Stocks post 18.8 percent loss in six weeks

KARACHI (March 03 2003) : The stock market losses in the past one-and-a-half month amounted to 18.8 percent, in line with all international bourses on fears of possible US attack on Iraq which also pushed the oil prices internationally to touch 12-year high level.

Since the UN resolution against Iraq was passed in November 2002, almost all stock markets of the world have been posting losses. Investors are not certain when this war uncertainty would be over.

Earlier, it was expected that US-led coalition would attack Iraq in January; then the attack looked imminent in the middle of February, after Haj.

However, amid strong opposition from all round the world, the Iraq crisis lingers on, adding more uncertainty in financial markets behaviour.

Despite strong resistance, investors are avoiding riskier equity investment as they are still confused on what would happen to the ongoing Iraq problem and its consequences.

Leading print and electronic media, no doubt, are trying to prove arguments in favour of war. Recently, 'The Economist' came out with a issue titled 'Why war would be justified'.

A few weeks back, 'Newsweek' magazine issue, with a caption 'Why business wants war', was trying to justify that an end to uncertainty was necessary and that can only be achieved through disarming Iraq.

Major equity markets of the globe that witnessed a bad last year, are on the declining path since the beginning of 2003. To-date, Dow Jones, FTSE, BSE, etc are down 5.2 percent, 8.1 percent, and 2.8 percent respectively, amid mounting uncertainty about Middle East.

Investors are worried about the outcome of war, if any, and its duration, and how it can affect the already depressed economies.

Strong stance taken by France, Germany and Russia to avert a war is adding to the confusion of the investors. With this, the uncertainty on the aggressive posture of North Korea is also hitting the Asian region, which is already being under pressure due to mounting oil prices.

Pakistan bourses, that initially ignored the developing tension in the Middle East, are now seriously following the developments on the Iraq front.

After the end to the honeymoon period in mid-January, investors are keenly waiting for any concrete development on US-Iraq conflict, though Pakistan economy may not directly get affected substantially due to war.

That is why despite good corporate results, declining yields in the money market and low badla rates, KSE Index dipped by 18 percent during last one and half month after it touched the peak of 2955.

Leading scrips are currently trading at an average PER of 6-7 times 2003 earnings with dividend yields of around 11-12 percent.

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