KARACHI STOCK EXCHANGE IN 2008

S.M. ABBAS ZAIDI,
Research Analyst
, PAGE
Sep 29 - Oct 12, 2008

Karachi Stock Exchange (KSE) is the biggest and most liquid exchange and has been declared as the Best Performing Stock Market of the World for the year 2002. On July 31, 2008, 653 companies were listed with the market capitalization of Rs. 3,301.908 billion (US $ 46.258 billion) having listed capital of Rs. 713.077 billion (US $ 9.990 billion). KSE has been rated as one of the Best Performing Markets of the world. However, Karachi stock exchange in the year 2008 has been badly affected because of many reasons. The year started by the instability of the political and economic environment which has a severely affected the performance of Karachi stock exchange.

DECADEWISE PROGRESS

YEAR

NO. OF LISTED COMPANIES

LISTED CAPITAL (RS. IN MILLION)

MARKET CAPITALIZATION (RS. IN MILLION)

1950

15

117.3

-

1960

81

1,007.70

1,871.40

1970

291

3,864.60

5,658.10

1980

314

7,630.20

9,767.30

1990

487

28,056.00

61,750.00

2000

762

236,458.50

382,730.40

Source: KSE

CURRENT YEAR PERFORMANCE OF KSE

KSE 100 INDEX

MONTHS

INDEX

1-Jan

13,666.43

31-Jan

14,017.01

1-Feb

13,974.41

29-Feb

14,934.30

3-Mar

14,816.43

31-Mar

15,125.29

1-Apr

15,209.86

30-Apr

15,122.47

2-May

14,956.82

30-May

12,130.51

2-Jun

12,281.20

30-Jun

12,289.03

1-Jul

12,289.03

31-Jul

10,583.58

1-Aug

10,171.39

29-Aug

9,208.26

1-Sep

9,210.15

24-Sep

9,190.75

Source: KSE

During this year the Karachi stock exchange started from 13,666.43 points and went up to more than 14,000 points in Jan. This trend continued to rise till May but during that month the KSE went down sharply from 14, 956.82 points to close at 12,130.51 points. The performance of major sectors was positive during elections, as everyone was expecting political stability after the elections. But the performance of major sectors collapsed because of uncertain environment, political instability and high inflation due to which the foreign investment saw a sharp decline, which had a major affect on the performance of the Karachi stock exchange. Thus, KSE continues to suffer badly and has lost more than 5,000 points in less than five months. Currently, the Pakistani stocks are witnessing the lowest trading volumes this year. The KSE board imposed a floor on the benchmark index on Aug. 28 to stop falling below 9,144 points. Dealers do not expect it to be removed before Oct. 6. The Karachi Stock Exchange (KSE) benchmark 100-share index ended a marginal 0.10 percent, or 8.76 points, lower at 9,190.75. Volume was 1.27 million shares traded. The previous lowest volume was 1.9 million shares. Dealers and investors are also worried about the economic outlook with the rupee hitting a record low of 78.55 this week, inflation at more than 25 percent and dwindling foreign reserves. Foreign currency reserves were down to $8.91 billion in the week that ended on Sept. 13. It is assumed that $8.91 billion is not even enough to cover two months of imports. Moody's Investor Services downgraded the outlook for Pakistani debt to negative and highlighted the foreign exchange market's doubts over when funds would arrive to bolster dangerously low currency.

MAJOR SECTORS IN KARACHI STOCK EXCHANGE (2008)

SECTORS

JAN

SEP

BANKS

MCB

382.55

235.75

NBP

221.1

93.02

UBL

166

68.25

ENERGY

KESC

5.65

3.8

HUBCO

31

21.46

KAPCO

50.5

40

CEMENT

LUCKY

111.55

57.77

DG.KHAN

90

39.55

JAVEDAN

104

97.9

AUTO ASSEMBLER

PAK SUZUKI

316.6

83.79

INDUS MOTOR

303.25

151.8

HONDA CARS

51.4

18.39

PHARMACITICAL

ABBOT

206.25

110

GLAXO

190.05

108.7

SEARL

44.45

65.9

TRANSPORT

P.I.A

6.45

4.2

P.I.C.T

66.9

62

CHEMICAL

NICL

4.85

2.13

NIRE

14

5.3

ICI

177.55

129.49

SUGAR & ALLIED

SGML

36.65

11.84

TLML

12.3

6.5

HAL

11.65

11.39

MUTUAL FUND CLOSED ENDED

PGF

27.15

14.97

PIF

13.2

6

MBF

8.5

7.7

PPFL

12.1

6.06

Source: KSE

CONCLUSION

KSE during the first quarter of 2008 was the best performing stock market according to Morgan Stanley Composite Index (MSCI). A few months ago the KSE saw its index of leading shares reach the highest point in its history after a six-year rally. Unfortunately, Karachi Stock Market plunged massively by 4,500 points in little over two months due to host of reasons, mainly to political upheavals and worsening economic scenario of the country. After losing 1,286 points or 10 percent during the last week, stock market began the week with another heavy loss when its benchmark KSE-100 index lost 493 points, wiping out billions of rupees from the market. The shares in Pakistani companies have crumbled, losing one-third of their value since April, as investors have fled a country mauled by political upheaval and a violent insurgency. The rupee has also taken a dive, falling some 20% so far this year to a historic low of around 78 to the US dollar last week and inflation has soared to almost 25%. If this government remains unable to govern effectively, then discordant policies and their weak implementation could further set back investor confidence and would damage Pakistan's balance of payments stability as well as the government's fiscal financing prospects. With the investors waiting for any positive news, they do not seem interested in any investment and trading activities due to which the karachi stock exchange faces low trading.