Market watch: KSE-100 sheds 596 points as investors brace for tough IMF bailout

Investors opt for panic selling due to developments on economic front

KARACHI: Bears returned to the stock market in a big way on Wednesday as the KSE-100 index plunged over 700 points in intra-day trading and slipped below the 35,000-point mark before recovering partially by the day's end.

A likely tough International Monetary Fund (IMF) bailout sparked uncertainty at the bourse and investors resorted to panic selling and offloaded stocks, which pushed the market deep in the red.

Following a brief start in the positive territory, selling pressure emerged which persisted for most part of the day. Cherry-picking at the end of the session made the market keep the 35,000-point mark.

The index showed across-the-board selling including big, mid-cap and penny stocks.



Despite the selling pressure, financial stocks outperformed on expectations of an increase in the key policy rate by the State Bank of Pakistan in the wake of upcoming IMF programme.

All index-heavy sectors bore the brunt of uncertainty and most of the stocks lost ground.

At the end of trading, the benchmark KSE 100-share Index recorded a decrease of 596.03 points, or 1.67%, to settle at 35,035.03.

"Investors are selling to avoid further losses, which they foresee ahead of Pakistan's likely entry into a tough IMF bailout," Arif Habib Limited Head of Equity Sales Saad bin Ahmed told The Express Tribune. "Market talk suggests a 100-basis-point hike in the key interest rate in the monetary policy announcement by the end of May."

Besides, there was also talk of the possibility of delay in budget presentation as authorities were undecided about finalising the name for the Federal Board of Revenue (FBR) chairman, he said.

Moreover, there were rumours of making the currency market free from state control, which may not suit Pakistan as it had low foreign exchange reserves, he said.

"We foresee the market bottoming out near 34,000 points," he added. "The market may see renewed buying around the current low levels."

In its report, Arif Habib Limited stated the KSE-100 index had a major drop of 781 points caused by across-the-board selling.

"The market started on a positive note but selling pressure, which was witnessed in the past couple of sessions, started re-emerging soon," it said

Power, exploration and production, cement, steel, financial and chemical sectors contributed mainly to the trading volumes and also to the market's decline.

K-Electric fell significantly earlier in the session, but started recovering by the day's end.

"Investors seem to have been concerned about repercussions of the IMF loan terms as well as a host of issues from a rising interest rate to an impending tough budget," the report concluded.

Overall, trading volumes increased to 113.2 million shares compared with Tuesday's tally of 65.4 million. The value of shares traded during the day was Rs4.6 billion.



Shares of 328 companies were traded. At the end of the day, 38 stocks closed higher, 281 declined and nine remained unchanged.

K-Electric Limited was the volume leader with 16.8 million shares, losing Rs0.25 to close at Rs4.2. It was followed by Sui Northern Gas Pipelines with 5.7 million shares, losing Rs3.01 to close at Rs68.59 and Maple Leaf Cement with 5.2 million shares, losing Rs0.92 to close at Rs24.37.

Foreign institutional investors were net buyers of Rs726.9 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.