Pakistan stocks fall; rupee at record low

Pakistan currency fell because of negative sentiment surrounding the economic outlook.

Pakistan currency,the rupee on Thursday fell to a record low because of negative sentiment surrounding the country8217;s economic outlook,and strong dollar demand for oil import payments amid soft inflows.

Dealers said they expect the local unit to stay under pressure for now,as dollar payments are typically higher in July and August because of stronger oil demand and debt payments

The rupee closed at 86.80/85 to the dollar 8212; its weakest ever closing 8212; down from 86.64/70 on Wednesday.

The previous weakest close by the rupee was 86.75/80 on August 1.

The rupee hit a record low of 86.85 today,and the main reason for the rupee being under pressure is because it8217;s sentiment driven,said a dealer at a foreign bank.

Stalled payments from a bailout programme by the International Monetary Fund IMF is also negatively impacting the rupee.

The IMF has criticised the Pakistan government for its patchy implementation of fiscal reforms,and has held back the sixth tranche of an 11 billion loan programme since August last year.

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IMF and Pakistan officials were due to meet last month,but the meeting has been delayed and no new date has been announced.

Dealers said increased remittances from Pakistanis working abroad had supported the rupee and shielding the currency from a sharp fall in recent weeks,but the increased dollar demand over the last week pushed the rupee lower.

According to official data,remittances rose 38.57 percent to 1.1 billion in the first month of 2011/12 fiscal year,compared with 791.18 million in the same period last year.

In the currency market,stocks fell more than 1.2 percent because of the deteriorating security situation in the country8217;s financial hub.

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At least 30 people have been killed in a fresh outbreak of violence in Karachi,but police on Thursday said the clashes now focused more on gang turf wars after months of ethnic and political disputes.

The deteriorating law and order situation of the city coupled with lower than expected earnings by National Bank of Pakistan caused index to fell by more than 1 percent,said Samar Iqbal,a dealer at Topline Securities Ltd.

National Bank of Pakistan NBP reported on Thursday a net profit of 8.13 billion rupees 93.80 million for the first half of 2011,compared with a net profit of 3.86 billion rupees 44.4 millionin the same period last year.

The result was lower than analyst expectations and NBP ended 4.98 percent lower at 43.47 rupees.

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The Karachi Stock Exchange8217;s benchmark 100-share index closed 1.25 percent,or 141.43 points,lower at 11,128.52.

Volume fell to 41.62 million shares from 46.33 million shares traded on Wednesday.

In the money market,overnight rates rose to 13.40 percent,compared with the previous day8217;s close of between 10.75 percent and 11.0 percent amid tight liquidity in the interbank market.