Stocks fall 1.6pc as selling spree emerges in mutual funds

Stocks slumped by 1.6 percent on Wednesday, as selling spree emerged in mutual funds and other financial institutions on expected increase in rate hike by the central bank to meet one of the conditions of the International Monetary Fund (IMF), dealers said.

Madiha Javed, head of research at Ismail Iqbal Securities said, “The KSE-100 index remained under pressure throughout the session today after the federal cabinet approved increase of power tariff by Rs2/unit.”

Overall, index lost 596.03 points to close at 35,035.03 - lowest level in the last three years, not seen since MSCI approved Pakistan’s inclusion in EM Index. Activity improved with 113 million shares traded during the session, compared to 64 million shares traded in the last session, Madiha added.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 1.67 percent or 596.03 points to close at 35,035.03 points level.

KSE-30 shares index followed suit with a low of 1.62 percent or 273.09 points to end at 16,551.62 points level.

Of 328 active scrips, 38 moved up, 281 retreated, and nine remained unchanged.

The ready market volumes stood at 113.235 billion shares, as compared with the turnover of 65.363 million shares in the previous session.

Amin Yousuf, chief executive officer from AKY Securities said, “Mutual funds and other financial institutions are on the selling side, as they fear that the interest rate will go up in order to meet one of the conditions of the IMF.”

Even the government owned NIT kept away from the market, and did not provide the expected support. “Continuous selling in stock market would make heavy dents in the privatisation process, as consortium interested in buying government owned institutions would place lower bids comparing the pricing of share price trend currently,” Yousaf added.

A leading trader said the trading pattern was also influenced by speculation that the IMF would further demand the government to remove subsidies, which would increase electricity and gas prices.

Moreover, IMF wants to increase interest rate ranging from 12 percent to 14 percent, which would increase the cost of doing business, having adverse impacts on cement, auto companies, steel and pharmaceuticals.

Salman Ahmad, head of institutional sales at Aba Ali Habib said, “Before the opening of the market, news of the bomb blast in Lahore killing around 10 people broke the headlines.”

Add to that the uncertainty over the IMF programme conditions and likely devaluation of the already weak rupee, and the market did not recover, he added.

The highest gainers were Colgate Palmolive, up Rs110.09 to close

at Rs2,311.94/share, and Faisal Spinning, up Rs12.02 to finish at Rs252.55/share.

Companies that booked highest losses were Rafhan Maize, down Rs340.00 to close at Rs6,510.00/share, and Phillip Morris Pakistan, down Rs183.50 to close at Rs3,486.50/share.

K-Electric Limited recorded the highest volumes with a turnover of 16.775 billion shares.

The scrip lost Rs0.25 to close at Rs4.20/share.

The lowest volumes were witnessed in Hub Power, recording a turnover of 3.199 million shares, whereas the scrip lost Rs0.74 to end at Rs19.03/share.