Local, international odds keep equity, currency markets in red zone


The stock market whereas continued to witness bears dominating the benchmark index on Monday the money market too kept making history by seeing the interbank exchange rate closing higher than that of the open market.
The rupee on the interbank market traded against dollar at Rs 104.87, just three paisas lower than what the money dealers said “lifetime high” of Rs 104.90.
In a historic development, as the market sources put it, the rupee-dollar parity ranged between Rs 104.30 and Rs 104.75 on the open market. “For first time in history we are seeing the interbank rate going higher than open market for last one week,” viewed Malik Bostan, chairman Exchange Companies Association of Pakistan (ECAP). “Rs104.90 was the lifetime high,” he added.
Asfar Bin Shahid, a banking analyst, says, “It is something very odd that is happening.” Seeing improved inflows of foreign investment as a lone remedy for Pakistan’s balance of payment woes, Shahid said the country’s marginal dollar reserves caused the rupee record depreciation.
According to the State Bank, up to August 23 the country’s foreign exchange reserves contracted to $10.390 billion, of which the State Bank held only $5.203 billion.
SBP Governor Dr Yaseen Anwar also tends to attribute the prevailing pressure on rupee to the mounting pressures on external sector stemming mainly from lack of financial inflows and slippages in the foreign exchange reserves. “Of late the foreign exchange market has witnessed few jitters,” he told Pakistan Today.
Shahid said, “Officially a country must hold at least $11 billion that could finance its two to three months imports bill.” The economist opines that even the fresh $6.6 billion IMF loan would not help the local currency be stable.”
“The load of outflows is more. You need substantial foreign investment that comes with improved law and order and uninterrupted energy supplies,” the analyst said
ECAP chief Bostan too termed huge IMF repayments as a major drain on the country’s dollar reserves, saying the rupee was under immense pressure due to heavy repayments.
It was 26th of last month when Islamabad dolled out $393 million to the International Monetary Fund (IMF) as 19th installment under the Fund’s 2008 half-paid $ 7.3 billion Stand-By Arrangement (SBA).
The State Bank said Pakistan since July 2001 had repaid $5.055 billion to the international lender and is due to clear Rs 2.101 billion more by September 2015.
Also, the money exchanger said, while the banks’ six-month forward booking of the dollar at Rs 104 was maturing the market had no enough dollars available. “This too made the dollar appreciate,” he said. Outflows of the greenback from the stocks market and clouds of war hovering over Syria and the consequent turmoil for international currencies were other negatives Bostan cited for the rupee’s weakness. “Gold prices (per ounce) also dropped to $1,200 from $1,400 on international market,” he said.
Stock market: The day was all negative for the sentiment-driven Karachi Stocks Exchange (KSE) where the KSE 100-share index shed 436.17 points or by 1.97 percent to close at 21,724.68 points compared to 22,160.85 points of Friday last week.
“Pakistan stocks continued bearish trend amid institutional profit taking post major earning announcements,” said Ashen Mehanti of Arif Habib Corporation.
The trading turnover contracted to 180 million from 185 million shares traded on previous day.
Mehanti said factors like security unrest in the city, rising political uncertainty ahead of the federal cabinet’s Tuesday’s meeting on the city’s law and order situation and growing fears on uncertainty over the central bank’s policy rate stance ahead of announcement due on September 13 played a catalyst role in bearish activity. “Limited foreign interest and regional uncertainty on impact of Syria military action affected the sentiments,” Mehanti said. Consolidation continued amid concerns for rising economic uncertainty, higher government debt and uncertain global stocks and commodities, said he.
InvestCap analyst Abdul Azeem said during August KSE100 index shed 4.9 percent on the back of volatility witnessed in the international equities market.
“Such market decline is primarily due to the severe value wipe-off in the int’l equities amid US expected attack on Syria and the possible rippling effects on local equities i.e. anticipated foreign sell-off in the local market,” he viewed.
He said the rising trend in international oil prices and depreciating rupee whereas was likely to further fuel the backbreaking inflation in the country, the US-allies attack on Syria would be unfavorable for investors providing further impetus to negative sentiments in equities.