PSX tumbles 5.1pc on policy rate hike in a week

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The benchmark of the Pakistan Stock Exchange (PSX) registered the highest weekly decline after March 27, 2020, in the outgoing week. — AFP/File
The benchmark of the Pakistan Stock Exchange (PSX) registered the highest weekly decline after March 27, 2020, in the outgoing week. — AFP/File

KARACHI: The benchmark of the Pakistan Stock Exchange (PSX) registered the highest weekly decline after March 27, 2020, in the outgoing week.

The KSE-100 index lost 2,375 points or 5.11 per cent on a weekly basis to close at 44,114 points. According to Arif Habib Ltd, the decline in the value of shares was mainly because of the State Bank of Pakistan increasing its policy rate by 150 basis points to 8.75pc coupled with an alarming current account deficit that widened to $5.1 billion in the first four months of 2020-21.

Other key drivers of the decline in the share market included the continuation of net selling by foreign investors amid the PSX’s transition from MSCI’s emerging market to frontier market as well as a decline in foreign exchange reserves that put pressure on the national currency.

The fact that the last week was also a rollover week also led to chaotic and gloomy sentiments on the bourse, it added.

Despite the announcement of a staff-level agreement with the International Monetary Fund (IMF), investors’ sentiments remained subdued.

There was, nonetheless, a rebound of sorts in the benchmark index after petroleum dealers ended their strike following an agreement with the government to increase their margin.

The news about the inflow of $3bn from Saudi Arabia next week and a sharp decline in international oil prices also gave a breather to the stock market.

Sector-wise, contribution to the downside was led by cement, which took away 462 points from the index, followed by commercial banking (326 points), technology and communication (290 points), fertiliser (270 points) and oil and gas exploration (252 points).

Scrip-wise, major losers were Lucky Cement, which dropped 205 points, followed by TRG Pakistan (177 points), Habib Bank Ltd (114 points), Pakistan Petroleum Ltd (98 points) and Engro Corporation (95 points).

Foreigners sold stocks worth $39.1 million versus a net sell of $25m in the preceding week. Major selling was witnessed in commercial banking ($15.7m) and fertiliser ($6.3m). On the local front, buying was reported by individuals ($16m) and companies ($13.3m).

The average daily volume and traded value for the outgoing week were up 8pc and 13pc to 264m shares and $60m, respectively.

According to AKD Securities, the stock market is likely to switch gears and shift to the positive side in the coming week.

The expectation of the change in direction is on the back of a meltdown in crude oil market, which will give some relief on the commodities’ front.

On the flipside, the news of a new Covid-19 variant may give rise to panic across the globe, it added.

Published in Dawn, November 28th, 2021

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