Stocks decline 1.37pc, as Moody’s downgrades banking sector outlook

Stocks declined by more than one percent on Monday, as blue-chip financial stocks fell on the back of Moody’s negative outlook for the banking sector, dealers said.

Analyst Ahsan Mehanti from Arif Habib Corporations said bearish activity was witnessed at the PSX, as investors’ fear the government would take harsh decisions following Prime Minister Imran Khan’s meeting with the IMF chief. “IMF conditions on new taxes and increased tariffs would weaken growth and corporate earnings outlook,” he said.

Financial stocks were battered after Moody’s changed Pakistan’s banking system outlook to negative on concerns over low-rated sovereign debt and slower economic growth, Mehanti added.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 1.37 percent or 560.82 points to close at 40,326.53 points level. KSE-30 shares index followed suit with a low of 1.56 percent or 306.60 points to end at 19,292.00 points level.

Of 340 active scrips, 59 moved up, 264 retreated, and 17 remained unchanged. The ready market volumes stood at 134.413 billion shares, as compared with the turnover of 169.100 billion shares in the previous session.

Salman Ahmad, head of institutional sales at Aba Ali Habib, said, “Three factors eroded the share values - technical correction, financial institutions selling, and IMF agreement, which will lead to some harsh conditional ties.”

The market remained under stress after it climbed above 41,000 points level, which led to selling. Moreover, financial institutions or mutual funds were net sellers, he said.

“After government nod that we are close to strike deal with the IMF, rupee came under pressure, which further depressed investors’ sentiments, who want the dust to settle on the agreement with the donor agency,” Salman added.

Shaking hands with the IMF would lead to some harsh conditions, such as cutting gas and electricity subsidies across the board. It would also ask Pakistan to maintain an effective exchange rate, an analyst said.

The dollar appreciated by more than 50 paisas on Monday, putting pressure on rupee once again. A leading analyst said the reason behind the sharp fall in the market was due to Moody’s report on the banking sector, which downgraded the outlook to negative from stable citing slower economic growth.

Moody’s said slower growth would contain business opportunities for banks, and stall improving trend in the problem loans and lower growth forecast. Following this development, financial shares witnessed sharp decline in the range of Rs0.29 to Rs3.58 per share.

The highest gainers were Colgate Palmolive, up Rs50.00 to close at Rs1,950.00/share, and JDW Sugar, up Rs14.33 to finish at Rs300.99/share.

Companies that booked highest losses were Wyeth Pakistan Limited, down Rs53.66 to close at Rs1,051.34/share, and Sanofi-Aventis, down Rs43.90 to close at Rs861.10/share.

Azgard Nine recorded the highest volumes with a turnover of 5.513 million shares. The scrip gained Rs0.41 to close at Rs14.84/share. The lowest volumes were witnessed in K-Electric Limited, recording a turnover of 15.499 billion shares, whereas the scrip lost Rs0.14 to end at Rs6.24/share.