China rate hike prompts Asia stocks slowdown
Most Asian stocks slipped Wednesday on fears of a slowdown in the Chinese economy after Beijing announced its first interest rate rise in three years.
Traders grew concerned that any easing in the world’s second biggest economy could hurt the exports of other countries looking to China’s growth as the key to recovery from the global downturn. Tokyo tumbled 1.65 percent, or 157.85 points, to 9,381.60 and Hong Kong had slipped 0.65 percent by the break.Sydney was 0.66 percent, or 30.8 points, lower at 4,624.9, with resources firms hit as they rely heavily on Chinese demand.Shanghai was 1.16 percent up in the afternoon and Seoul rose 0.71 percent, adding 13.12 points to end at 1,870.44. The People’s Bank of China announced late Tuesday it would raise the benchmark one-year lending and deposit rates by 25 basis points each, as Beijing tries to contain inflation and soaring property prices. It was the first rate rise since December 2007.
KSE-100 Index inches up by 28 points
KARACHI: The trade activities remained almost flat on Thursday at Karachi Stock Exchange (KSE) as the benchmark KSE-100 Index posted a slight gain of 28 points to finish at 9,762.
Opening with green numbers, the KSE-100 Index remained in the positive zone throughout the session as investors took cautious positions in energy and cement sectors.
The trade volume remained thin at 40 million shares with HUBCO topping the list of volume leaders at Rs36.80, up by paisas 18.
Meanwhile, KSE-30 Index slipped 5 points to close at 9,636.
Bears come to rule KSE
KARACHI: Acute bearish trend is being witnessed at Karachi Stock Exchange (KSE) at the very outset of trade week today, as the benchmark 100-index tumbled below 10,000-point level, Geo News reported Monday.
The market opened into positive territory; but, the rumors in the winds, relating delay in financing system, pushed the investors to sell their shares, pressing the index to shed over 350 points to below 10,000-point level.
According to analysts, the today’s market slump has been spurred by the delay of new financing product and falling far short of GDP growth targets.
It was further said the market’s future is hinged on the foreign investment and if they opted to sell shares in the market, then this negative trail could persist for several coming days.
Mixed trend at KSE ahead of budget
KARACHI: The trading of shares at Karachi Stock Exchange (KSE) witnessed missed activity Friday, as the benchmark KSE-100 Index finished the day with 16 point up to 9,636.
Today’s trade began with green numbers which later turned red as investors opted for profit taking ahead of the announcement of Federal Budget 2010-11 on Saturday. This pushed the Index down to 9,543 points. However, later investment by financial institutions provided support to the Index which closed 16 points up at the current level.
The market turnover was recorded at 90 million shares with Jehangir Siddiqui Company leading the list of actives at Rs12.53, up by paisas 45.
Meanwhile, KSE-30 Index gained 30 points to close at 9,607.
Bullish activity pushes KSE-100 Index to 9,621 points
KARACHI: Bulls dominated Karachi Stock Exchange (KSE) Thursday, contributing 122 points to the benchmark KSE-100 Index which closed at 9,621.
Today’s trade began upbeat and remained positive throughout the session. At one stage the Index was seen at its intra-day high of 9,651 points as investors took particular interest in energy and banking sectors.
The trade volume stood at 140 million shares with Lotte Pakistan topping the list of actives at Rs9.30, up by paisas 23.
On the other hand, KSE-30 Index gained 155 points to finish the day at 9,577.
Bears squeeze 195 points from KSE-100 Index
KARACHI: The Karachi Stock Exchange (KSE) began its fresh week downbeat as the benchmark KSE-100 Index plummeted by 195 points to close at 9,326 on Monday.
The Index opened 200 points down today and mostly remained in the negative zone throughout the session. The investors remained shaky amidst fear of imposition of Capital Gains Tax.
Trade volume was thin and stood at 65 million shares – lowest in the past month.
KSE-100 Index recovers 183 points on fresh buying
KARACHI: Following heavy selling spell at Karachi Stock Exchange (KSE) during the past days the benchmark KSE-100 Index Wednesday recovered 183 points to close at 10,612 on the back of fresh buying.
The share market began with positive numbers on screens as investors went on buying spree at dips, particularly in banking and energy sectors.
Market turnover was recorded at 19.1 million shares with Lotte Pakistan topping the list of volume leaders at Rs9.56, stronger by paisas 45.
The market analysts are of the view that shares available at attractive levels and will draw the attention of investors.
SBP keeps interest rates unchanged at 12.5pc
KARACHI: The State Bank of Pakistan (SBP) announced today its sixth monetary policy for the next two months, Geo News reported Monday.
It should be mentioned that that the central bank was widely expected to keep the interest rates unchanged at 12.5 percent this year because of resurgent inflation. The decision has been caused by the unexpected rise in the consumer prices by over 13 per cent year-on-year in April, 2010.
The central bank has reviewed monetary policy every two months since September last year.
The bank said the power crisis would affect the commercial and financial activities in the country.
Direct foreign investment in the country is subject to quite precarious condition. The inflation rate made surge to 13.3 percent in April.
The government would not be able to cope with the fiscal deficit by 5.1 percent, according to the new monetary policy.
Monetary Policy: Discount rate kept unchanged at 12.5%
KARACHI: State Bank of Pakistan has decided to keep its policy discount rate unchanged at 12.5 percent.
This decision was taken at a meeting of the Central Board of Directorsof State Bank held under the Chairmanship of SBP Governor, Syed Salim Raza here on Monday.
The policy statement said the economy is recovering but it lacks the necessary infrastructure and sufficient macroeconomic stability to build on the momentum.
Stabilization efforts over the last one and a half year have brought dividends in the shape of contraction in the external current account deficit, containment of excessive money growth, and reduction in inflation.
However, it said, the worsening power crisis, which has severely hampered economic activity in the economy, and fiscal weaknesses, continue to impede sustainable recovery and comprehensive macroeconomic stability.
At the same time, inflation has started to increase gradually. In this scenario, monetary policy, being a stabilization tool, has to remain focused on its ultimate target of monetary and financial stability. Encouraged by an increase in exports, over dollars 1.8 billion in each of the last two months, supported by steady workers remittances, and helped by the realization of $656 million from the Coalition Support Fund (CSF) in May 2010, the external current account deficit will be close to 2.5 percent of GDP for FY10.
The variables of concern, however, are uncertain official foreign flows and declining Foreign Direct Investments (FDI). Thus, despite a significant contraction in the external current account deficit, dollars 3.1 billion during July-April FY10, SBP s foreign exchange reserves have largely remained unchanged, around $11.5 billion on average, during the course of the current fiscal year.
With an expected export and import to GDP ratios of 10.5 and 17 percent for FY11, keeping SBP s foreign exchange reserves stable in the medium term without a discernable increase in financial inflows would be challenging. Moreover, since the financial inflows are, and expected to remain, heavily skewed in favour of borrowings, sustainability of external debt would require a manageable current account deficit and dependable financial inflows.
A positive implication of the strengthened balance of payment position is a gradual build-up in the Net Foreign Asset (NFA) component of broad money. After experiencing an outflow of Rs150 billion in FY09, NFA now shows an inflow of Rs90 billion during July 1 May 14, FY10. This has facilitated market liquidity; although most of the increase in NFA took place in Q1-FY10. SBPs” Open Market Operations provided the necessary support to adequately manage the market liquidity from September 2009 onwards. More importantly, this correction in the components of M2, in favour of NFA, has helped purchasing power of the rupee in the domestic economy and in the foreign exchange market. For instance, the ratio of outstanding stocks of Net Domestic Assets (NDA) to NFA has come down from a high of 14 in November 2008, when inflation peaked at 25 percent, to around 8.4 by end-April 2010.
The NDA continues to be driven by governments” borrowings for budgetary support. In fact, for Q3-FY10, government breached its quarterly borrowing limits from SBP by about Rs30 billion. Since the beginning of Q4-FY10, government borrowing has increased by another Rs150 billion, reaching Rs1310 billion (on cash basis) on 14 May 2010 against the end-June target of Rs1130 billion. Similarly, government borrowing (net of deposits) of Rs206 billion from scheduled banks during July 1 May 14, FY10 is also substantial.
This persistent borrowing from the banking system for budgetary support coupled with expected borrowings for commodity operations in Q4-FY10 is jeopardizing the space for private sector credit, causing inertia in market interest rates, running the risk of excess domestic credit creation, and increasing the debt burden of future generations.
The need for heavy government borrowings for budgetary support from the banking system emanates from the unsustainable equation of revenues and expenditures and uncertain external borrowings of the fiscal authority. The Federal Bureau of Revenue s (FBR) provisional tax collection figures, during the first ten months of the current fiscal year, were Rs1026 billion. This implies that, to meet the yearly target of Rs1380 billion, a collection of another Rs354 billion is required in the next two months.
This would be quite challenging given a monthly average of Rs 102 billion in the last ten months. Even if the target is met, the FBR tax-GDP ratio is likely to be less than 10 percent, which is one of the lowest in the world. There is a risk that the government may miss the revised fiscal deficit target of 5.1 percent of GDP, which will be inconsistent with the objectives of macroeconomic stability. Moreover, further deterioration of the fiscal account will have consequences for debt sustainability and the external balances.
For medium term fiscal sustainability, necessary for overall macroeconomic stability, it is of utmost importance that effective measures are taken to increase the tax-GDP ratio and reduce the current expenditures of the government. Revenue deficit, the difference between total revenues and current expenditure, must be brought down to zero as stipulated in the Fiscal Responsibility and Debt Limitation (FRDL) Act of 2005.
It was 1.5 percent of GDP in FY09 and may cross 2 percent of the expected GDP in FY10. Cutting development expenditures may provide immediate relief but damages the prospects of much needed investment in infrastructure such as electricity generation and human capital. This, in turn, limits the future productive capacity of the economy and adversely affects the inflation outlook as the gap between aggregate demand and aggregate supply widens.
All inflation indicators, whether it is Consumer Price Index (CPI), Wholesale Price Index (WPI), Sensitive Price Index (SPI), or Non-food Non-energy (NFNE) and trimmed measures of core inflation, have shown an upward movement in recent months. The year-on-year CPI inflation, for instance, was recorded at 13.3 percent for the month of April with a month-on-month growth of 1.7 percent.
While adjustments in electricity prices, increase in domestic prices of petroleum products, and volatile movements in various food items have given a spurt to inflation, its persistence at a high level indicates that a fall in productivity has played a role as well. This signifies an entrenchment of expectations of double digit inflation, which must be checked to improve the prospects of sustainable economic growth. The cumulative growth of 4.4 percent in Large Scale Manufacturing (LSM) during July-March, FY10 is encouraging. However, its sustainability would require supportive growth in private sector credit and improvement in the availability of electricity. The former would be difficult to achieve without reduction in the scale of fiscal and public sector borrowings from the banking system and the latter requires forward looking infrastructure investment and resolution of energy sector circular debt.
In these circumstances, with inflation on the rise and the fiscal position not responding to the current monetary policy stance, SBP will closely monitor developments to ensure stability of aggregate prices and support nascent recovery of private economic activity. Therefore, SBP has decided to maintain the policy discount rate at 12.5 percent, the SBP policy statement said.
Bears further suppress KSE-100 Index by 184 points
KARACHI: Bearish spell continued at Karachi Stock Exchange (KSE) on Monday, as the benchmark KSE-100 Index further slashed by 184 points to close at 90687.
The Index started downbeat and remained under selling pressure throughout the session, closing at the current level which is the lowest in the past two and a half months.
The market turnover was recorded at 70 million shares with Lotte Pakistan topping the list of volume leaders at Rs9.69, down by paisa 1.
KSE-30 Index plunged by 223 points to finish the day at 9,699.
