Political turmoil rattles PSX

Benchmark KSE-100 index dives 1,878.43 points, settles at 61,065.32

KARACHI:

As political uncertainty deepened in the wake no clear majority for any political party in general elections, the Pakistan Stock Exchange (PSX) plunged on Monday, giving up nearly 1,900 points as investors resorted to panic selling to avoid hefty losses.

The market slumped despite announcement of robust financial results and a 26% year-on-year (YoY) surge in remittances that amounted to $2.4 billion in January 2024.

In the morning, the trading day commenced on a relatively positive note, with the KSE-100 index touching the intra-day high at 62,634.37 points. However, it started falling rapidly from that point onwards owing to heightened selling pressure, primarily sparked by the growing political noise and the delay in circular debt management plan, where the International Monetary Fund’s (IMF) approval was pending.

Additional factors that contributed to the downturn included Bloomberg’s assessment of default risks, Moody’s rating concerns in the face of political instability, policy uncertainty and high leveraged positions at the PSX.

The index reached its intra-day low at 60,647.67 points about an hour before close of trading. However, value hunters seized the opportunity to make selective purchases of attractive stocks, which helped to erase some prior losses.

Exploration and production (E&P), power, and cement sectors registered significant declines and the bourse closed the day slightly above the 61,000-point mark.

“Stocks fell sharply on election deadlock and political turmoil after the announcement of general election results,” said Arif Habib Corp MD Ahsan Mehanti.

“Strong financial results and upbeat data showing $2.4 billion in remittances, which surged 26% YoY in January 2024, supported the index to close above the day’s low,” he said, adding that caution by Bloomberg about default risk, Moody’s rating concerns over political instability, policy uncertainty and high leveraged positions at the PSX played the role of catalysts in bearish close of the stock market.

At close, the benchmark KSE-100 index recorded a plunge of 1,878.43 points, or 2.98%, and settled at 61,065.32.

Topline Securities, in its commentary, said that “continuing last week’s momentum, Pakistan equities commenced business on a negative note.”

Read Election fever influences trading at PSX

“The aforesaid selling spree can be attributed to further delay in the circular debt management plan where the IMF’s nod is awaited and may likely be received this week, as informed by the Petroleum Division,” it said.

In addition, uncertainty on the political front about the formation of a new government dampened market sentiment.

Resultantly, E&P, power and cement sectors contributed negatively to the KSE-100 index as Oil and Gas Development Company, Pakistan Petroleum, Mari Petroleum, Hub Power and Lucky Cement lost a total of 640 points, Topline added.

Arif Habib Limited (AHL), in its report, noted that only three stocks rose while 88 shares fell on the KSE-100 index. Oil and Gas Development Company (-7.5%), Pakistan Petroleum (-7.5%) and Mari Petroleum (-5.59%) were the biggest contributors to the decline.

It added that the MSCI would announce results of its February 2024 Index Review later in the day, which could be beneficial for Pakistan concerning passive flows at the end of the month.

JS Global analyst Mohammed Waqar Iqbal stated that the market sentiment weakened owing to the lack of clarity on the political front. “Delay in reforms, upcoming debt repayments and currency devaluation are the key concerns,” he pointed out.

“Going forward, we recommend investors to adopt a buy-on-dips strategy in banking and fertiliser sectors,” the analyst added.

Overall trading volumes increased to 349.97 million shares against Friday’s tally of 258.1 million. The value of shares traded during the day was Rs12.7 billion.

Shares of 354 companies were traded. Of these, 35 stocks closed higher, 300 dropped and 19 remained unchanged.

K-Electric was the volume leader with trading in 50.3 million shares, losing Rs0.44 to close at Rs4.21. It was followed by WordCall Telecom with 34.6 million shares, losing Rs0.07 to close at Rs1.21 and Oil and Gas Development Company with 14.9 million shares, losing Rs10.88 to close at Rs134.20.

On a day when many investors opted for heavy selling, foreign investors were net buyers of shares worth Rs808.5 million, according to the National Clearing Company of Pakistan Limited (NCCPL).

Published in The Express Tribune, February 13^th, 2024.

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