Market bloodbath: KSE-100 plunges over 1,300 points as economic concerns mount

Massive economic uncertainty and depressed investor sentiment enveloped the Pakistan Stock Exchange (PSX) on Tuesday as the KSE-100 Index plunged over 1,350 points to settle just over the 38,300 mark.

Stalemate over talks with the International Monetary Fund (IMF) with regard to resumption of the bailout programme played on investors’ mind, who remained concerned over Pakistan’s economic outlook as well.

At close, the KSE-100 Index was down 1,378.54 points or 3.47%, hovering around the 38,342.21 mark. This is the benchmark index’s lowest level in 30 months.

Trading began on a positive note, but selling pressure soon gripped the market, dragging equities lower.

Automobile, cement, banking, chemical, oil and other sectors were all in the red as investors offloaded their holdings. As the day progressed, the KSE-100 only found itself dragged deeper in the red.

On the political front, dissolution of Khyber-Paktunkhwa’s assembly is on the cards and the provincial government may send a summary later during the day.

On the economic front, Minister of State for Petroleum Musadik Malik said that the government will have to increase the price of gas as it looks to revive the IMF bailout programme.

Pakistan is also set to hold bilateral talks with a Russian delegation on Tuesday, for a long-term oil and liquefied natural gas (LNG) trade deal and the construction of the $3 billion Pakistan Stream Gas Pipeline (PSGP) project.

Speaking to Business Recorder, Ismail Iqbal Securities Head of Research Fahad Rauf stated the equity market has been under pressure for the past few days.

“Political and economic uncertainty is rising with each passing day,” he said. “On one hand, the IMF programme is stalled and on the other, there is no clarity whether general elections will take place on time or earlier than scheduled. Both ends are open.”

Umair Naseer, Director Research of Topline Securities, told Business Recorder that media reports regarding Finance Minister Ishaq Dar’s statement pertaining to IMF has dented market sentiments.

“This has raised concerns of a further delay in the resumption of the IMF programme,” he said.

“Moreover, political scenario is also uncertain, creating panic. The default risk is also playing on the minds, as our foreign exchange reserves remain low,” he added.

Naseem added that inaction from the government on taking key decision pertaining to energy prices is also irking sentiments.

Saad Khan, Head of Research at IGI Securities, echoed similar sentiments, saying that institutional selling was witnessed at the bourse on account of political ambiguity. “Noise of early election is making rounds in the market,” he said.

“Moreover, the Monetary Policy Committee (MPC ) meeting of the central bank is around the corner, and the market is expecting a rate hike of around 100bps,” said Khan.

The market expert called for the resumption of the IMF programme at the earliest to end economic chaos.

Pakistan’s stocks have been under pressure for weeks now as the government remains engaged in talks with the IMF, but has yet to reach an agreement on revival of its bailout programme. The delay comes hand in hand with falling foreign exchange reserves that have hit an over nine-year low with less than one month of import cover.

On the economic front, rupee’s downward trajectory against the US dollar continued for the 20th successive session as it depreciated Re0.32 or 0.14% on Tuesday to close at 228.66.

Volume on the all-share index surged to 205.9 million from 105.5 million on Monday. The value of shares traded jumped to Rs6.7 billion from Rs3.2 billion recorded in the previous session.

K-Electric was the volume leader with 29.9 million shares, followed by WorldCall Telecom with 14.5 million shares, and Sui Northern Gas Pipelines with 9.7 million shares.

Shares of 340 companies were traded on Tuesday, of which 34 registered an increase, 281 recorded a fall, and 25 remained unchanged.