Market watch: Stocks hammered as index slips below 40,000

Benchmark index decreases 846.93 points to close at 39,296.70

KARACHI: Pakistan stock market faced another round of battering on Monday as the benchmark KSE-100 index dived over 800 points to finish trading deep in the red.

Markets across the Asia-Pacific region were also in the red with investors worried about the impact of Chinese coronavirus outbreak on the global economy.

The virus has killed more than 900 people and infected 40,000 across mainland China and has spread to more than two dozen countries in what has been termed a global health emergency. It has also jolted major supply chains for everything from food and household supplies to cars and electronics parts.

Reeling from the turmoil in global markets in addition to soaring inflation in the country, the Pakistan Stock Exchange fell below the 39,300-point mark as investors opted to offload stocks.

Arif Habib Limited Head of Research Samiullah Tariq told The Express Tribune that the higher-than-forecast inflation reading for January coupled with worsening macroeconomic indicators was the main reason behind the stock market's persistent decline over the past few days.

"This, combined with political and economic uncertainty, is proving to be detrimental for the stock market," he said.

The analyst expected the market to fall further in the coming days and stabilise around 38,000 points. He pointed out that the market would start rising once the numbers (macroeconomic indicators) began improving.

Ongoing talks between the International Monetary Fund (IMF) and Pakistan ahead of the release of third loan tranche turned investors jittery.

At close, the benchmark KSE-100 index recorded a decrease of 846.93 points, or 2.11%, to settle at 39,296.70.

Aba Ali Habib, in its report, stated that taking cue from last week's downward trend, the bourse extended the bear-run and nosedived 846.93 points to close below the psychological barrier of 40,000 points.

"The drop in the KSE-100 index was primarily due to domestic macroeconomic concerns and the downslide in Asian markets, which pushed investors to book profits and remain sidelined."

Moreover, recent news flow indicated IMF's dissatisfaction over the government's revenue collection ability, which may set the stage for additional taxes and revised energy tariffs in the ongoing policy review. This would further fuel inflation.

"Going forward, we believe the ongoing corporate results season may drive investor sentiment," the report added.

Selling pressure was observed across the board, led by the heavyweight cement sector, which dragged the index into the red zone. Cement giant Lucky Cement closed with a loss of Rs7.90 followed by Cherat Cement and DG Khan Cement, which fell Rs2.28 and Rs3.82 respectively.

Oil and gas marketing companies also pulled the index down as PSO, Hascol and Shell closed lower.

JS Global analyst Maaz Mulla said carnage was witnessed at the bourse with the KSE-100 index losing 847 points and closing at 39,297.

"This selling pressure was on the back of likely redemptions in mutual funds. Engro (-2.3%), Oil and Gas Development Company (-2.5%), PSO (-4.7%), Pakistan Petroleum (-2.1%), Mari Petroleum (-4%), Hubco (-1.4%), Bank AL Habib (-2.1%) and Pakistan Oilfields (-2.2%) were among major laggards, which dragged the index down."

On the news front, Mulla said, dialogue between Pakistan and the visiting IMF delegation continued.

Moreover, selling pressure continued in the cement sector, where DG Khan Cement (-5.7%), Pioneer Cement (-5.5%), Fauji Cement (-5.7%), Maple Leaf Cement (-2%) and Lucky Cement (-1.7%) were the major losers.

Pakistan Petroleum (-2.1%), Pakistan Oilfields (-2.2%) and Oil and Gas Development Company (-2.5%) from the exploration and production sector closed in the red as crude oil prices edged lower in the international market.

"We expect the market to trade sideways in the short term on the back of political uncertainty, ongoing IMF talks and FATF review later this month," he added.

Overall, trading volumes decreased to 180.8 million shares compared with Friday's tally of 193.5 million. The value of shares traded during the day was Rs6.7 billion.

Shares of 357 companies were traded. At the end of the day, 41 stocks closed higher, 300 declined and 16 remained unchanged.

Hascol Petroleum was the volume leader with 15.4 million shares, losing Rs1.38 to close at Rs21.63. It was followed by Unity Foods with 11.7 million shares, losing Rs0.90 to close at Rs11.76 and Maple Leaf Cement with 9.6 million shares, losing Rs0.44 to close at Rs21.37.

Foreign institutional investors were net sellers of Rs53.3 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.