Market watch: KSE-100 slumps as economic uncertainty rattles market
The Pakistan Stock Exchange (PSX) began the week on a highly bearish note on Monday, with the benchmark KSE-100 index plunging over 750 points as the market reacted to developments on the economic and political fronts.
In the backdrop of an unsatisfactory economic scenario, coupled with rising coronavirus cases, the index fell below the 44,000-point mark. Economic uncertainty following the reconstitution of Economic Advisory Council (EAC) and the change of finance minister ahead of budget impacted the investment climate.
In a surprise move, the prime minister on Saturday approved the reconstitution of EAC but did not appoint former finance minister Shaukat Tarin as its convener.
Moreover, the inflation rate once again jumped above 9% in March, as reported by the Pakistan Bureau of Statistics on Thursday, which coupled with a gloomy economic outlook aided the bearish sentiment.
The benchmark KSE-100 index opened in the green, however, the bourse could not hold on to higher levels and gave way to selling pressure. Throughout the trading session, the index could not break out of the red zone.
At close, the benchmark KSE-100 index recorded a decrease of 752.74 points, or 1.7%, to settle at 43,548.21 points.
“The slump can be attributed to the rising Covid-19 cases in Pakistan and regional countries,” Pak-Kuwait Investment Company Head of Research Samiullah Tariq told The Express Tribune.
“Changes in the cabinet and uncertainty about the refinery policy, coupled with delay in payments to independent power producers (IPPs), aided the market’s decline,” Tariq said.
“However, we expect the trend to change after the Economic Coordination Committee (ECC) meeting, which is scheduled to be held on Wednesday.”
Shedding light on the low volumes recorded on Monday, BMA Capital Executive Director Saad Hashemy pointed out that when the market declined with a drop in volumes, it was not a good sign.
Investors were confused due to the political instability, change of finance minister and reconstitution of EAC. Market players were looking for certainty before taking fresh positions.
The expert added that there was not much time left in the budget announcement, which would be made in June 2021, and the government’s decision to change the finance minister at such a time caused jitters in the stock market.
Moreover, economic numbers including a high inflation rate and investor preparation ahead of Ramazan also contributed to the negative close.
A report of Arif Habib Limited stated that the market took a battering with a major slide of 830 points during the session.
Although the overall leverage positions decreased, the stocks which had high levels of leverage positions (including NetSol, TRG Pakistan, Attock Refinery and National Refinery) came crashing down after failing to make forward moves.
The report added that lockdown concerns due to the rapid spread of coronavirus in Punjab, IMF conditions (post-resumption of loan programme) that hinted at a rising cost of production for industries as well as withdrawal of tax exemptions left investors perturbed.
Selling pressure was witnessed across the board, particularly on technology and banking-sector stocks.
Sectors contributing to the performance included technology (-142 points), banks (-136 points), cement (-88 points), exploration and production (-60 points) and textile (-48 points).
Overall trading volumes rose to 302.8 million shares compared with Friday’s tally of 266.8 million. The value of shares traded during the day was Rs13.4 billion.
Shares of 391 companies were traded. At the end of the day, 61 stocks closed higher, 322 declined and eight remained unchanged.
TRG Pakistan was the volume leader with 24.6 million shares, losing Rs8.74 to close at Rs127.48. It was followed by Dost Steels with 24.4 million shares, gaining Rs0.72 to close at Rs5.88 and Silkbank with 20 million shares, gaining Rs0.11 to close at Rs1.26.
Foreign institutional investors were net buyers of Rs95.4 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.