Stocks fall as investors put up shutters on economic scares

Stocks yet again lost on Monday as last week’s monetary tightening action coupled with further devaluation of local currency panicked investors into putting up their shutters amid compounding economic uncertainties arising especially from inflationary pressures, dealers said.

Analyst Ahsan Mehanti from Arif Habib Corporation said stocks closed bearish amid thin trade after State Bank of Pakistan raised key policy rate by 50 basis points, raising cost on debt and concerns over surge in local petroleum products prices in line with rupee devaluation and rising global crude oil prices.

“Uncertainty over outcome of FATF’s (Financial Action Task Force) Asian wing Asia Pacific Group’s delegation’s visit for decisions to remove the country from the task force’s grey list and uncertainty over terms and outcome of IMF (International Monetary Fund) talks for possible $12 billion bailout weighed on the market,” Mehanti added.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 0.76 percent or 294.49 points to close at 38,354.85 points, whereas KSE-30 took a hit of 0.70 percent or 126.96 points to end at 18,132.51 points.

Of 321 active scrips, 62 moved up, 243 retreated, and 16 remained unchanged. The ready market volumes stood at 65.857 million shares, as compared with the turnover of 137.733 million shares in the previous session.

Salman Ahmad, director financial institutions at Aba Ali Habib said, the continuous benchmark interest rate and dollar appreciation unnerved the investors.

“There has been a never-seen-before rise in interest rates as in just 12 months or so it has shot up sharply. Another factor that also deterred investment flows was the devaluation of rupee which showed that not all is well at the economic front as authorities are just playing with the words,” Ahmad said.

Another analyst said the central bank’s comments clearly highlight possibility of further monetary and exchange rate actions with an aim to further slow down the aggregate demand, reduce external account, and to help remain ahead of the curve on inflation. “We anticipate negative market reaction as the latest decision reopened one more source of uncertainty, which was previously assumed to have been settled,” the same analyst said.

Another dampener for the market observers was the rise in petrol and diesel prices, which further trimmed the margins of the listed companies as it would increase the cost of doing business.

Topline Securities in a report said equities lost 0.76 percent during the first session of April on further monetary tightening and downward revision of real GDP growth to 3.5 percent from earlier expectations of around 4 percent.

“Fertiliser was the worst performing sector during the day, eroding 83 points from the index, followed by E&P and banking sector, cumulatively reducing the index by 112 points,” the brokerage said.

The highest gainers were Pakistan Services, up Rs45.10 to close at Rs947.60/share, and Murree Brewery, up Rs15.00 to finish at Rs796.00/share.

Companies that booked highest losses were Nestle Pakistan, down Rs191.80 to close at Rs7000.00/share, and Rafhan Maize, down Rs144.99 to close at Rs6900.01/share.

Sui Northern Gas recorded the highest volumes with a turnover of 4.528 million shares. The scrip gained Rs0.16 to close at Rs75.27/share.

The lowest volumes were witnessed in Unity Foods recording a turnover of 14.220 billion shares, whereas the scrip lost Rs0.16 to end at Rs2.53/share.