The Karachi Stock Exchange (KSE)-100 Index dropped 4.46% amidst political uncertainty on Monday, marking the biggest ever plunge of the equity market within a day in terms of points.
The benchmark index lost 1,309 points by the end of trading and closed at 28,071. The decline was the biggest in a single day in terms of percentage since February 2009, with 100 stocks hitting their lower circuits, which is the maximum value by which a stock’s price can decrease before its trading is suspended for the rest of the day.
Speaking to The Express Tribune, Elixir Securities Chief Executive Officer Junaid Iqbal said the stock market declined because political unrest gave rise to fears that the government could collapse. “While it’s impossible to predict how the stock market will perform in the future, I think the military is unlikely to step into the political arena at this moment,” he said, adding the fight against the Taliban is keeping the military engaged in North Waziristan.
According to AKD Securities, the equity market has shed close to 8% from its current-year-to-date high, which is in line with the average magnitude of historical corrections. A major political crisis is typically followed by the market shedding 5% on average, with the highest fall of 16.3% recorded during the week after President Musharraf’s resignation in 2008, it added.
Sharp escalation in political tension resulted in the KSE-100 Index going down by as much as 4.8% in intraday trade, barely missing the imposition of the price floor.
Elixir Securities analyst Faisal Bilwani said his brokerage house expects volatile trading on primarily institutional activity in coming days while the market continues to see choppiness ahead of August 14.
Shares of 376 companies were traded on Monday. Share prices of 253 companies declined, 14 closed higher while nine remained unchanged at the end of the day. The value of shares traded during the day was Rs8.9 billion, up 115% from the value of shares traded on Friday.
Total turnover remained 215.46 million shares, which was almost three times higher than 71.9 million shares traded on August 8.
Lafarge Pakistan Cement was the volume leader with 19.7 million shares, gaining Rs0.27 to finish at Rs15.01. It was followed by the Bank of Punjab with 18.3 million shares, losing Rs0.63 to close at Rs7.57 and Fauji Cement with 12.2 million shares, losing Rs0.15 to close at Rs19.
Foreign institutional investors were net sellers of Rs523 million during the trade session, according to data maintained by the National Clearing Company of Pakistan Limited.
Published in The Express Tribune, August 12th, 2014.