Stocks shed almost one percent as bears return on dismal data

Stocks lost almost one percent on Wednesday as dismal oil data and cost of borrowing concerns made bears to return to the market, dealers said.

Salman Ahmad, head of Equity Sales at Aba Ali Habib said rise in the benchmark interest, reaching to double digit, was the main factor behind slippage in share values.

“The companies with leverage position like cement and steel sectors which borrowed in the last two years for expansion are under threat because of rising interest rate, which would throttle the earnings,” Ahmad said.

Pakistan Stock Exchange’s benchmark KSE-100 shares Index lost 0.76 percent or 299.76 points to close at 39,303.11 points level. KSE-30 shares Index followed suit with a loss of 0.85 percent or 162.09 points to end at 18,812.00 points.

Of 358 active shares, 103 moved up, 231 retreated, and 24 remained unchanged. The ready market volumes stood at 138.104 billion shares compared with the turnover of 195.852 billion shares in the previous session.

The market underwent heavy selling pressure and at one time index lost more than 800 points.

“However, some respite came following the news that Prime Minister Imran Khan would soon visit Karachi and be briefed on stock market performance,” Ahmad added.

Companies that booked highest losses were Nestle Pakistan, down Rs341 to close at Rs8,700/share and Bata Pakistan, falling Rs38 to end at Rs1,542/share. The lowest volumes were witnessed in Maple Leaf that recorded a turnover of 8.112 million shares, losing Rs1.39 to end at Rs42.45/share.

The highest gainers were Phillip Morris Pakistan, up Rs131.70 to close at Rs3,284.88/share and Hinopak Motor, rising Rs27.48 to finish at Rs577.11/share.

Lotte Chemical recorded the highest volumes with a turnover of 10.625 million shares. The scrip gained Re0.18 to close at Rs18.85/share.

Analyst Ahsan Mehanti from Arif Habib Corporations said stocks closed bearish amid thin trade on investor concerns over economic uncertainty amid record surge in external debt to $96.7 billion.

“Unexpected surge in the policy rate, dismal data on cement and oil sales and ongoing foreign outflows played a catalyst role in bearish close,” Mehanti added.

Analysts said continuous sliding of stocks would jeopardise clients’ exposures and further erode values.

“However, no possibility of systematic risk is envisaged as regulators have developed systems to avert crisis,” Adil Ghaffar, chief executive officer of First Equity Modaraba said. “After declining for around 900 points short covering was observed during the last hours.”

Analysts said the market lacked positive developments from the economy side. Once again the rupee depreciated against dollar and it is likely to reach the Rs140 level in line with one of the conditions of the International Monetary Fund to obtain loans. Rising rupee/dollar parity also impact sectors having foreign exchange leveraged, like cement, pharmaceutical, oil, refinery and gas exploration.

High cost of borrowing in the wake of rising interest rate also hit hard all the manufacturing units.

Analysts said another factor which dented the sentiment was continuous talk of change in guards at the ministry of finance. Though Minister for Finance Asad Umar categorically denied his resignation, the reports are doing round that the finance minister along with two or three other top officials might face exit.