Stocks swing back into red over ‘mini-budget’ fears

Stocks took a swing for worse on Wednesday reversing yesterday’s gains as the government’s announcement to amend finance bill 2018 sent the market players packing amid fears over macroeconomic situation and a rudderless economy, dealers said.

Ahsan Mehanti, an analyst at Arif Habib Corporation, said the bearish sentiments reigned supreme amid institutional selling in select stocks across-the-board on concerns over economic uncertainty.

“Reports on government plans to cut PSDP (Public Sector Development Programme) by Rs380 billion and shelve unapproved schemes dented steel and cement stocks,” Mehanti said.

He added that investor concerns over unresolved circular debt crisis, dismal data on auto sales for July-August 2018 and foreign outflows played a catalyst role in bearish close at the Pakistan Stock Exchange (PSX).

The PSX’s benchmark KSE-100 shares index fell 0.58 percent or 237.49 points to close at 40,522.04 points, while its KSE-30 shares index fell 0.90 percent or 179.67 points to end at 19,857.09 points.

As many as 356 scrips were astir today, of which 100 moved up, 237 went down, and 19 remained unchanged. The ready market volumes stood at 136.979 billion shares compared to a turnover of 139.508 billion shares in the previous session.

Shumaila Badar, head of research at Ismail Iqbal Securities, said the KSE-100 Index came under pressure ahead of upcoming budgetary measures, expected to be announced in a parliament session on Friday. “We expect the market to be mixed to slightly negative ahead of the mini-budget announcement,” Badar pointed out.

The market was rife with rumors that the government was likely to increase customs duty by one percent and withdraw exemptions given to salaried class. The new measures in the shape of mini budget are aimed at increasing tax collection by Rs300 billion, which would increase inflation rate, making a case for further monetary tightening.

Faisal Shaji, a strategist from First Standard Capital, said the market had been continuously sliding since the start of September owing to the fact that the new government had so far been unable to set an economic direction.

“Some local players are jittery given certain events whereas institutional activity is also muted,” Shaji said.

He added that the local retail was continuously bearing the brunt of the prevailing bearish mode, whereas the market also lacked depth.

“We think this bearish spell may continue since new economic managers will take stock of the anemic economy,” Shaji added.

The highest gainers were Khyber Textile, up Rs16.70 to close at Rs350.70/share, and Sitara Chemical, up Rs14.34 to finish at Rs379.00/share.

Companies that booked highest losses were Nestle Pakistan, down Rs497.80 to close at Rs9458.30/share, and Millat Tractors, down Rs55.30 to close at Rs1132.40/share. Descon Oxychem recorded the highest volumes with a turnover of 7.140 million shares. The scrip gained Rs0.42 to close at Rs27.97/share.

The lowest volumes were witnessed in Unity Foods Limited, recording a turnover of 14.570 million shares, the scrip lost Rs0.85 to end at Rs40.16/share.