The Pakistan Stock Exchange (PSX) plunged 2% (or almost 900 points) to close to 42,000 points at around 1:8pm on Monday, as traders aggressively pulled out investment in panic after the central bank unexpectedly hiked the key policy rate by 100 basis points to over two decades high at 16%.
The development stands negative from companies listed at the bourse, as it would reduce flow of credit to private sector and hurt their net profits, going forward.
"Market down 650 points at opening after unexpected rate hike," Topline Securities CEO Muhammad Sohail said in a brief comment.
Earlier, the market was strongly expecting no change in the policy rate, so that the fading economic activities could gradually stabilize. However, the latest rate hike may further hurt economic activities.
Read PSX plunges by over 2,000 points after PM Shehbaz announces 'super tax'
The weekend political developments were also reportedly to have informed the investors' decisions.
Former prime minister Imran Khan's statement that the party will quit all provincial assemblies, to force the incumbent federal government to hold early elections, added gloom to the PSX.
The sales were seen across the board, including on penny and stable stocks. The market was hovering at around three months high before it came under selling pressure.
SBP hikes key policy rate
Against strong market expectations for maintaining the status quo, Pakistan’s central bank had surprisingly hiked its key policy rate by 100 basis points to over a two-decade high at 16% to curb the elevated inflation reading and achieve a "higher growth on a more sustainable basis”.
Read more Economic, political uncertainty dents PSX
The State Bank of Pakistan (SBP) revised up its projection for average inflation reading to 21-23% for the current fiscal year 2023 compared with the earlier 18-20%.
"This [rate hike] decision is aimed at ensuring that elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis,” the SBP announced in a statement issued after the end of its monetary policy meeting.
“Higher food and core inflation are key contributors to elevated inflation," it added.
The central bank had further said after incorporating the Post-Disaster Needs Assessment of the floods and latest developments, the FY23 projections for a growth of around 2% and current account deficit of around 3% (or $10 billion) of the GDP shared in the last monetary policy statement were reaffirmed.
1732225542-0/logan-(1)1732225542-0-165x106.webp "article")
1724919650-0/Untitled-design-(5)1724919650-0-270x192.webp "kundi to call apc on security")
COMMENTS (2)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ