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Karachi: Pakistani shares ended 4.52 per cent lower on Friday after the central bank increased its key discount rate to 12 per cent from 10.5 per cent the previous day to counter inflation and widening deficits.
The Karachi Stock Exchange (KSE) benchmark 100-share index fell 615.26 points to end at 13,011.74, its lowest level since September 18. Volume was 101 million shares and losers beat gainers 294 to 37.
The index at times moved towards its limit of a five per cent fall but did not reach it.
Under market rules, the index cannot move by more than five per cent in a day.
The KSE-index has shed 7.6 per cent since the beginning of the year and is 17.3 per cent lower than its life-high, set on April 21.
"The rise in the discount rate and subsequent rise in lending rates dampened the already weakening sentiment of the business community," said Asad Iqbal, managing director at Ismail Iqbal Securities.
On Thursday, the State Bank of Pakistan (SBP) increased in its key discount rate to 12 per cent from 10.5 per cent, with effective from yesterday, to tackle surging inflation and widening fiscal and current account deficits.
Severe pressure
Dealers said the banking sector was under severe pressure as the central bank announced that banks should pay depositors a minimum five per cent on interest-bearing checking accounts, with effect from June 1, to encourage deposits.
Before, the average return on all saving accounts was 2.1 per cent but there was no mandatory level.
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