Stocks fall 1.6 percent on monetary tightening expectations

Stocks fell sharply on Tuesday on market talks that the central bank might further tightened its policy stance following a massive currency devaluation while concerns over a grim economic outlook also freaked the investors into selling like crazy, dealers said.

Ahsan Mehanti at Arif Habib Corporation said stocks fell across the board amid slump in rupee value and a surge in the prices of local petroleum oil lubricant (POL) products; however, hopes remained high on likely receipt of $1 billion SAFE deposit from China to stabilise exchange rate.

“Foreign outflows, uncertainty in rupee-dollar parity, concerns over thinning foreign currency reserves and debt repayments, rupee devaluation, weakening earnings, and dismal economic outlook catalysed panic selling at the apex bourse,” Mehanti said.

Pakistan Stock Exchange (PSX) benchmark KSE 100-share index shed 1.60 percent or 702.26 points to close at 43,228.90 points, whereas KSE 30-share index lost 1.83 percent or 395.98 points to close at 21,294.54 points. Of 339 active scrips, 48 advanced and 274 declined, whereas 17 remained unchanged. The ready market volumes stood at 137.78 billion shares compared to a turnover of 160.14 billion shares the previous session.

An analyst said investors were flustered over the currency devaluation, third in the last seven months, eroding the rupee by almost 15 percent, which suggested the trade and current account deficit numbers were precarious and difficult to recoup right now. “The country requires huge borrowing to plug the deficit," an analyst said.

Another analyst said the market observed heavy declines in the midsession following an announcement that Dr Shamshad Akhtar, the caretaker finance minister, would address a press conference later in the day. “Rumors started doing rounds that the government was all set to take drastic measures like increasing the interest rate further to control the economic damage,” the analyst said.

He added that continuous decline in domestic currency would increase cost of doing business, clipping the margins of the listed companies.

Zeeshan Afzal, head of research at Insight Securities, said the PSX staged a profit-taking session.

“The benchmark witnessed a downward slide amid yawning trade deficit that reached 13.4 percent to $33.886 billion in 11MFY18 (eleven months of the current fiscal year) pooled with overseas workers’ remittances that increased only 2.8 percent to $18.028 billion, lower than the market expectations, and the upcoming FATF decision at the end of the month,” Afzal said.

Moreover, according to Global Cement, an international news agency, business activity in Pakistan slowed during the month of Ramazan, with cement demand also declining. In May 2018, domestic cement sales were the slowest in the current fiscal year, which runs until the end of June 2018 causing DG Khan Cement and Fauji Cement PA to close at their daily lower limits i.e. 5 percent. Participants were seen active in banking, and cement sectors.

The highest gainers were Rafhan Maize, up Rs344.67 to close at Rs8,198.00/share, and Abbott Laboratory, up Rs15.82 to finish at Rs691.82/share. Colgate Palmolive, down Rs100.04 to close at Rs3,497.96/share, and Sapphire Textile, down Rs46.64 to close at Rs1,093.45/share were among the top losers. Allied Bank Limited recorded the highest volumes with a turnover of Rs 2,20,000 shares, while the bank’s scrip gained Rs0.02 to close at Rs0.08/share.

The lowest volumes were witnessed in Bank of Punjab. It recorded a turnover of 11.446 million shares, with its scrip losing Rs0.38 to end at Rs12.86/share.