KARACHI: The Pakistan stock market plunged 2,266 points (5.6 per cent) and closed at 37,984, which put the weekly rout at a 20-month record since June 16, 2017.

The coronavirus outbreak that crossed borders into 40 countries and triggered worldwide scare, prompting investors to move from the commodities and stocks into safe havens, gold and bonds. As economists started to fret over the negative impact on global growth, Pakistan market also gained traction with effects felt on the domestic bourse, particularly when two cases of the dreaded virus-infected persons were confirmed mid-week. The confidence which was pushed to new lows jettisoned shares all throughout.

More negatives were added by Moody’s report suggesting an adverse impact on local banks post Pakistan’s stay in the Financial Action Task Force’s grey list until next review in June. The usual pressure of the rollover week also kept investors on their toes.

On the political side, investors remained nervous over the resurging political uncertainty after the Punjab assembly refused to extend ex-PM Nawaz Sharif’s bail on medical grounds. In contrast, Pakistan and the International Monetary Fund reaching a staff-level accord on the second review with disbursement of third tranche of $450 million subject to the board’s approval provided some comfort to the market. Moreover, SBP’s foreign exchange reserves continued to rise by $87m.

Foreign fund managers continued to ditch stocks in the South Asian markets and the PSX clocked in foreign sell-off of a massive sum of $22.5m compared to net sale of $8.6m the earlier week. On the domestic front, selling was witnessed in commercial banks of $7.6m and exploration and production (E&P) $4.8m. Major local buying was reported by insurance companies at $25.3m and banks/DFIs $7.8m. Average daily volume stood at 174m shares, higher by 63pc while mean traded value jumped 54pc to $48m.

Sector-wise, negative contributions came from E&P, declining by 575 points, led by weakness in International oil prices, commercial banks 531 points, fertiliser 278 points, power generation and distribution (233 points, and oil and gas marketing companies 191 points.

Among scrips, declines were led by Pakistan Petroleum, down 256 points, Oil and Gas Development Company 194 points, Hub Power 170 points, Habib Bank 152 points and Engro Corporation 103 points.

Other major news flow included staff-level accord on second review agreed with the IMF, Trump tells India that ties with Pakistan are very good, payment to Russia of Rs1,442bn to settle 40- year old trade dispute, investors offer Rs1.4tr for T-bills and exporters’ key demands on energy tariff accepted.

Going forward, unless the global fear of the spread of coronavirus subsides, the world currency and commodities will continue to take a hit. The recovery of the two virus-infected persons discovered in Pakistan could lessen panic. Potential global sell-off is expected to weigh on investor sentiments as expectations of worldwide slowdown gain traction and resonate among domestic investors.

Lower oil prices may pose a threat to earnings of index-heavyweight oil and gas sector which is likely to drag down the index, but the impact may be positive for the country’s inflation and trade figures.

Published in Dawn, March 1st, 2020