Pakistani bourses remained under pressure during the last quarter while intensifying crackdown against big political parties and their big fishes, the market sources said, adding that the Karachi 100-Index fell 6.1 percent in term of rupee and 8.8 percent in US dollar term.
KSE-100 Index is down 11 percent in term of Pak Rupee (14 percent in term of dollar) from its all time peak of 36,222 on Aug 6, 2015. It is now trading at 24-week low.
The analysts said the operations against terrorists in Karachi and arrests of big fishes in political parties create too much panic in the market. In this connection, the Securities and Exchange Commission of Pakistan (SECP) has clarified this rumour last Tuesday saying, “The National Accountability Bureau (NAB) has been approached to take punitive action exclusively against those brokers who embezzled client’s assets and gave a breather to investors’ confidence prompting them to take fresh position in the market.”
The market fell by 1419 points in a day on August 24 on a rumour of the arrest of brokerage house owners. There were rumours that the NAB started crackdown against those brokerage houses who were financing terrorists in Pakistan.
They further said that the operation against Taliban in tribal areas near Afghan border and Indian’s violations of ceasefire at Pak-Indian border have also little impact on the market.
In the year 2015, KSE-100 index is up only 0.5 percent in Pak Rupee terms but down by 3.5 percent in US dollar. However, it outperformed compared to Sri Lanka, its Asian Frontier peer, which fell by 10.2 percent (in US$ terms). Vietnam and Bangladesh witnessed lesser fall of 1.9 percent (in US$ terms) and US$0.03 percent (in US$ terms), respectively, than it’s above mentioned Asian Frontier peers.
“Falling global equity markets has been the primary reason for this performance,” said Muhammad Tahir Saeed of Topline brokerage house. Foreigners, being one of the largest stakeholders in Pakistan market with exposure of close to $6.5 billion (33 percent of free float), have been net sellers.
Foreigners net selling in 2015 to date is $179.6 million (excluding HBL secondary offering) according to National Clearing Company Pakistan Limited (NCCPL) data, with $105 million in last quarter.
Asian stocks have dropped for a 5th month, the longest losing run since 2008. Moreover, MSCI world index also posted worst quarterly decline in four years. MSCI EM was down 20.2 percent while MSCI FM eroded 10.9 percent in last quarter.
Almost $11 trillion has been wiped off the value of global equities in 3rd quarter 2015 as per Bloomberg. Main reasons for this fall include China’s economic slowdown and uncertainty over federal reserve plans to raise interest rates.
Volumes have dried down in Pakistan. In September 2015, average daily volume in cash market remained at Rs 8.1 billion ($77.7 million), the lowest in the last 12 months, the analyst said. This compares unfavorably with this year’s average daily volume of Rs 12.5 billion ($123 million). And low volume is considered a negative development in Pakistan especially for local traders, he added.
“Though there has been some political noise at the local front, we don’t see it as a major cause of concern,” topline analyst said. Army operation, especially in Karachi, has resulted in snagging of militant wings of different political parties, he added. That is why relationship between ruling party and opposition parties, especially the Pakistan People’s Party (PPP) and Muttahida Quami Movement (MQM) has been affected badly, he said.
Official leverage position is high but not alarming. Open interest in single stock futures is currently Rs 5.6 billion compared to this year average of Rs 7.6 billion.
The topline securities have revised down its index target to 34,500 for Dec 2015 from 36,000 due to 1 less than expected earnings growth of oil companies owing to steep fall in crude oil prices, net foreign outflows that may not re-rate market as expected and political noise in the country that may affect sentiment.
For the time being global markets, crude oil price trend and foreign activity will remain a key driver for Pakistan market, the analyst said. Other factors to look at are pace of economic recovery, currency devaluation and political scenario. On Thursday, the KSE-100 Index gained around 484 points till 4 pm closing at 32771 points because of the clarification of SECP.