Despite IMF’s optimism, panic selling continues in Pakistan

The leading stock market of Pakistan, KSE-100 index lost 258.97 points to close at 9,428.44 Tuesday as traders continued panic selling fearing failure of a leading brokerage house to meet margin calls along with the reported decline in Asian markets.

Despite market’s’ southward movement, IMF today said that Pakistan’s economy is getting back on track after a balance of payments crisis 18 months ago but it still remains vulnerable to shocks and a risky market for investors,

At the end of the session the institutional buying of select stocks recovered 71 points after declining to 330 points earlier in the day.

Overall trading improved to 135.439 million shares from Monday’s 73.667 million shares.

Hasnain Asghar Ali at Aziz Fidahusein Co said that the first trading session witnessed positive numbers because of appreciating status quo in the monetary stance and imposition of new taxes on economy, and through low quantum strength in the index heavyweights.

Later, these confidence-building measures failed to contain nervous sellers because margin calls led sell-off by financial institutions enhanced the panic in the market leading to its sharp fall.

Corporate support helped in halting the downward trend and recovering 71 points before the end of the day. Traders dealt with the situation by readjusting their equity portfolios in accordance with the prescribed limits while the possible buyers holding back to trim down their holdings at available rates.

Market capitalization fell to Rs 2.657 trillion losing Rs 74 billion.

Trading at Karachi Stock Exchange is expected to follow the downturn tomorrow because of the anticipated amendments in the post budget-trading pattern.

All Pakistani Stock Exchanges followed a sliding pattern on Tuesday with LSE-25 index losing 83.99 points to reach 2962.82 points against 3046.81 points of Monday, and ISE-10 index declining from 2,362.90 to 2,330.38 points dropping 32.52 points.

In a related development IMF today suggested that political uncertainty, chronic insecurity and a budget deficit inflated by spending to tackle a militant insurgency are all threats to recovery but the outlook is far brighter than when Pakistan was on the brink of default in 2008.

Paul Ross of the International Monetary Fund (IMF) told Reuters in Islamabad today: “in terms of the economy, stabilisation seems to be taking hold … progress has been made.”

Pakistan turned to the IMF for an emergency package of loans in November 2008, when inflation was 25 per cent, central bank reserves were the equivalent of just one month of imports and the current account deficit had widened to 8.5 per cent of gross domestic product for the fiscal year 2007.