Analysts said other factors that affected market sentiment negatively included foreign outflow from the market despite record earnings announcements, strong valuations and record foreign exchange reserves of $18.31 billion.
The Karachi Stock Exchange (KSE) 100-share index lost a massive 815.37 points or 6.68 percent to close at 11, 375.09 points as compared to 12,190.37 points at the close of previous week.
“In spite of State Bank of Pakistan unexpectedly announcing a 50 basis points cut in the policy rate over the weekend, the market witnessed broad-based selling pressure,” said JS Sec analyst Sana Hanif. “Investor interest was clouded by precarious debt situation of the US and threatening law and order situation in the city.”
In the final session of the week, the market lost 4.0 percent - highest single day drop since Oct 19, 2009 - following sharp declines in the regional markets.
In a surprising move last weekend, the SBP reduced the policy rate to 13.50 percent from 14 percent previously. The central bank cited comfort on the external account front, retirement of government borrowings at the end of the third and fourth quarters of FY11, and expectations of inflation for FY12 to remain at the target level, as key reasons behind the cut.
The 100-share index opened on a positive note on this news flow, however, the market failed to sustain the positive mood and underwent massive selling, mainly led by local banks which were net sellers of $11.6 million; whereas, foreigners were net buyers of $4.6 million. Key results released during the week were Lucky Cement and ABL. Lucky posted earnings of Rs 3.9 billion [earning per share (EPS) of Rs 12.28] in FY11, up 27 percent on yearly basis and announced a final cash dividend of Rs 4 per share.
ABL registered profit of Rs 5.0 billion (EPS Rs 5.85) in 1HFY11, up 39 percent and declared an interim cash dividend of Rs 2.5 per share. Both the results were in line with expectations. However, owing to the prevailing uncertainty in the global markets, the stocks of these companies failed to maintain their pre-result levels. ABL ended the week with a 4.9 percent decline, and Lucky plunged by 2.8 percent.
The daily average volumes went up by 145.16 percent to close at 113.17 million shares as compared with 46.16 million shares of the previous week.
Arif Habib Investment Ltd Director Ahsan Mehanti said the market plunged this week after global stocks and commodities showed a record fall as fears grew over eurozone sovereign debt crises and US economic recovery.
The KSE saw record fall in scrips across-the-board this week, he said and added that investors feared foreign outflow from Pakistan bourse despite record earnings announcements, strong valuations, record foreign exchange reserves of $18.31 billion and investor support after SBP unexpectedly announced 50 bps cut in policy rate over the weekend.
Investor concerns over violence in Karachi, US-Pak confrontation on production of nuclear arms and uncertainty over the next tranche of the International Monetary Fund for economic support affected investor sentiment ahead of major corporate earnings announcements next week. staff report
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