Business | Markets
Rate rise fails to curb buoyant Karachi index
Pakistan's main index rose almost four per cent yesterday a day after the central bank raised its rates, as dealers said the hike was expected by investors and had been discounted in the market.
- Reuters
- Published: 00:02 July 31, 2008
Karachi: Pakistan's main index rose almost four per cent yesterday a day after the central bank raised its rates, as dealers said the hike was expected by investors and had been discounted in the market.
The Karachi Stock Exchange (KSE) benchmark 100-share index rose 3.9 per cent, or 404.83 points, to 10,853.02 points on turnover of 87.6 million shares.
The free-float KSE-30 share index gained 4.6 per cent to 12,405.25.
"There were fears that the State Bank may raise the discount rate by 200 basis points, so the one per cent rise has been taken positively," said Sajid Bhanji, a dealer at brokers Arif Habib.
The central bank on Tuesday announced an increase in its key discount rate to 13 per cent from 12 per cent, reinforcing its fight against inflation and widening twin deficits.
A Reuters poll of seven analysts showed a range of expectations for the rate rise lay mainly between 0.5 and 1 percentage point. One analyst predicted a hefty 150 basis point move.
State Bank Governor Shamshad Akhtar announced an increase in a monetary policy statement that focused heavily on what she called a "totally unsustainable" level of government borrowing.
Dealers said investors had expected a hike of at least 100 basis points in the interest rate and the market had already incorporated that as it fell 5.3 per cent this week till Tuesday's closing.
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.
The KSE index is down 23 per cent since the start of the year and is 31 per cent lower since its life high on April 21.
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