Pakistan stocks end down in thin turnover

Karachi: Pakistan's main index ended lower in Thursday in thin turnover and dealers said the index had not priced in the global financial crisis because of a floor imposed last month.

The Karachi Stock Exchange placed a floor on the main index on August 28 to prevent it from dropping below 9,144. The KSE board will review the floor on September 25.

The Karachi Stock Exchange (KSE) benchmark 100-share index ended 0.15 per cent, or 13.92 points, lower at 9,202.31 points.

Volume was 4.5 million shares. The market saw its lowest ever trading volume of 3.53 million shares on Wednesday.

"Global financial turmoil has not and cannot affect Pakistan, thanks to the floor which is in place," said Asad Iqbal, managing director at Esmail Iqbal Securities.

Cautious trades

Dealers said investors were cautious after the weekend's events on Wall Street, where Lehman Brothers filed for bank-ruptcy protection and rival Merrill Lynch agreed to be sold to Bank of America for $50 billion.

The US government then bailed out insurer AIG with $85 billion.

US shares prices plummeted to three-year lows on Wednesday and forced increasingly desperate major banks to scramble for merger partners, Morgan Stanley topping the list.

"The floor is unlikely to be removed until world markets settle down as the pent up selling due to the floor coupled with a lack of confidence is likely to cause a potential crisis in Pakistan as well," said Iqbal.

The KSE-index has shed 34.6 per cent since the beginning of the year and is 41.5 per cent lower than a life high set in April.

Grim indicators

Dealers said investors were also worried about the country's weak economic outlook with the rupee at a record low, inflation at more than 25 percent and dwindling foreign reserves.

Foreign currency reserves were down to $8.91 billion in the week that ended on September 6. Analysts said $8.91 billion was not even enough to cover two full months of imports.

Adding to investors worries, there is mounting tension between Pakistan and the US, its largest bilateral donor, over US military action against militant targets on Pakistani territory.