to 30 paisas against the dollar to stand at 84.35 (buying) and 84.65 (selling) today against yesterday’s 84.55 and 84.75,” the ECAP chief told Pakistan Today.
The money exchanger, however, said the post-Osama impact would not be long term and the rupee had regulatory reasons to recover against the dollar. “The lifting of a ban by the State Bank on the export of pound sterling and euro helped the rupee gain Rs 2.0 during the last two to three months,” Bostan opined.
About the prospect, the ECAP chairman said the Pakistan currency would continue to gain strength against that of the US on the back of favorable regulatory measures, the forthcoming Hajj and Umra season, and strong foreign exchange reserves currently standing at $ 17.179 billion.
The news about Bin Laden’s death, some analysts believe, have added to the investors’ nervousness on the eve of a tax-heavy federal budget due at the end of this month.
“Bearish activity (was) witnessed as the investors fear the outfall of the death of al-Qaeda chief Osama bin Laden,” said Ahsan Mehanti, Director Arif Habib Investments.
The KSE, the country’s largest bourse, lost 21.65 on Monday and 79 points on Tuesday while turnover at the ready-counter was recorded falling from 109 million to 76 million and 50 million shares during last two days. On Tuesday the KSE 100-share index closed at 11,956.89 points, losing 79 pints or 0.66 percent against 12,035.89 points of Monday that also saw a “head-on” dip of 21.65 percent.
“(The) volumes remained thin with limited institutional and foreign interest in the earnings announcement session on investors’ fears on backlash after death of al-Qaeda chief,” Mehanti said.
Analysts like Hasnain Asghar Ali of Aziz Fidahusein and Company insist that the ‘likely’ repercussions of what he termed the OBL (Osama Bin Laden) operation, coupled with a tense law and order situation in the metropolis, was keeping investors tense. “The tense city and various threats that may come as a repercussion of OBL operation added to the nervousness” at KSE, Hasnain said. On the thin volumes, the analyst told Pakistan Today that while the results season was over there was no ‘trigger’ left at the bourse to encourage investment.
“The upcoming budget left the handful of market participants with no option but to readjust themselves for a tougher investment environment ahead,” he said. The analyst said issues like the rising inflationary tide and higher interest rates, mounting circular debt, fiscal mismanagement, law and order issues and threats by pro-Osama supporters, a likely increase in corporate tax slab and Capital Gains Tax (CGT) were “self-explanatory” when it comes to taking into account investors’ interest in the local bourses.
