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Karachi index down on rate rise expectations
Pakistani stocks fell over four per cent to a one-week low yesterday, ahead of a central bank monetary policy statement that is expected to include an increase in the key discount rate of between 50 and 150 basis points.
- Reuters
- Published: 00:05 July 29, 2008
Karachi: Pakistani stocks fell over four per cent to a one-week low yesterday, ahead of a central bank monetary policy statement that is expected to include an increase in the key discount rate of between 50 and 150 basis points.
The Karachi Stock Exchange (KSE) benchmark 100-share index shed 4.11 per cent, or 453.68, to 10,578.49 on turnover of 62.4 million shares.
The KSE-index is down 24.9 per cent since the start of the year and 32.8 per cent lower since its life-high on April 21.
The free-float KSE-30 share index shed 4.23 per cent to 11,996.57 points.
"Investors are expecting a rise of up to 150 basis points in the monetary policy." said Sajid Bhanji, a dealer at brokers Arif Habib.
Pakistan's monetary policy is likely to be tightened further when it is unveiled today to help contain inflation which is currently at a 30-year high. Last week, the International Monetary Fund said Pakistan needs to tighten fiscal and monetary policy to contain inflation and reduce its current account deficit.
The central bank increased its key discount rate to 12 per cent from 10.5 per cent in May.
Soaring inflation
Inflation running over at over 21 per cent is at its highest in three decades, the fiscal and current account deficits are unsustainable, and the foreign exchange reserves barely cover three months imports.
"Pakistan is at a major crossroads, if monetary and particularly fiscal policy makers are able to divert attention from political provocations and take aggressive action to combat future challenges, we may see the country revert to the path of dynamic sustainable growth once more," said IGI's chief economist Zainab Jabbar.
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