KARACHI: As panic-prone investors started to jettison shares right after opening of the market on Monday, stocks extended their fall for sixth day in a row.

The intense panic, that had gripped investors on last trading session of the previous week, exacerbated further on Monday.

Heavy sell-off by both local and foreign investors saw the KSE-100 index cave in by 1,328 points (3.39 per cent), the highest single day drop in 15 months, dragging the benchmark to close at 37,898 points — lowest in 10 months.

Rs244 billion ($2bn) was wiped off the market capitalisation in a single day while $36bn have been evaporated in the past 17 months with current capitalisation at $63bn. Incidentally, the rout represented an aggregate loss of 28pc from the peak of May 2017.

Red was splashed all across the trading screen as analysts were feverishly working to crunch numbers and calculate the scores of shares that closed on their lower circuits — 5pc down from previous level.

All heavily weighted shares crashed — including Habib Bank, United Bank, Lucky Cement and DG Khan Cement. Banks, power, steel and cement sectors were battered as investors feared increase in the cost of doing business which in turn would hit the company bottom lines and drag down stock prices. During the day, brokers and analysts tried to calm down the market, which saw the index recover a little from its intraday crash of over 1,457 points.

Arif Habib, the leading broker and former chairman of the bourse urged that economic managers share information with the public regarding the current account deficits and eroding foreign exchange reserves as well as plans to ease the pain. He said that investors were spooked due to uncertainty, which he reminded was worse than bad news.

Other senior market participants agreed the fuel that fired selling was the confusion regarding Pakistan’s entry into the International Monetary Fund programme, about which mixed signals were being flashed.

“Mutual Funds have not sold off equities, at least not us,” says Dr Amjad Waheed, CEO of NBP Funds (previously Nafa), the largest such player in the country with Rs115bn under management. He also denied any run on redemptions and maintained his sangfroid.

“Our industry has ample liquidity and once the dust settles and clearer picture emerges of the economy, there is likely to be cherry-picking as Pakistani stocks have turned pretty attractive,” Amjad continued.

Foreign funds, who have disposed of equity worth $362m over the last five months, continued the sell-off despite what most market analysts thought was an attractive valuation of below eight times the forward earnings.

The local investors’ fear of a further flight of foreign investment was exacerbated as foreigners were seeking exit from most emerging markets due to increase in US interest rates.

According to figures released by the National Clearing Company of Pakistan, foreigners were the biggest sellers, dumping stocks worth $7.5m.

Among local participants, senior analysts suspected that individuals, punters, and short-term traders threw away stocks to meet ‘margin calls’.

Khurram Schehzad, Chief Commercial Officer of JS Global reckoned that the market meltdown was due to “global equity currency decline, the indecisiveness on IMF or any other funding options, rising energy prices, hike in interest rates and expected impact on the currency.”

He however stressed that their quick bounce-back once the funding option materialises.

Published in Dawn, October 9th, 2018