Stocks decline as investors see another rate hike on horizon

Stocks declined on Friday amid concerns that the central bank would likely increase the benchmark interest rate next week to curb rising inflation numbers, dealers said.

Salman Ahmad, head of institutional sales at Aba Ali Habib said, “The market in first session was dull but following the announcement of the monetary policy to be announced next week, market turned negative, as most people expect that the interest rate will go up.”

Logical conclusion in view of the available numbers, especially inflation, was that there would be another rate hike. “The market on Monday would likely see fresh dip because of review in monetary policy, he said.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 0.60 percent or 202.91 points to close at 33,672.49 points level. KSE-30 shares index followed suit with a low of 0.47 percent or 75.90 points to end at 15,934.85 points level.

Of 304 active scrips, 62 moved up, 218 retreated, and 24 remained unchanged. The ready market volumes stood at 55.509 million shares, as compared with the turnover of 39.486 million shares in the previous session.

Analyst Ahsan Mehanti from Arif Habib Corporation said, “Stocks closed lower amid pressure in selected scrips across the board on economic uncertainty.”

The surge in local fertiliser prices and renewed hopes about positive outcomes from Prime Minister Imran Khan’s visit to the United States, invited mid-session support at the PSX. Uncertainty over State Bank of Pakistan (SBP) policy rate announcement next week, dismal data on auto sales (sliding by 4.2 percent in FY19), and concerns over unstable rupee parity played a catalytic role in the bearish close, he added.

A leading trader said besides some sectors like fertilisers, almost all others, including automobile assemblers and auto parts and accessories sectors landed in the negative zone.

The main reason behind the pruning was the auto numbers released recently, which showed that sales were down after six years. Auto sales dropped by eight percent in the fiscal year ended June 30, 2019 to 237,950 units, compared with 258,632 units.

Car sales were down because of rising interest rate, economic slowdown, higher car prices, and government ban on non-filers from buying cars. The ban remained in place for almost the whole of the last fiscal year, the trader explained.

Hayat Khan, an analyst at BMA Capital, said, “Bearish session was witnessed with improved volumes compared to the previous session.”

After a slightly positive opening, the benchmark index reduced gradually with low volumes. The market remained depressed because of ongoing concerns the business community has regarding the documentation efforts, Hayat added.

The highest gainers were Gatron Industries, up Rs9.00 to close at Rs314.00/share, and Pakistan Hotels, up Rs7.13 to finish at Rs171.14/share.

Companies that booked highest losses were Sapphire Textile, down Rs65.00 to close at Rs1,275.00/share, and Murree Brewery, down Rs25.00 to close at Rs735.00/share.

K-Electric Limited recorded the highest volumes with a turnover of 6.894 million shares. The scrip lost Rs0.09 to close at Rs4.00/share.

The lowest volumes were witnessed in International Steels Limited, recording a turnover of 1.355 million shares, whereas the scrip lost Rs1.76 to end at Rs34.26/share.