Expected rise in interest rates stocks end lower

KARACHI, Stocks ended lower on Tuesday as cautious investors booked profits on fears of a hike in the key policy rate when the monetary policy is unveiled next week, dealers said.

The monetary policy for the subsequent two months is due to be announced on Sept. 29. The central bank raised its key policy rate by 50 basis points to 13 percent in July.

The Karachi Stock Exchange's benchmark 100-share index ended 0.71 percent, or 71.08 points, lower at 9.992.50 Turnover rose to 88.44 million shares, compared with 65.05 million shares traded on Monday.

Inflation rose to a four-month high in August as the country's devastating floods forced food prices higher. The consumer price index rose a higher-than expected 13.23 percent from a year earlier and it was up 2.5 percent from July.

Earlier analysts expected the central bank to wait and see till the release of damages assessment report, which is due to be released in mid October, but with inflation higher than expected, there are fears that the central bank may hike the policy rate.

In the currency market, the rupee eased to 85.77/87 to the dollar, down from 85.77/87 on Monday amid higher payments for imports and dealers expect pressure to continue.

The rupee has been supported last week by remittances from overseas Pakistanis, which, according to the central bank, was a record $933.06 million in August. The last highest amount of remittances was $841.44 million in June.

In the money market, overnight rates ended higher at 12.00 percent, compared with Monday's close of between 10.10 and 10.25 percent after the State Bank of Pakistan conducted a three day repo and mopped up 18.5 billion rupees worth of treasury bills.