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June 26, 2019

Stocks lose as gas tariff hike fears weigh amid lack of triggers


June 26, 2019

Stocks on Tuesday remained on the rocks for the second session in a row as a proposed hike in gas tariff seen bearing down on corporate earnings outlook and speculations of Pakistan’s possible downgrade in MSCI’s review scared investors into selling or staying on the sidelines, dealers said.

Topline Securities in a report said equities extended losses as a likely increase in gas price weighed on investors’ sentiments to take fresh positions, because most of the sectors would not be able to pass on higher cost of production to consumers amidst lower aggregate demand.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index lost 0.82 percent or 281.33 points to close at 34,190.62 points, while KSE-30 went down by 0.78 percent or 127.21 points to end at 16,160.24 points. Of 343 active scrips, 118 moved up, 193 retreated, and 32 remained unchanged. The ready market volumes stood at 144.849 million shares, compared to 78.764 million in the previous session.

Muhammad Faizan Munshey, head of foreign institutions at Next Capital, said the market continued to fall, taking inspiration from Monday's close amid bleak economic outlook and the absence of any positive triggers. “Negative sentiments were also fueled by the statement of the outgoing FATF (Financial Action Task Force) president Marshall Billingslea that Pakistan has failed to implement the action plan and there is a possibility of it being placed in their blacklist in October 2019,” Munshey said.

Ahsan Mehanti, analyst at Arif Habib Corporation, said stocks closed lower on higher trades amid global equity selloff. “Post budget uncertainty, dismal economic data on CPI Inflation, exports, expected hike in gas tariff and uncertainty over fate of rupee-dollar parity dragged the index down,” Mehanti added.

The share market was once again on the selling side and received a heavy jolt during the session with the index hitting the session low of 33,984 points. However, with eleventh-hour recovery helped the market close above 34,000 points’ level.

According to a leading research analyst the market was down on the back of rumors that MSCI might downgrade Pakistani equity market as following a continuous decline in share values, the market capitalisation has been unable to meet the criteria. Nevertheless, there is a possibility that buffer rule might save the day, and downward review might delay for the quarter.

Another factor which eroded sentiment was the gas price increase, which, according to the same analyst if approved by the federal cabinet, might draw a backlash from the political parties and prove negative for the economy in general. Inflation, which is feared to escalate down the line, will increase the cost of doing business, making products uncompetitive at the global markets. The highest gainers were Phillip Morris Pakistan, up Rs148.13 to close at Rs3966.66/share, and Bata Pakistan, up Rs64 to finish at Rs1400/share.

Companies that booked highest losses were Nestle Pakistan, down Rs232.18 to close at Rs6685.32/share, and Unilever Foods, down Rs165 to close at Rs5500/share.

K-Electric Limited recorded the highest volumes with a turnover of 21.355 shares. The scrip lost Rs0.04 to close at Rs4.21/share. The lowest volumes were witnessed in Cherat Cement recording a turnover of 4.127 million shares, whereas the scrip gained Rs0.07 to end at Rs31.47/share.

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