A STOCKBROKER talks on phones as he watches the movement of share prices on a monitor at the KSE on Monday.—AFP

KARACHI: The stock market witnessed a bloodbath on Monday as the KSE-100 index came crashing down by 1,419 points, or 4.11 per cent, to settle at 33,100 points and in the process wiped off Rs270 billion from the paper value of corporate Pakistan.

The index initially took a steep plunge to the intra-day low by 1,500 points, but stockbrokers and strategists tried to calm the market. This saw the index claw up slightly. Yet panic was thick in the air as punters and day traders watched stocks on all sectors, including banking companies, cement and chemicals, being badly hammered, which led to most of the 100 shares on the KSE index sink to close at their ‘lower circuits’.

Although the market on Monday suffered the heaviest single day decline since Aug 11 last year when the benchmark had crashed 4.7pc on the occasion of ‘sit-in protests’ in Islamabad, major market participants and several fund managers were putting up a bold front. “Instead of watching the blood on the trading screens, investors would do well to focus on underlying corporate fundamentals”, said Nasim Beg, vice chairman of Arif Habib Savings, the fund that holds Rs60bn under management. He reckoned that there was no real change in the health of the corporate sector.

“The farm income was likely to decline as a result of fall in prices of commodities, but overall the country’s economy was unlikely to suffer since it was not ‘export-oriented’,” he said. Mutual funds sold off stocks worth $19.75 million mainly to salvage their ‘capital protected funds’ as well as to meet some big ‘redemption orders’.

Traded volumes were recorded at 322.6m shares, up 3pc from Friday, while traded value stood at Rs12.5bn, down 10pc.

Many stock strategists linked the massive fall in share prices on Monday to the global equity meltdown. On Wall Street, the Dow drifted down by 1,089 points in the opening minutes. “Asian stocks plunged as the rout in the global equities deepened after US shares slumped and futures signalled further declines,” said dealers at brokerage Topline Securities. Quoting a news agency, Topline dealers said that global equities had now lost more than $5 trillion in value since China’s surprise decision to devalue its yuan on Aug 11.

Analysts stressed that the markets were taking the brunt of the blow since the devaluation of yuan by China had sparked a currency war across Asia Pacific.

Raza Jafri, executive director at Interbank Securities, observed: “Pakistan is primarily a domestic demand story, but it is clearly not unaffected by global events, particularly as foreign selling continues.”

As the rupee weakened against the dollar by 2.3pc in inter-bank market on Monday, foreign portfolio outflow accelerated to $6.03m. Analysts said that foreign investors had come to hold as much as one-third of the KSE ‘free-float’ and the incessant selling was reason enough to unnerve local weak holders.

“The fall on Monday was exacerbated by the uncertainty on the political front,” said one observer, adding that “uncertainty, as every stock market player knows, is worse than bad news”.

The decline in price of WTI crude to below $40 a barrel pushed the heavy-weight oil & gas stocks in the red. Beginning of futures rollover week on Monday, with the ‘open interest’ at Rs9bn also dented market sentiments.

Yet no-one was willing to hazard a guess on the market movement going forward. “Market may bounce back after today’s rout, but it is difficult to say if it has already bottomed out,” said Raza at brokerage Interbank.

Several stockbrokers did attempt to reassure investors; some by offering comforting words: “It is time to buy when there is blood on the street,” said one. Another broker tried to assuage investors by pointing out: “Statistically speaking, the month of August has been a weaker month for the KSE looking at the past 10 years data, falling 7.8pc, on average, with losses 70pc of times.”

Khurram Schehzad, director of research and investment strategy at Arif Habib Limited, pointed out that the KSE was still outperforming the emerging markets, though it had shed 8pc from the gain of 13pc since peak stock prices. “Emerging markets on the other hand have lost around 20pc from the beginning of this year,” he affirmed.

Published in Dawn, August 25th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play