Pakistan stocks down, financial crises not priced in
KARACHI, Sept 18 (Reuters) - Pakistan's main index ended lower on 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 Aug. 28 to prevent it from dropping below 9,144 points. The KSE board will review the floor on Sept. 25.
The Karachi Stock Exchange (KSE) benchmark 100-share index ended 0.15 percent, 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 Ismail Iqbal Securities Ltd.
Dealers said investors were cautious after the weekend's events on Wall Street, where Lehman Brothers LEH.P filed for bankruptcy protection and rival Merrill Lynch MER.N agreed to be sold to Bank of America (BAC.N) for $50 billion.
The U.S. government then bailed out insurer AIG (AIG.N) for $85 billion.
U.S. 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 percent since the beginning of the year and is 41.5 percent lower than a life high set in April.
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 Sept. 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 United States, its largest bilateral donor, over U.S. military action against militant targets on Pakistani territory.
Among the most active companies, volume leader, Engro Chemicals Ltd (EGCH.KA) fell 1.95 percent to 182.51 rupees, Meezan Bank (AMZN.KA) shed 2.86 percent to 27.20, while Bank Islami (BIPL.KA) ended flat at 10.71 rupees. (Reporting by Sahar Ahmed; Editing by Robert Birsel)
