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Pak bourse feels brunt of ME, political situation
March 04, 2011
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Global equity markets were the ones to feel the brunt of the impact. Among those, frontier markets were the ones that hemorrhaged the most, specially the Asian Frontier markets, as the MSCI Frontier Market index plunged by massive 13.2 percent since the outset of current month. 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, says a research report by Invest Cap securities. Emerging Asian markets walked the same path as they too knocked down, 4.34 percent and 5.79 percent. However, the developed markets were in no mood to follow this domino trend, as evident from the MSCI World Developed Market index, up 2.54 percent, and since the 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 less risky compared to others, the report said
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Pakistan’s equity markets witnessed a huge turmoil last week, as its largest bourse’s bench mark Karachi Stock Exchange [KSE] 100 index shed around 315 points following continuous political uncertainty at home and in the Arab world.
Global equity markets were the ones to feel the brunt of the impact. Among those, frontier markets were the ones that hemorrhaged the most, specially the Asian Frontier markets, as the MSCI Frontier Market index plunged by massive 13.2 percent since the outset of current month. 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, says a research report by Invest Cap securities.
Emerging Asian markets walked the same path as they too knocked down, 4.34 percent and 5.79 percent. However, the developed markets were in no mood to follow this domino trend, as evident from the MSCI World Developed Market index, up 2.54 percent, and since the 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 less risky compared to others, the report said.
Pakistan political situation too remained volatile last week, as the major coalition partners in Punjab Pakistan Muslim League-N and Pakistan People’s Party after three years of partnership decided to part their ways. The cabinet in Punjab province has seven ministers from the PPP. The PML-N chief made the announcement at a news conference last week after chairing a meeting of top leaders of the PML-N to discuss relations with the PPP, which also heads the government at the centre. The decision to end the alliance with the PPP in Punjab was made after the expiry of a deadline set by the PML-N for the implementation of a 10-point reforms agenda. The benchmark KSE-100 index to 11,223.52 points level following selling pressure from the foreign players. Market volume improved to 156.84 million shares while capitalization stood at Rs 3,037.41 or $35.57 billion.
At regional level, the situation in Middle East and Libya weighed heavily, equity markets were not oblivious to global these happenings. Last week alone, markets like India, South Korea and Taiwan, lost 3-4 percent of their market capitalization. Indian market took the major hit during the past week only as it shed off almost $46 billion. However, since the turn of the year, Indian market has lost 15 percent of its market cap. Similarly South Korea and Taiwan have lost 3 percent and 6 percent so far. Pakistan was among the top losers for the week at its market cap was slashed down by 7 percent, the Invest Cap reports shows.
As compared to the decrease in total market cap, decline in foreign selling was not at significant levels. During the past week alone, Pakistan equity market cap was down by $2.8 billion, whereas foreign selling's contribution was limited to minuscule 0.19%. Similar was the trend in all fellow markets in the region where we saw decrease in foreign selling at very low value as compared to decrease in the market cap.
Conversely, Pakistan is still one of the countries which enjoy net foreign inflows, 3.3 million. This nullifies claims that bloodbath during the past week in Pakistani market where KSE 100 index plunge of 7 percent week on week was due to selling by foreigners. However, this minimal net foreign outflow did its part to shatter investor confidence and pour fuel on the fire of panic selling, which happens to be the actual reason behind Pakistani equity market taking a nose dive, according to the Invest Cap report.
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