Index drops 20 points amid dull trading (16092008)

LEADER REPORT
KARACHI: Volumes remained dull as lack of interest of participants precluded them from investments in the country's equity market. Ambiguities related to economic performance of the country has scared investors away from the capital market as they hunt for newer less risky avenues for investments. The index continued to shed weights from previous sessions. The rumor related to the removal of floor earlier than scheduled before the next meeting was seen as a negative factor, and if it is lifted, the stock may witness huge plunges.
The benchmark KSE-100 Index shut down by 20 points at 9,233 points. Only 10.5mn shares were traded intraday, showing negativity prevailing in the market, as investors opted to stay sidelined.
The fertilizer sector remained the major loser despite recent rise in subsidies for DAP to Rs2,200 from Rs1,000. This rise anticipated to witness better earnings primarily by FFBL and ENGRO that are holding inventories of DAP, while both these scrips held their previous values; FFC lost Rs1.41 per share intraday.
Depleting foreign exchange reserves, depreciating local currency against the dollar, growing current account deficit, hiking inflation and increasing outflow of foreign portfolio investments from our local bourses is portraying negative picture of our economic outlook.
Foreign investors are opting to offload their portfolio investments from equity exchanges due to such negative vibes. Our foreign exchange reserves had fallen on Sept 6th, 2008 to USD9.10bn, posing serious concerns for the economy. Month of August saw the trade deficit to stand at USD1.878bn a decline of 14.18 percent MoM. However, decline in oil prices coupled with passing on of subsidies can release some pressure, seconded by loan arrangement from ADB. Furthermore, the deteriorating law and order situation remains a question of key concern for investors, as well. In the short to medium term, we believe the stock market is anticipated to perform in the precarious zone, therefore, investors are suggested to adopt wait and watch strategy and remain sidelined until any positive triggers may be witnessed on the economic front.