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June 25, 2019

Stocks run into rout as political tussle over budget panics investors


June 25, 2019

Stocks on Monday ran into a rout as panic-selling ensued over fears that the ongoing parliamentary tug-of-war may delay the approval of finance bill 2019/20, while cement sector came down like a sandcastle after being slapped with hardened regulations, dealers said.

Topline Securities in a repot said equities witnessed a massive decline after nine sessions owing to rising political noise in the legislative assemblies, raising concerns over the passage of budget amid likely increase in gas price during this week. The cement stocks were badly hit by uncertainty over the sustainability of cement prices is increasing, while strikes by transporters and dealers also dampened outlook on the cyclical sector, the brokerage added. Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 1.86 percent or 653.30 points to close at 34,471.95 points level, whereas KSE-30 followed suit with a low of 2.07 percent or 344.32 points to end at 16,287.45 points level.

Of 337 active scrips, 46 moved up, 273 retreated, and 18 remained unchanged. The ready market volumes stood at 78.764 million shares, as compared to 129.305 million shares in the previous session.

Analyst Ahsan Mehanti from Arif Habib Corporations said, “Panic gripped investor sentiments on concerns over weak corporate earnings outlook”. Reports on new investments from $9 billion Pak-Qatar economic partnership and $3 billion Qatar deposit/investments invited mid-session support.

“Economic uncertainty and uncertainty on the approval of IMF’s (International Monetary Fund) $6bn bailout package on July 3 contributed to the bearish close,” Mehanti added. Mohammad Faizan Munshey, head of foreign institutional sales at Next Capital said stocks slid sharply owing to panic selling by investors amid concerns over grim inflation and interest rate outlook and lack of positive developments.

“News reports that Pakistan will get $3 billion in deposits and investments from Qatar failed to excite the investors who preferred to exercise caution and stay on the sideline,” Munshey added.

An analyst said the market went down as a couple of new measures had been taken on the distribution of cement. The government (from the new fiscal year) has asked distributors to take cheques from the buyers and pay 1.5 percent turnover tax. These steps are enough to slow down the sale of the commodity, which will resultantly squeeze the margins of cement companies. Moreover, cement price has come down on speculation that the cartel of the manufacturing companies has disbanded, which resulted in downward price correction.

The stock market from the commencement of the trading session recorded declines across the board. For a brief period some of the shares witnessed improvement but it proved short-lived. The benchmark index succumbed to selling pressure in cement shares where most of the group giants closed at their lower locks, i.e. losing five percent in single session. The highest gainers were Phillip Morris Pakistan, up Rs169.53 to close at Rs3818.53/share, and Nestle Pakistan, up Rs69.50 to finish at Rs6917.50/share.

Companies that booked highest losses were Mari Petroleum, down Rs34.74 to close at Rs1021.55/share, and Abbot Laboratories, down Rs23.27 to close at Rs442.15/share. TRG Pakistan Limited recorded the highest volumes with a turnover of 5.396 million shares, while the stock lost Rs1 to close at Rs17.11/share.

The lowest volumes were witnessed in WorldCall Telecom, recording a turnover of 2.077 million shares, whereas the scrip lost Rs0.05 to end at Rs0.74/share.

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