Fear of IP gas project sanctions bring KSE down by 442 points


Fragility of the investors’ confidence on the country’s stocks market exposed Monday with Karachi Stock Exchange (KSE) nose-diving by 442 points amid panic selling.
Threat of the imposition of economic sanctions by the United States, the market observers believe, on Pakistan for clinching the $ 7.5 billion gas pipeline deal with Iran played havoc with investors’ sentiments on the c0uontry’s largest bourse. “Panic selling witnessed at KSE amid the investors’ concerns for US warning Pak-Iran IP gas project could incur sanctions connected with Iran’s nuclear program,” viewed senior equity analyst Ahsen Mehanti. Mehanti, also a director at Arif Habib Securities, said institutional profit-taking was witnessed in stocks across the board post major earning announcements as the investors awaited the outcome of pipeline deal.
The first day of the week saw the benchmark KSE 100-share index sliding by 441.62 points or 2.46 percent to close at 17,522.56 points against 17,964.18 of last week on Friday. The intraday high and low were, respectively, recorded at 18,036.90 and 17,493.28 points. The analysts said early morning the index mounted to 18,059 points, but soon lost 258 points and fell to 17,705 points amid fears that Pak-Iran gas deal could upset the equity market and investment climate in the country. President Zardari is in Iran to lay foundation stone of the strategic project. “There is panic in market over this gas deal,” they said. The free-float KSE 30 index also lost 371.38 points by dropping to 14,219.36 points from 14,590.74 points of last trading session. Of the total 348 scrips traded, only 51 set in the green zone, while 285 closed in minus and 12 remained unchanged.
The trading volume slightly declined to 234.655 million shares from Friday’s 235.847 million. The market capital contracted by Rs 94 billion to Rs 4.368 trillion as against the previous Rs 4.462 trillion. The trading value, however, increased to Rs 8.226 billion from Rs 8.067 billion of last session. PTCL appeared as a volume leader by having its 20.6 million shares traded on the day losing, however, 49 paisas in terms of per share that opened at Rs 20.76 and closed at Rs 20.27. Engro Corporation, Jahangir Siddiqui Co, Fauji Cement, Nishat Mills, Telecard, Maple Leaf, Lotte PakPTA, Byco Petroleum and NIB Bank were others to follow.
Turnover on the futures market also remained dismal at 22.89 million as against 35.04 million shares of Friday. “Pakistan and Iran are going to lay foundation stone of the Pak-Iran gas pipeline project that can attract sanctions from America and annoyance from the Saudi Arab,” suggests an early morning account of the investors’ fear on the market. Nauman Khan, a Topline analyst, said besides selection of the caretaker set-up, development on IP gas deal had got the investors’ eyes on the Karachi bourse.
This, he said, could strain Islamabad’s ties with its largest donor, the US. Khan said US’s expression of reservation over the project could potentially have implications for the country’s aid as well as trading environment. “The uncertainty is creating a wave of uneasiness amongst the investors and was one of the reasons behind 1% or 221 points fall in KSE100 last year,” said Khan adding the ground breaking ceremony of $7.5 billion pipeline project Monday created uneasiness amongst the investors. “Though, we flag that threat of sanction is still in its infancy stages but it has created some nervousness amongst the investors,” the analyst said.
To recall, sanctions imposed on Pakistan have span over 3-phases i.e. 1979-1990, 1990-1998 and 1998-2001. In the last phase, imposed due to 1998 nuclear test, amongst other steps economic development assistance was terminated; foreign military sales were suspended; credits by the US suspended; US banks withheld all loan trenches; loans from donors agencies, such as the IMF and World Bank, were suspended. However, several important components of the sanctions were waived during 1998. Also, Arif Habib’s Mehanti said factors like security unrest in the city after Abbas Town blast, dismal cement sales for Feb’13 and economic uncertainty adversely impacted the sentiments on Monday. This, he said was despite easing gas shortfall issues in fertilizer sector and ECC’s approval for raise in refineries deemed duty to 9 percent.