The KSE-100 Index recovered more than half its losses on Wednesday to eventually finish 412 points or 0.89% lower, a recovery that came after it took a battering in intra-day trading.
Earlier, the index had suffered a fall of nearly 2.7% or 1,200 points before investors came around, cherry-picking across the board at the Pakistan Stock Exchange (PSX).
At close, the KSE-100 finished with a fall of 411.61 points or 0.89% to settle at 45,597.24. It hit an intra-day low of 44,788.63 for a decrease of 1,220.22 points.
The index has been under pressure this week with market participants reacting to negative triggers including the interest-rate hike by 25 basis points, worsening trade and current account deficits as well as taking a cue from regional markets that reacted to the Evergrande issue.
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On Monday, the State Bank of Pakistan (SBP) Monetary Policy Committee (MPC) increased the key interest rate by 25 basis points to 7.25%. The KSE-100 suffered an over 500-point on Tuesday as well.
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Mohammed Sohail, CEO Topline Securities, said that the pressure was due to the rollover week, and increase in the KIBOR rate by the central bank.
Samiullah Tariq, Head of Research and Development at Pakistan Kuwait Investment Company Limited, said that amid central bank’s monetary tightening stance investors have been spooked over further rise in the policy rate.
The MPC in its statement had said that it expects monetary policy to remain accommodative in the near term, with possible further gradual tapering of stimulus to achieve mildly positive real interest rates over time.
However, Tariq was of the view that he expects confidence to be restored among investors in the coming days.
Other market experts told Business Recorder that monetary policy tightening has had a negative effect on the index.
“Interest rate tightening leads to pressure in the market as the cost of borrowing increases,” said analysts.
Asian investors soothed by Evergrande bond plan
Furthermore, volatility across regional and global equities especially in the backdrop of China’s real estate giant Evergrande's expected default also impacted the local market.
On the international front, traders await a crucial meeting of the US Federal Reserve, where it could announce a timetable to start tapering its vast monetary easing programme. That comes against the ever-present backdrop of spiking coronavirus infections and slowing global growth.
Analysts said that local investors are also cautious over upcoming talks between the International Monetary Fund (IMF) and the Pakistan government expected to be held this month.
In addition, weakening of PKR against the USD has also left investors worried, over the rise in inflation concerns.
Volume on the all-share index increased from 325.88 million on Tuesday to 583.73 million on Wednesday. The value of shares traded also increased significantly during the session, amounting to Rs17.39 billion from Rs12.32 billion on the previous day.
WorldCall Limited was the volume leader with 91.05 million shares, followed by Azgard Nine with 36.19 million shares, and Hum Network 34.07 million shares.
Shares of 525 companies were traded on Wednesday, of which 99 registered an increase, 413 recorded a fall, while 13 remained unchanged.