Precarious law and order situation mars the index (13092008)

LEADER REPORT
KARACHI: Market began in the negative territory as volumes remained low throughout the day, while it saw minor recovery before close. The investors remained distressed in wake of economic conditions backed by fragile law and order situation as American forces yet again went ahead with the attack in North Waziristan.
The benchmark index, KSE-100 shed slightly by 10 points to close at 9,254 levels while volumes did not witness any recovery staying at 12mn shares. Decliners out passed the Advancers with 48 scrips gained values against 32 losers.
Pakistan's economic outlook has seen deterioration with depleting foreign exchange reserves, depreciating currency, expanding current account deficit, rising inflation and increasing outflow of foreign portfolio investments from equity markets. The foreign exchange reserves have fallen by USD7.38bn from USD16.48bn on Oct 7th, 2008 while they are currently standing on Sept 6th, 2008 at USD9.10bn, posing serious concerns for the economy. Month of August saw the trade deficit to stand at USD1.878bn as against USD1.644bn in July, a decline of 14.18 percent MoM. Further the CPI inflation stayed at staggering 25.33 percent during August 2008. However, the FPI on Sept 11, saw net buying of Rs221mn showing some interest while the net selling was witnessed during the month so far over Rs856mn.
Banking sector is expected to see a major hiccup as the SBP recently revised its minimum capital requirements, as well as, CAR to Rs23bn by December 2013 and 10 percent, respectively. The sector is anticipated to witness M&A of smaller banks while top five banks are expected to reach such requirements.
Competition commission of Pakistan has asked FBS to provide data to determine the real costs and prices of the cement manufacturers to proceed through the investigation against the present cement cartel. The purpose of the investigation is to curb higher prices being charged by cement manufacturers, which if rightly undertaken may bring the prices of cement down by Rs15-20 in prices of a 50kg bag.
Furthermore, the Fertilizer sector blue-chip companies ENGRO and FFBL are expected to experience better earnings on the back of recent increase in DAP subsidy to Rs2,200 whilst the selling price is capped at Rs3,050. ENGRO and FFBL holding large inventory of DAP thus will remain primary beneficial from such provision.
Strong stance by the country's COAS to tackle any infringements to challenge the country's territorial integrity may create confrontation and hamper the situation at our borders. This confrontation seconded by weak economic indicators, is anticipated to woo investors away from the local bourses. Despite such stance, US forces did go ahead with operations, which may cause shaky conditions at our borders.