Stocks enter fourth day of rout as Fitch report bites

Stock on Thursday spiraled further down entering the fourth straight day of rout as latest projections by Fitch Solutions flared up fears that country’s flagging economy was slipping deeper into recession, while institutional selling turned out to be the main culprit, dealers said.

Salman Ahmad, head of institutional sales at Aba Ali Habib said the market had been in depression since the start of the week because of year-end obligations. “All the institutions have been squaring up their positions. Things are likely to be stabilised especially after the IMF (International Monetary Fund) board meeting, scheduled for July 3,” Ahmad said.

Following the approval of IMF bailout and other assistance expected from the World Bank and Asian Development Bank, domestic markets -both equity and foreign- are likely to be stabilised, which will help stage some recovery, Ahmed added. Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index lost 0.92 percent or 314.13 points to close at 33,774.43 points, while KSE-30 went down by 1.28 percent or 205.49 points to end at 15,879.88 points.

Of 326 active scrips, 132 moved up, 175 retreated, and 19 remained unchanged. The ready market volumes were recorded at 135.021 million shares, compared to 159.680 million shares in the last session.

Madiha Javed head of research at Ismail Iqbal Securities said the index ended up in the red zone, primarily of a weakening rupee. “This is ahead of IMF’s meeting next week where Pakistan’s EFF (Extended Fund Facility) is expected to be approved,” Javed said.

She said Fitch Solutions revised down Pakistan’s economic growth forecast from 4 percent for FY20 to 2.7 percent, stating that IMF’s package would result in tighter monetary and fiscal regime, slowdown in government, development spending, depressed purchasing power, and lower exports amid global slowdown.

Ahsan Mehanti, analyst at Arif Habib Corporation, said stocks were battered owing to reemergence of economic uncertainties after Fitch comments.

Investor sentiment remained subdued after dismal data on large scale manufacturing growth for April, Mehanti said, adding, higher global crude oil prices and upbeat data on urea sales for May invited late session recovery.

Muhammad Faizan Munshey, head of foreign institutions at Next Capital, said the brutal sell-off was being fueled by mounting investor concerns over the outlook on inflation and interest rates, which could curtail growth in the economy and have a damaging knock-on effect.

“Rupee continues to drop against dollar, however, some respite was witnessed later in the day and the greemback came down to Rs163.35, but closed above Rs164-mark,” Munshey added. The highest gainers were Sapphire Fiber, up Rs37 to close at Rs782.00/share, and Indus Motor Company, up Rs34.38 to finish at Rs1177.38/share.

Companies that booked highest losses were Phillip Morris Pakistan, down Rs198.33 to close at Rs3768.33/share, and Nestle Pakistan, down Rs132.13 to close at Rs6666.87/share. K-Electric Limited recorded the highest volumes with a turnover of 24.990 million shares. The scrip lost Rs0.02 to close at Rs4.19/share.

The lowest volumes were witnessed in HBL Growth Fund recording a turnover of 3.539 million shares, whereas the scrip gained Rs0.73 to end at Rs10.74/share.