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April 11, 2019

Stocks sink to 3-year low as growth worries deepen


April 11, 2019

Stocks slid almost 1.5 percent on Tuesday, with the benchmark index closing at its lowest in 3 years, on concerns about slowing economy following a highly anticipated but dismal forecast from the International Monetary Fund (IMF) on medium-term growth prospects of the country.

IMF said Pakistan’s growth to fall to 2.9 percent and 2.8 percent during the current and next fiscal year. It said the economy will grow at an average rate of 2.5 percent during the next five years and its external imbalance will remain elevated. Growth rate of 2.5 percent is the lowest economic growth rate predicted by any multilateral lender.

Selling was widespread and surfaced on every counter of the local market, depressing the mood of the investors.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 1.48 percent or 550.65 points to close at 36,579.32 points level. KSE-30 shares index followed suit with a low of 1.81 percent or 317.76 points to end at 17,259.86 points level.

Of 347 active scrips, 43 moved up, 284 retreated, and 20 remained unchanged. The ready market volumes stood at 141.177 billion shares, as compared with the turnover of 160.484 billion shares in the previous session.

Fitch also released a report on Pakistani banks, which were expected to remain under pressure.

Madiha Javed, head of research at Ismail Iqbal Securities, said the market saw a steep fall during the second half of the session, "given the IMF's forecasts, which see a 2.4 percent GDP growth for Pakistan into the medium-term.”

Cements were the largest losers on the back of price drop in the northern region by various players. As per news reports, cement prices fell by Rs20-25/bag to Rs520-560/bag up north. “Pharmaceuticals also remained under pressure post PM’s statement of reversal in recent price hike of pharmaceutical drugs within 72 hours,” Javed said.

Analyst Ahsan Mehanti from Arif Habib Corporations said stocks closed bearish, as investors weigh dismal IMF projections on Pakistan growth on macroeconomic challenges and slowdown in global economy.

“Investor concerns over dismal report by the World Bank, expecting economic growth rate decelerating to 2.7 percent in FY20, risks over MSCIs downgrade to frontier market status and pre-budget uncertainty played a catalytic role in the bearish close,” Mehanti added.

Salman Ahmad, head of institutional sales at Aba Ali Habib said healthy indicators from the trade numbers were totally ignored by the investors, as market lacked any big positive news.

“Investors were waiting for some details on the rescue package to be signed with the IMF, its amount and attached conditions.”.

Traders said announcement of new tax amnesty scheme, a key condition of the Financial Action Task Force, will bring some relief in the market. Announcement will help improve some of the tax deficit, which has crossed to over Rs300 billion, they added.

The highest gainers were Nestle Pakistan, up Rs279.33 to close at Rs7,768.00/share, and Atlas Honda Limited, up Rs15.00 to finish at Rs375.00/share.

Companies that booked highest losses were Island Textile, down Rs28.01 to close at Rs1,894.99/share, and Wyeth Pakistan Limited, down Rs25.97 to close at Rs897.02/share.

Al-Shaheer Corporation recorded the highest volumes with a turnover of 3.627 million shares. The scrip gained Rs0.54 to close at Rs16.00/share.

The lowest volumes were witnessed in Unity Foods, recording a turnover of 25.515 billion shares, whereas the scrip loss Rs0.53 to end at Rs2.25/share.

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