KARACHI: Share prices sank like a stone on Thursday as the latest economic data showed a worsening trade deficit with an indication that interest rates may go up sharply in the immediate term.

The KSE-100 index lost 2,134.99 points or 4.71 per cent to close at 43,234.15 points. The benchmark lost the highest number of points in a day since March 2020 when the Covid-related restrictions kicked in. The single-day decline in share prices constituted the fourth largest fall ever in terms of index points, according to Ismail Iqbal Securities Ltd. The trade deficit for November amounted to $5.1 billion, the highest-ever in the country’s history. In addition, investors expected an interest rate increase in the next monetary policy as the cut-off yields of treasury bills recorded a major jump in the latest auction.

The expectation of a higher inflation number next month on the back of the low-base effect, coupled with currency depreciation, further eroded investors’ sentiments, according to Arif Habib Ltd.

Market participation increased by 60.4pc to 386.8 million shares as investors rushed to dump their holdings. The value of traded shares jumped 52.4pc to $79.7m.

KSE-100 index sheds over 2,134 points, highest in a single day since March 2020

Speaking to Dawn, Next Capital CEO Najam Ali said volatility in the stock market would continue until the return of stability to the foreign exchange market. “The [stock] market can predict an interest rate hike and build it into earnings. The real problem is the perception that the government is unable to control inflation and curb imports. That’s creating nervousness,” he added.

But Mohammed Sohail of Topline Securities asserted that nobody anticipated that the yields on treasury bills would jump close to 12pc so quickly. “[The latest auction] sent a signal that interest rates would not just increase, but increase rather sharply. That’s why investors sold their positions aggressively, which created a panic-like situation,” he told Dawn, noting that the stock market will remain under pressure and “take a long time” to recover from the sudden jolt.

The only stock that contributed positively to the KSE-100 index was First Habib Modaraba, although its weight in the benchmark index is just 0.09pc. Its share price increased by Rs0.07 or 0.77pc to Rs9.22.

Six index constituents that registered no change in their share prices were Ibrahim Fibres Limited, EFU General Insurance Limited, Feroze1888 Mills Limited, Murree Brewery Company Limited, Pakistan Services Limited and Shakarganj Limited.

The rest of 93 companies that contribute to the performance of the KSE-100 index posted share price declines ranging from 0.2pc to 9.98pc on a day-on-day basis. Sectors taking away the highest number of points from the benchmark index included commercial banking (360.42 points), cement (314.2 points), oil and gas exploration (240.12 points), technology and communication (211.75 points) and fertiliser (203.7 points).

Shares that contributed most negatively to the benchmark included Lucky Cement Limited, which took away 149.77 points from the KSE-100 index, followed by Systems Limited (118.9 points), Hub Power Company Limited (101.45 points), Habib Bank Limited (91.39 points) and Pakistan Petroleum Limited (76.94 points).

Stocks recording the biggest declines in percentage terms included Yousaf Weaving Limited, which went down 9.98pc, followed by Byco Petroleum Pakistan Limited (9.3pc), Pakistan International Bulk Terminal Limited (8.11pc), International Industries Limited (7.5pc) and Attock Refinery Limited (7.5pc).

Stocks that contributed significantly to the traded volume included WorldCall Telecom Limited (33.02m shares), Dolmen City REIT (29.58m shares), Byco Petroleum Limited (22.82m shares), Unity Foods Limited (17.73m shares) and G3 Technologies Limited (17.58m shares).

Foreign investors remained net buyers as they purchased shares worth $0.74m on a net basis.

Published in Dawn, December 3rd, 2021