Market watch: Stocks lose over 650 points amid absence of support fund

Benchmark index decreases 1.9% to settle at 34,471.95

KARACHI: The Pakistan stock market dropped over 750 points in intra-day trading on Monday due to delay in creating the market support fund. Later, the bourse made a slight recovery, but still closed deep in the red.

"Absence of the market support fund (which was promised by the government) turned investor sentiments negative," Arif Habib Limited Head of Equity Sales Saad bin Ahmed told The Express Tribune.

The Economic Coordination Committee (ECC) of the cabinet had approved the market support fund worth Rs20 billion on May 31, 2019. However, it has remained inactive since the Ministry of Finance has yet not issued the required letter of comfort for establishing the fund.

State-owned National Investment Trust (NIT) has been authorised to use the fund for buying shares of state-owned enterprises listed at the Pakistan Stock Exchange (PSX).

Secondly, Ahmed said, it was the first day of the current rollover week at the PSX, during which investors settled the debt taken to buy stocks.

Apart from these, contraction in cement sales and protest by businessmen over the weekend against the condition of submitting a copy of the Computerised National Identify Card (CNIC) of unregistered buyers to document the domestic trade, also sparked selling pressure at the stock market, he said.

There was across-the-board selling. Each and every sector including oil and gas exploration, cement, automobile and banks faced sell-off from investors.

"The market may drop another 500 to 1,000 points if the support fund is not created, going forward. Otherwise, it will recover," he said.

At the end of trading, the benchmark KSE 100-share Index recorded a decrease of 653.3 points, or 1.86%, to settle at 34,471.95.

JS Global analyst Maaz Mulla said equities closed on a bearish note with the benchmark KSE-100 index diving 653 points and closing at 34,472.

The bourse kicked off trading on a positive note, hitting a high of +69 points, but soon came under pressure, touching a low of -757 points.

The cement sector came under pressure where Lucky Cement (-5%), Fauji Cement (-6.1%), DG Khan Cement (-5%), Maple Leaf Cement (-5%), Kohat Cement (-5%) and Cherat Cement (-5%) closed at their lower circuits as reports came about further price cuts in the northern region.

Moreover, he said, the oil sector also displayed a dismal performance, though crude oil extended gains in the international market, prompted by tensions between Iran and the United States.

In the exploration and production sector, Pakistan Petroleum Limited (-2.2%), Oil and Gas Development Company (-1.8%) and Pakistan Oilfields Limited (-2.9%), remained in the red zone.

Engro (-1.7%) was the major laggard in the fertiliser sector. Among the financials, HBL (-1.7%) was the major laggard.

Traded value stood at $18 million, down 31% and trading volume stood at 79 million shares, down 39%, said the analyst. Furthermore, major contribution to the market volume came from K-Electric (0%), TRG Pakistan (-5.5%), Fauji Cement (-6.1%) and Maple Leaf Cement (-5%).

"We expect the market to remain volatile due to developments on the economic and political fronts," he added.

Overall, trading volumes decreased to 78.8 million shares compared with Friday's tally of 129.3 million. The value of shares traded during the day was Rs2.89 billion.

Shares of 337 companies were traded. At the end of the day, 46 stocks closed higher, 273 declined and 18 remained unchanged.

K-Electric was the volume leader with 6.4 million shares, with no change in value at Rs4.25. It was followed by TRG Pakistan with 5.4 million shares, losing Re1 to close at Rs17.11 and Fauji Cement with 4.2 million shares, losing Re1 to close at Rs15.29.

Foreign institutional investors were net buyers of Rs125.5 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.