KARACHI: Stock investors lost 17.3 per cent of their investments in dollar terms in July — a period that saw the highest month-on-month depreciation.

The dollar-based losses in stock investments in July were the highest since March 2020, according to a research report issued by Arif Habib Ltd. The dollar rate in the local currency surged to Rs239 from Rs205 at the close of the preceding month. This translates to more than 14pc depreciation in a single month.

Financial services firm Bloomberg said July has been the worst month for the rupee since 1989 when it started tracking the local currency.

The dollar-based value of all listed shares is hovering around a 12-year low. Market capitalisation is currently $28.2 billion as the country struggles with a severe shortage of dollars amid an unrelenting political crisis.

In rupee terms, however, the loss of stock investments in July was less pronounced. The benchmark index shed 1,390.47 points or 3.3 per cent on a monthly basis, said the brokerage house. The decline was 3.6pc and 4.8pc in the preceding two months.

“As a result, domestic businesses appear anxious over the rising cost-push inflation,” it added, noting that major sectors may no longer be able to completely pass on the impact of the exchange rate movement given suppressed domestic demand amid the economic slowdown.

The average daily volume during July was 145 million shares, down 31pc month-on-month. The average daily traded value also decreased 30pc to $21m. Foreign investors bought shares worth $7.4m.

On the local front, mutual funds and insurance companies were major sellers as they offloaded shares worth $11.9m and $8.4m, respectively.

Last month also saw the benchmark regain some semblance of stability after the government reached a staff-level agreement with the International Monetary Fund (IMF), which has paved the way for the disbursement of $1.2bn, the brokerage said.

However, political instability arising out of the Punjab chief minister election once again took a heavy toll on the market trajectory.

“Investors anxiously await the release of the IMF tranche as two more credit ratings agencies — Fitch and S&P Global — have downgraded Pakistan’s outlook from neutral to negative, reflecting the rising risks to external financing,” it said.

Published in Dawn, July 30th, 2022