Higher foreign inflows boost KSE by 49%

Higher foreign inflows boost KSE by 49%

KARACHI: The Karachi stock market witnessed a bullish trend in 2013 by registering an increase of 49.4 percent, which according to analysts is the result of higher foreign inflows. 
The Karachi Stock Exchange (KSE) 100-share index increased by a massive 8,355.81 points or 49.4 percent to close at 25,261.14 points on December 31, 2013 as against 16,905.33 points on December 31, 2012. 
Analysts said another reason for the bullish trend was that the Pakistan Muslim League-Nawaz government retired circular debt of Rs 480 billion just after 45 days of coming into power on June 5, 2013. 
The market crossed the psychological level of 26,000 points level last Friday and closed at 26,046.71 points, translating into an increase of 9,141.38 points or 54 percent when compared with 16,905.33 points.
The International Monetary Fund's (IMF) Executive Board approved in September 2013 a $6.7 billion loan for Pakistan to support its programme to stabilise the economy and boost growth, which boded well for the market 
The programme under the IMF's Extended Fund Facility restored investors' confidence in the market as the depleting foreign exchange reserves of the country were taking a toll on foreign and local investment.
The foreign exchange reserves of the country were draining fast as the country was repaying the previous loan of around $8 billion to the IMF in the shape of instalments, but the approval of EFF programme helped the market shore up the foreign exchange reserves position.
Improvement in the rupee's value against the dollar during the last couple of weeks also boosted investors' confidence in scrips across-the-board. 
"The inflation numbers also witnessed some recovery on the back of lower prices of perishable food items," said HabibMetro Financial Services analyst Bilal Asif. "The IMF instalment of $550 million further eased off the pressure on rupee." 
Major banks, cement and textile companies remained in the limelight backed by a number of related news. Nevertheless textile sector moved in a swinging fashion due to the Generalised System of Preferences (GSP) Plus status. 
Despite tough testing time ahead in the year 2014, the analyst believed the benchmark might continue to perform along with minor hiccups.
The volumes on yearly basis also improved by 39.52 million shares or 20 percent to 237.44 million shares by the end of 2013 as against 197.92 million shares as of December 31, 2012.
The improvement in returns at the market attracted a major chunk of foreign investment. The entry of foreign investors into the market can also be attributed to better economic policies of the current government. 
Market capitalisation on yearly basis also showed an impressive growth of 43 percent to Rs 6.05 trillion as compared to Rs 4.24 trillion.
Analysts said that the current level of the 100-share index is being cited by foreign investors as risky for investment and any untoward development on the economic or political front could wipe out a couple of hundred points off the index. 
However, market pundits were of the view that the market had been undergoing technical correction along the way to the 26,000 points level, therefore chances of a major decline in the index are quite rare. 

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