Stocks slump amid policy rate uncertainty

KSE-100 index dives 1,047.71 points, settles at 71,695.03

KARACHI:

Pakistan Stock Exchange (PSX) on Monday came under heavy selling pressure as the KSE-100 index slumped nearly 1,050 points amid uncertainty surrounding the State Bank of Pakistan (SBP)’s policy rate announcement ahead of new loan talks with the International Monetary Fund (IMF).

Although trading began on a positive note, reflecting the sharp gains recorded in the previous session, market sentiment turned bearish as the day progressed. The index touched its intra-day high of 73,300.75 in the first hour and from that point onwards it experienced a consistent downward trend.

Institutional profit-taking in certain overbought stocks and expectations of structural reforms, particularly by doing away with government subsidies in energy, fertiliser and gas sectors as part of a new IMF programme, contributed to the bearish momentum.

Resultantly, the market fell rapidly and reached its intra-day low of 71,602.94 towards the close of trading. Significant selling was observed in power, fertiliser and exploration and production (E&P) sectors. The market closed near the day’s low with hefty losses.

“Stocks closed sharply lower on the SBP’s policy rate uncertainty ahead of Pakistan-IMF loan talks,” said Ahsan Mehanti, MD of Arif Habib Corp.

“Institutional profit-taking in selected overbought stocks and likely structural reforms under a new IMF programme to end subsidies in energy, fertiliser and gas sectors played the role of catalysts in bearish close at the PSX.”

At close, the benchmark KSE-100 index posted heavy losses of 1,047.71 points, or 1.44%, and settled at 71,695.03.

Topline Securities said that Pakistan equities had a mixed day ahead of two key events scheduled for the evening. “The monetary policy committee was meeting to decide whether to keep the status quo or start monetary easing to assist the ailing economic activities in the backdrop of a historic high interest rate,” it said.

Moreover, “the IMF board of directors was meeting to approve a $1.1 billion tranche for Pakistan, post staff-level approval the country won last month.”

Power, fertiliser and E&P sectors contributed the most to the sell-off where Hub Power, Engro Fertilisers, Fauji Fertiliser, Oil and Gas Development Company and Mari Petroleum lost 497 points, Topline added.

Arif Habib Limited (AHL), in its commentary, wrote that the PSX saw “a weak start to the week ahead of the SBP’s monetary policy meeting for which views were mixed concerning when the rate cutting cycle would begin.”

Despite a 1.44% day-on-day decline, short-term support remained intact, it said.

Fauji Fertiliser Bin Qasim (+5.45%), National Foods (+5.35%) and Highnoon Laboratories (+3.08%) were the biggest contributors to the gains. On the other hand, Hub Power (-3.56%), Oil and Gas Development Co (-2.14%), and Fauji Fertiliser Co (-1.7%) were the largest drags, AHL added.

Overall trading volumes increased to 613.3 million shares against Friday’s tally of 541.1 million. The value of shares traded during the day was Rs26.3 billion.

Shares of 385 companies were traded. Of these, 133 stocks closed higher, 231 dropped and 21 remained unchanged.

Hascol Petroleum was the volume leader with trading in 60.1 million shares, gaining Rs0.58 to close at Rs8.11. It was followed by Fauji Fertiliser Bin Qasim with 35.2 million shares, gaining Rs1.84 to close at Rs35.62 and Pace (Pak) Limited with 32.65 million shares, gaining Rs0.74 to close at Rs3.49.

Foreign investors were net buyers of shares worth Rs94.04 million.

Published in The Express Tribune, April 30^th, 2024.

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