Blog > Editor's Pic > Crisis Investing: Sharp drop in Pakistan stocks
 | Email This Article Email This Article  | 

Crisis Investing: Sharp drop in Pakistan stocks

Posted December 31, 2007

"We believe that the full effect of the sell-off in Pakistan will not be seen until the end of this week, maybe early next week. There is the potential for at least two further drops, which will bring the KSE 100 down into the mid- to low-13,000s." — J. Christoph Amberger

by J. Christoph Amberger 

Baltimore — (TFN): Despite the three-day trading hiatus imposed by the Pakistani government in the aftermath of Benazir Bhutto's assassination, the Karachi stock exchange released its pent-up selling pressure right after opening this morning. The stock exchange dropped 4.7% during the short morning session.

pakistan's karachi stock exchange drops 

Within minutes after re-opening, the main SE index (the KSE 100) had already lost more than 680 points, leveling out at 14,085.

Despite the precipitous drop, KSE 100 still finished the year 40 percent higher than at the end of last year.

None of the Pakistani ADRs we listed in our initial Crisis Coverage showed any trading activity during the restrained New Year's Eve trading activity in the United States markets.

We believe that the full effect of the sell-off in Pakistan will not be seen until the end of this week, maybe early next week. There is the potential for at least two further drops, which will bring the KSE 100 down into the mid- to low-13,000s.

The prices of Pakistani ADRs — electricity provider Hub Power Co. (HUPOF, $13), top Pakistani banks MCB Bank Ltd. (MCBBI, $27.75) and United Bank Ltd. (UDBKL, $11.86), Oil & Gas Development Co. Ltd. (ODVCI, $20.56), and already battered telecommunications giant Pakistan Telecommunication Co. Ltd. (PKTMF, $73) — will probably experience a somewhat buffered and delayed reaction. Still, drops of 10-15% by early next week are not out of the question. We extend our prospective buying period from January 2, to January 7-8.

Depending on the further political developments in the country, especially the course of the upcoming elections, the recovery of both the Karachi stock exchange and the American Depositary receipts of some of its blue chip equities may take anywhere between 3 and 6 months.

Despite Pakistan's proximity to India, and the ongoing low-level conflict between the two nuclear regional powers, we believe the situation will have little to now effect on the Indian stok market. Our recommendations and assessments of that situation,  best summarized by our colleague Karim Rahemtulla in his recent interview with TFN's Laura Cadden, remain unchanged.

****Make sure you sign up for our FREE TFN News Feed for breaking news, special reports and new financial videos. Click here to pick your favorite reader. If you prefer to have the feed delivered to your email, just click here. 

Related Articles


Posted by TFN-International · Filed Under Editor's Pic, International Investing 

Comments

close Reblog this comment
Powered by Disqus · Learn more
blog comments powered by Disqus