KSE-100 suffers one of 2021's worst falls

The KSE-100 suffered one of its worst falls of the calendar year, losing 2.01% or 908 points to end near 44,300, a level last seen in April 2021, as market participants reacted to the bundle of negativity surrounding Pakistan on Wednesday.

Only twice has the KSE-100 suffered a greater fall, in terms of percentage, in 2021 with both instances being registered in March.

On Wednesday, a casual start was followed by market bloodbath as the KSE-100, widely regarded as the benchmark, plummeted nearly 1,300 points by mid-day before a minor recovery took the index over the 44,000 level.

At close, the KSE-100 ended with a fall of 908.19 points or 2.01% to settle at 44,366.74. The fall comes a day after the index posted a gain of 457 points.

Bulls return as KSE-100 breaks losing streak, gains 457 points

Reaction to negative news

Market participants reacted to news that US senators have tabled a bill, seeking an investigation into the Taliban’s recent takeover in Afghanistan, while also assessing Pakistan’s role before and after the fall of Kabul. The proposed legislation requires the US secretary of state, in consultation with the secretary of defence and the director of national intelligence, to submit a report on entities providing support to the Taliban to the appropriate congressional committees.

While it is remains too early to discuss economic implications, experts believe the development comes as a thaw in US-Pakistan relations. This alone, they say, had a negative impact on the market on Wednesday.

“The (US-Pakistan) relationship has turned iffy as Pakistan tries to defend its role and voices unfair scapegoating of Afghanistan's swift surrender to Taliban. Trust would take time,” tweeted A.H. Soomro, Managing Director at KASB Securities. “That said, the ties need to repair. There are high probabilities of Pakistan being removed from major non NATO ally status,” he said, adding that Pakistan needs US support for getting off the FATF grey list, bringing foreign investors and keeping exports intact.

The KSE-100 also took cue from regional markets with Shanghai and Hong Kong shares dropping on Wednesday, tracking overnight Wall Street losses and hit by China's worsening power crunch, as investors exited Chinese stocks vulnerable to factory shutdowns including chemicals and steelmaking.

Broader negative sentiment also weighed as economic uncertainties ahead of a scheduled tightening of US monetary policy and deepening concerns over persistent inflation.

The KSE-100 Index has been under pressure for several weeks now as economic sentiment turned less bullish amid a widening current account deficit, rupee depreciation and interest-rate hike by the State Bank of Pakistan. On Wednesday, the rupee hit a new low in the inter-bank market, its sixth successive decline against the US dollar.

Rupee's decline continues, hits new low against dollar

Meanwhile, sectors dragging the benchmark KSE-100 Index low included banking (169.15 points), technology and communication (117.30 points) and cement (113.51 points).

Volume on the all-share index increased from 364.86 million on Tuesday to 468.76 million on Wednesday. The value of shares traded also increased significantly during the session, amounting to Rs16.4 billion from Rs14.03 billion on Tuesday.

Telecard Limited was the volume leader with 52.43 million shares, followed by WorldCall Limited with 51.19 million shares, and Dolmen City with 36.02 million shares.

Shares of 560 companies were traded on Wednesday, of which 60 registered an increase, 489 recorded a fall, while 11 remained unchanged.