KARACHI – Pakistan was among top losers for the week at its market cap slashed down by seven percent. Compared to a decrease in total market cap, decline in foreign selling did not rise to significant levels. The Pakistani equity market cap was down by $2.8 billion, whereas foreign selling’s contribution was limited to a minuscule 0.19 percent.
This was shown in the assessment of Invest capital to gauge the impact of Middle Eastern fiasco, which started from Tunisia and then moved towards Egypt. It now engulfs Libya, along with Bahrain, on regional markets, with primary focus on what has happened in Pakistani capital market.
On the regional level, equity markets were not oblivious to global happenings. In the last week, markets like India, South Korea and Taiwan lost three to four percent of their market capitalisation. The Indian market took the major hit during the past week, as it shed off almost $46 billion, where as prior to that, it had only lost $1.3 billion for the month till February 18.
However, since the turn of the year, Indian market dwindled 15 percent of its market cap. Similarly South Korea and Taiwan have lost three and six percent of their market cap in the current. However, unlike India, both these markets have undergone an increase of two percent in market cap in Jan-11. Only Thai and Indonesian markets increased three and four percent and underwent least depreciation (market cap down by only one and two percent respectively).
A similar trend was seen in all fellow markets, where a decrease in foreign selling, at a very low value, was seen compared to a decline in the market cap, said Asad Siddiqui at Investcapital. He added that Pakistan still enjoys net foreign inflows ($3.3 million MTD).
This nullifies claims that bloodbath during the past week in Pakistani market where KSE-100 index plunged a weekly seven percent due to foreigners selling. However, this minimal net foreign outflow did its part to shatter investor confidence and pour fuel on the fire of panic selling, which primarily caused a nose dive in the Pakistani equity market.
However, with Margin Trading System’s expected implementation in the first week of March-11, KSE is expected to bounce back due to availability of liquidity and attractive values. Increasing oil prices are expected to have a significantly positive impact, especially on E and P sector, which is already trading at appealing levels, he added.
Global equity markets have felt brunt of the impact. Among those, frontier markets were hemorrhaged the most, specially the Asian Frontier markets as the MSCI Frontier Market index slumped by a massive 13.2 percent since the turn of current month.
Impact in the current year was more severe as it dwindled 15.60 percent. Emerging Frontier markets were not spared from this onslaught as their Asian index was down for both, this month and since the start of current year (down 4.42 percent and 5.87 percent respectively). Emerging Asian markets walked the same path as they knocked down (4.34 percent MTD and 5.79 percent YTD).
However, developed markets were not in the mood to follow this domino trend, as evident from the MSCI World Developed Market index (up 2.54 percent MTD). Since start of the year, the index has appreciated by a good 4.78 percent. Highlighting the fact that money, taken out from bleeding markets, is being put back in developed markets, as they are relatively less risky.
