20000105

KSE ranks 5th among

active Asian stock markets

HARIS ZAMIR

KARACHI: The Karachi Stock Exchange (KSE) ranked fifth among the active Asian stock markets during 1999 and recorded a recovery of 49 percent mostly in the last quarter after the advent of military government which helped to build up the confidence of the investors.

After two stressful years, most of the Asian economies are now back on track. Fortunately with the beginning of new millennium, Asian giants are on the road to recovery.

"Effective economic reforms, IMF funding and rescheduling helped most of the nations, including Pakistan, to come out of the prolonged bearish spell", Mohammad Suhail of IP Securities said.

The KSE during the past two years showed colossal losses and fell by 47 percent in 1998 while it made a turnaround in 1999, and is now seen standing in the ranks of Asian giants. South Korea's stock market recorded an increase of 77 percent, Hong Kong 69 percent, Indonesia 65 percent, India 64 percent, Pakistan 49 percent, Malaysia 41 percent, Japan 37 percent while the Sri Lankan bourse dipped by solitary one percent.

The military takeover would remain the hallmark of the year 1999. Most important was the people's reaction, who generally voted for army action and redefined the legitimacy of the new leadership.

"The 1999 brought yet another ray of hope as the index started heading towards its pre-blast levels of 1500-1700. It seems that the stock market has entered the new century with traditional optimism", Suhail said.

Most of the gains in the stock market were made after military coup of Oct. 12. The Chief Executive of Pakistan, General Pervez Musharraf promised to rehabilitate the confidence of investors both at home and abroad, deregulation of oil and gas sector is on the cards while privatization process would commence soon to retire expensive loans of the country.

A report of IP Securities said that most of the foreign fund houses remained net sellers in Pakistani stock market in 1999. Especially, after the IPP fiasco as foreign selling was around Rs 3 billion from May 1998 when the country conducted nuclear tests to date. From the second quarter 1998 onwards, it were only local institutions that supported the market. Thanks to the declining interest rate and resultant liquidity, local institutions injected substantial funds in the market.

During these turbulent times, the stock market witnessed three major rallies in 1999. The first PTCL led rally, where the index touched 1416 on May 24, was triggered by declining interest rates, debt rescheduling and unification of exchange rate. But it was shattered by the Kargil adventure.

The second unwarranted rally, which witnessed a high of 1292 on August 20 was initiated by Lahore based speculators and it burst because no genuine investors supported it.

The recent ongoing PSO driven rally erupted after the announcement of reform package by the military government. Since at the same time international financial institutions also responded positively, the impact turned out to be multidimensional, forcing the index to touch year's high of 1441 on Dec. 18, 1999.

PSO, the star performer of 1999 with a return of 209 percent, is still depicting a negative return on a two-year basis due to the substantial price erosion in 1998. Surprisingly in 1999, PTCL underperformed other key stocks amid heavy selling from overseas investors, resulting in decline of PTCL's weightage in KSE index from 34 percent to 27 percent currently.