KARACHI: Stocks suffered the worst single-day decline in 16 months on Monday as the KSE-100 index tumbled 1,335.43 points (3.30 per cent) and closed at 39,160.60.

The broad-based equities collapse wiped out Rs241 billion from shareholders’ wealth. Investors freaked out of equities right from the start, marking the fifth week of stocks rout in a row.

Fragile investor sentiments over the depleting foreign exchange reserves and lack of clarity on balance of payment position were shattered further by the bewildering episodes witnessed last week.

The whopping 150 basis points hike in policy rates by the State Bank against market consensus anticipation of 100bps; the shaky rupee and volatile commodities prices in international market had already clouded the market outlook. Investors’ fears were exacerbated by the huge foreign selling of stocks worth $32.6 million due to MSCI rebalancing on Friday.

A visibly worried trader mumbled that the benchmark index had caved in by 3,286 points or 7.7pc in 72 trading sessions since the incumbent government took oath to run the affairs of the state.

Although the market succumbed to enormous selling pressure on Monday, PSX Managing Director Richard Morin assured Dawn that the risk management measures were in place as always; nothing unusual was reported on the broker settlement or default.

Traders said that the investors jettisoned shares and sought the safety of fixed income assets in a bid to improve risk profile. Amjad Waheed, CEO of NBP Funds — the country’s biggest mutual fund with Rs115bn under management — asserted that 5-10pc of unit holders may have switched to money market funds from equity in the last one year, but on Monday it was business as usual with no run on redemptions.

While none of the sectors at the bourse managed to close in green, as many as 88 stocks closed at their ‘lower circuits’ — the maximum permissible 5pc decline in share price over the earlier session. Sector-wise, fertiliser, commercial banks and cement took the brunt of the blow as they contributed 629 points to the index decline.

Figures released by the National Clearing Company showed a surprise $0.3m stocks buying by foreign investors. Major selling of $5.86m came from mutual funds and $3.40m from the brokers’ proprietary trading. Banks absorbed $2.16m of selling and insurance companies $.5.22m.

Traded volume dipped 39pc to 164m shares while traded value declined 73pc to $47m. Scrip-wise, major decliners were Engro Corporation, down 4.95pc, Habib Bank 3.90pc, Fauji Fertiliser 4.99pc, Lucky Cement 5pc and Hub Power 4.45pc, erasing 384 points.

Published in Dawn, December 4th, 2018