Identifier
Created
Classification
Origin
09KARACHI209
2009-07-02 08:09:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Karachi
Cable title:  

KARACHI - STOCK MARKET REMAINS FLAT

Tags:  EFIN ECON EINV PK 
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VZCZCXRO4659
RR RUEHLH RUEHPW
DE RUEHKP #0209 1830809
ZNR UUUUU ZZH
R 020809Z JUL 09
FM AMCONSUL KARACHI
TO RUEHC/SECSTATE WASHDC 1120
INFO RUEHIL/AMEMBASSY ISLAMABAD 0581
RUEHLO/AMEMBASSY LONDON 0337
RUEHNE/AMEMBASSY NEW DELHI 1889
RUEHBUL/AMEMBASSY KABUL 0295
RUEHPW/AMCONSUL PESHAWAR 4627
RUEHLH/AMCONSUL LAHORE 2744
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHDC
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL
RUEKJCS/SECDEF WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RHMFISS/JOINT STAFF WASHINGTON DC
UNCLAS KARACHI 000209 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON EINV PK

SUBJECT: KARACHI - STOCK MARKET REMAINS FLAT

UNCLAS KARACHI 000209

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON EINV PK

SUBJECT: KARACHI - STOCK MARKET REMAINS FLAT


1. (SBU) Summary: The Karachi Stock Exchange (KSE)-100 Index ended
the week of June 19 at 7,039.73, essentially flat over the previous
week's close of 7,059.48. Overall market capitalization increased
slightly to $25.74 billion, with net foreign portfolio investment
inflow of $1.3 million. Investors remained on the sidelines while
awaiting clarification of various budget questions and tax
regulations. Security concerns and lack of a leverage product
continued to deter investment. End summary.


2. (U) The KSE 100-Index ended the week of June 19 at 7,039.73,
down 0.028 percent from the previous week's close. The first two
trading days following the June 12 budget announcement, the market
dropped 186.35 (-2.6 percent) before recovering slightly. Overall
market capitalization increased to $25.74 billion from $25.71
billion. After three weeks of net selling, net foreign investment
showed a modest inflow of $1.3 million. The energy, banking,
fertilizer, and cement sectors continue to be among the top
performers. (Note: The KSE-100 Index comprises the top company
from each of the 34 sectors on the KSE, in terms of market
capitalization. An additional 66 companies are selected for the
index based on market capitalization ranking. End Note.)


3. (SBU) KSE and brokerage firm contacts both identified budget
related concerns as deterring both local and foreign investment.
Mohammad Imran, a research analyst, said the market is closely
watching the expected decrease in the interest rate, international
aid pattern and projected fiscal year-end corporate results. Aneeta
Mirza, head of marketing for KSE, said that she has not seen any
"real excitement" in the market. Fears regarding the security
situation and the absence of a leveraged product to replace the
discontinued continuous funding system also left investors cautious
and short on funds. Following intense speculation about changes in
exchange related taxes, the June 13 budget announcement initially
left investors confused. The capital value tax of 0.2 percent on
the value of shares was replaced with a 16 percent tax on brokerage
commissions. After analysis, most brokerage firms believe there
will be very little impact on the cost to investors.


4. Comment: While the KSE-100 is up 22 percent since January 1, it
remains 10.9 percent below the market high of April 20. In recent
weeks, market activity has been relatively flat and investors will
likely continue to be cautious as they watch for any changes in the
security situation. Also dogging the market will be administrative
issues such as the lack of a leverage product and uncertainty about
interpretation of changes in the tax code.

FAKAN