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April 18, 2019

Stocks fall 1.6pc as treasury single account fears break banks


April 18, 2019

Stocks on Wednesday lost 1.6 percent, posting their second biggest one-day loss this year, near exclusively dragged down by banks that buckled under fears that a likely introduction of a treasury single account (TSA) would strangle their liquidity as well as interest income, dealers said.

The government on Wednesday proposed to introduce a TSA to transfer its deposits that are currently being maintained with commercial banks, to State Bank of Pakistan (SBP).

Topline Securities in its market review termed it "a negative development for banks in terms of systematic risk as total government deposits with commercial banks are around 13-14 percent of total banking sector deposits”.

This can lead to reduced net income for banks, the brokerage said, adding, as a result, the banks eroded 245 points from the index, followed by energy companies that cumulatively knocked 104 points off the index.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 1.68 percent or 629.38 points to close at 36,752.57 points level. KSE-30 shares index followed suit with a low of 1.62 percent or 287.21 points to end at 17,407.64 points level.

Of 357 active scrips, 68 moved up, 274 retreated, and 15 remained unchanged. The ready market volumes stood at 172.862 million shares, as compared to 139.977 million in the previous session.

Brokers said benchmark index remained negative throughout the session today. Analysts said the government had to lower its deposits from private banks by Rs800 billion from the present level of Rs1.3 trillion out of the overall deposits of Rs13.4 trillion in order to secure a loan from the IMF.

The government’s considerations to reduce its deposits from private banks came as a shock because if Rs800 billion parked at private banks moved to SBP, the liquidity at banks would dry up and the cushion expectation for capital market would lower.

Ahsan Mehanti from Arif Habib Corporation said panic gripped investor sentiments at the PSX after reports on tax amnesty plan approval delays amid reservations. Uncertainty over conditions of International Monetary Fund bailout package and pre budget uncertainty led to a bearish close, he added.

Brokers said technical correction set in as every time the market hits below 37,000, it faces resistance. Stocks that contributed positively to the index included: POL (10 points), KTML (4 points), NRL (2 points), SCBPL (2 points), and LOTCHEM (2 points).

Stocks that contributed negatively to the index included HBL (97 points), HUBC (38 points), NESTLE (28 points), OGDC (26 points) and BOP (24 points). The highest gainers were Otsuka Pakistan, up Rs4.86 to close at Rs146.98/share, and Clover Pakistan, up Rs4.28 to finish at Rs140.66/share.

Companies that booked highest losses were Unilever Foods, down Rs299 to close at Rs6500/share, and Nestle Pakistan down Rs296.50 to close at Rs7602.50/share. Trust Investment Bank recorded the highest volumes with a turnover of 5.685 million shares. The scrip gained Rs0.18 to close at Rs1.93/share. The lowest volumes were witnessed in BOP recording a turnover of 51.481 billion shares, whereas the scrip shed Rs1 to end at Rs12.54/share.

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