Rs1,758 bn investment evaporates from PSX in PTI reign

ISLAMABAD: Pakistan's stock market has paid a heavy price of political uncertainty and present government’s ambiguous fiscal policies.

During the last two years, the investors have lost Rs2,630 billion in the capital market out of which Rs1,758 billion loss has been inflicted in the first ten months of PTI government, analysis of stock market data reveals. Arif Habib — a stock market expert and a leading businessman -- thinks the stock market has to pay heavy price due to political uncertainty and government’s inability to take timely decisions. In addition to this, he also attributed the decrease in the market capitalisation to factors including the higher interest and exchange rates.

An analysis of the stock market data available at the PSX website shows that a total of Rs2,630 billion has been wiped from the market since June 2017. Most notably, Rs1,758 billion i.e. 67 percent of the total loss has been incurred in the first ten months of PTI government (August 17, 2018 to May 13, 2019).

The total foreign selling observed at Pakistan Stock Exchange from June 01, 2017 till May 13, 2019 amounts to Rs. 75.11 billion ($636.93 million). . The information available at National Clearing Company of Pakistan Limited (NCCPL) website shows that Rs29.36 billion ($236.9 million) i.e. 39 percent of the total selling by foreigners during the period was witnessed after August 17, 2018 since the PTI government came into power.

It is pertinent to mention here that from June 1, 2017 to May 13, 2019, KSE-100 Index has registered a total decrease of 14,064 pts (48,780: June 01, 2017 and 33,900: May 13, 2019). Notably, 28.83 percent of this total decrease has been registered during the last two years.

The market capitalisation ofall shares on June 1, 2017 was recorded at Rs9757.04 billion but it has decreased to Rs7126.36 billion. This shows the market capital has to face Rs2630.67 billion decline during the last two years.

The analysis of the stock market data further shows that KSE-100 Index has registered a total decrease of 8,546 points during PTI era (42,446: August 17, 2018 and 33,900: May 13, 2019). The market capitalisation of all shares was recorded at Rs8703.47 billion but it has decreased to Rs6945.03 billion on May 13, 2019. This shows the capital market has to face Rs1758.43 billion loss in first ten months of PTI government.

It is important to note here that the highest ever KSE-100 was reported on May 24, 2017 at the level of 52,876. For the period April 20, 2017 to September 12, 2017, the average traded volume and value on PSX had decreased drastically which reflects loss of investor's confidence. The average volume of shares traded per day at PSX was 269 million. Similarly, the average traded value decreased by 32 percent from Rs14.578 billion (average for April 20, 2017 to September 12, 2017 to Rs9.8 billion (average for May 28, 2017 to September 12, 2017).

According to the stock market experts, the loss not only affected the investors including pension and mutual funds policy holders where people invest for retirement planning etc. but the sluggish market activity has adversely affected the amount of tax deposited in the national exchequer.

Renowned businessman and stock market expert Arif Habib while talking to The News said, “There are some technical reasons behind the fall of stock market in the recent era. Owing to inflated interest rate scenario, the mutual funds investors have started shifting from equity investment to money market or fixed income instruments. A large number of investors are quitting the equity market and giving preference to money market. The mutual funds have no option but to sell their stocks”.

“Political uncertainty definitely has played a great role in the stock market slump. The uncertainty in fiscal policies by the present government particularly about the interest and exchange rate has also caused loss to the market. The investors were not sure what would be the interest and exchange rate. The delay in decision making whether to go to IMF or not has also shaken the market”, he said.

“Traditionally the markets perform well after the signing of deal with IMF but this time, the market has played quite opposite to the expectations. The IMF programme also helps in accessing the international market. There are chances the market will start performing well in the coming days. The Amnesty schemes are generally taken positively because this helps in introducing the culture of documentation. I am sure after this amnesty scheme the market will perform well”, said Arif Habib.