Turmoil in global equity markets | Pakistan Today

Turmoil in global equity markets

The KSE100 index rebounded on Wednesday, as the global indices recovered on the back of US Federal Reserve pledging to keep interest rates at its lowest level for the next four years. The benchmark index jumped by 2.5 per cent to end the day at the 11,311.29 level. The KSE100 Index following regional indices had dropped by 9.5 per cent (a decline of 1,155.5 index points) till August 09 2011, as foreign investor offloaded resulting in an outflow of $4.3million during the period.
This global turmoil was instigated by S&P lowering US rating from AAA to AA+ as it felt that US decision to increase its debt ceiling and reduce deficit were below par. The major contributor to the decline in KSE were OGDC (-15.6%), MCB (-10.9%) and NBP (-18.3%) as they pushed index lower by approximately 562 points.
Regional performance
Subsequent to S&P lowering of US ratings, the global indices went for a free fall, declining across the board. During the period between August 1 to 10 major regional indices went down on average by more than 10 per cent. The major loser was KOSPI (-17%) Index followed by Hang Seng and BSE Sensex Index which were down by 12 per cent and 8 per cent. KSE-100 Index on the other hand, suffered a decline of 7 per cent during the period. On Wednesday, European and US Indices went for a beating due European debt concerns and fears of France rating cut.
OGDC continues to be the major Index dampener
OGDC, though recovered yesterday by Rs3.05/share, turning out to be the major Index dampener during this turmoil as it lost its vigor by Rs24/share (15.6%) since July 29, contributing around (423 points) in the total fall of 9.5 per cent by the KSE-100 Index. Furthermore MCB, NBP and PPL cumulatively pushed the index down by 188 points, which despite being sizeable, is nothing compared to that of OGDC; thus recovery of the Index, once again will heavily rely on the performance of OGDC.
FIPI registered net selling of $9million
After S&P down rated USA’s sovereign rating from AAA to AA+ international markets witnessed a panic selling which subsequently led to an outflow of $11.9million in the last three trading days. It is believed that the outflow will continue to be a spoiler for the local bourses as it has witnessed an outflow of $41million since July 15. The local bourses have also been adversely affected by the volatile law and order situation that has resultantly spread panic amongst investors and stakeholders.
Strong domestic consumer base stocks safest bet
Market analysts are of the view that the market may feel the aftershocks of global markets with major fear of foreign selling keeping the KSE under pressure. However, they believe that these dips should be taken as an opportunity to go long in stocks with heavy reliance on domestic consumption, which will shield them from fears of recession in European and US economies. According to Arif Habib Limited research, stocks including POL, PPL, OGDC, PSO, APL, HUBC, FFC, PTC, LUCK and ACPL, may stand safe in the ongoing turmoil at the local bourse.

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