Stocks nosedive on economic jitters ahead of SBP policy meeting

KARACHI: Another volley of currency devaluation further dented the capital market on Friday, wiping away 800 points from the benchmark KSE-100 index, as share values succumbed to selling pleasure sparking panic in local and foreign investors, dealers said.

Analyst Ahsan Mehanti from Arif Habib Corporations said, “Stocks fell across the board, as rupee depreciation and uncertainty over central bank policy on discount rate impacted the investor sentiments at PSX.”

Rupee free fall against dollar, falling foreign exchange reserves, likely surge in State Bank of Pakistan (SBP) policy rate announcement on May 20, and concerns over International Monetary Fund (IMF) conditions and targets in federal budget FY19 played a catalytic role in the bearish close at the market, Mehanti added.

Pakistan Stock Exchange (PSX) KSE-100 shares index lost 2.37 percent or 804.50 points to close at 33,166.62 points level. KSE-30 shares index followed suit with a low of 2.63 percent or 425.40 points to end at 15,733.71 points level.

Of 329 active scrips, 31 moved up, 286 retreated, and 12 remained unchanged. The ready market volumes stood at 90.373 million shares, as compared with the turnover of 108.579 million shares in the previous session.

Topline Securities in its post-market note said, “KSE100 closed on negative note for seventh consecutive week taking 7 weeks loss to 15 percent.”

The sentiments were unchanged compared with Thursday’s session, as further devaluation of rupee made heavy dents at the capital market in the last session of the week.

“Continuous devaluation of the domestic currency unnerved the investors, who now believe that the government has accepted the harsh conditions of the IMF,” another analyst said.

Moreover, the date of the monetary policy announcement scheduled for Monday, further created craters in the price run up.

The general view in the market was that the monetary policy rate would witness a fresh hike of 1 to 1.25 percent from the existing mark of 10.75 percent.

Dealers said that the devaluation, possible rate hike and continuous selling from mutual funds resulted in heavy selling at the stock market.

However, the market talks near the end of the trading session that some of the senior brokers met Finance Adviser Hafeez Shaikh to formulate a state-run institution backed fund to support the sagging trend of the stock market.

Official announcement from the government backed institution for setting up of fund might help turn sentiments positive from negative and market to recover some of the losses on Monday. However, question mark for the investors would be the announcement of the monetary policy on Monday.

Fertiliser sector remained among one of the top laggards for the index, as concerns over withdrawal of sales tax exemption and talks related to replacement of Gas Infrastructure Development Cess (GIDC) with federal excise duty on gas supply are doing rounds.

Similarly, cement sector also performed poorly, as factors like slower economic growth, hike in policy rate and devaluation were likely substantially dent the profitability of manufacturers.

The highest gainers were Pakistan Tobacco, up Rs29.39 to close at Rs2,522.03/share, and JDW Sugar, up Rs12.63 to finish at Rs269.64/share.

Companies that booked highest losses were Rafhan Maize, down Rs325.50 to close at Rs6,184.50/share, and Nestle Pakistan, down Rs60.00 to close at Rs7,189.00/share.

K-Electric Limited recorded the highest volumes with a turnover of 15.343 billion shares. The scrip lost Rs0.33 to close at Rs3.67/share.

The lowest volumes were witnessed in Fauji Cement, recording a turnover of 1.632 million shares, whereas the scrip lost Re1 to end at Rs15.21/share.