KARACHI: Thursday turned into a real bloodbath for the investors who lost billions in a single day when the Karachi Stock Exchange (KSE) 100 index crashed soon after opening of the floor for the day trading.
Basically, two factors contributed to KSE 100 index crash . One, the selling of T-bills at 11.50 % interest rate and its expected impact in the form of further increase in policy rate in coming weeks . Second, widening trade and current account deficit and its negative fall out on the local curency. The panic selling at KSE led to further appreciation of the dollar vis – a vis the rupee.
On Thursday, the dollar appreciated more than one rupee to jump up to new level .
Dollar is on the rise despite injection of three billion dollar by Saudi government. On Thursday, dollar crossed 178 mark in the open market.
The currency dealers are uncertain where the dollar would end up its upward trend.
“I think its time to stay away from buying and selling of dollar”, a Karachi -based currency dealer said when NEWSMAN contacted him to comment on volatility of the currency market.
Ahmad Channay, a reputed Karachi -based industrialist in his talk to a TV channel said possible increase in policy rate is major cause of Thursday’s panic selling that brought KSE -100 index down by 2134 points. Thursday’s crash of KSE -100 index was an indication that the investors take every move of the regulator of the market into account. The State Bank of Pakistan ( SBP) had increased the policy rate by 150 basic points last month and its likely to increase the rate another time on December 14, 2021.
This is third worst day in KSE history. In the past it
experienced the same panic situation two times.
An economist said on the condition of not naming him that walking away of portfolio investors caused Thursday’s crash, but hoped that KSE indwx will make up soon.
On the dollar front the situation seems extremely volatile. Only some unseen factors like sharp decline in imports or injection of funds from some donors may help make it stable.
