Stocks plunge 2.12pc to three-year low; policy rate weighs

Stocks tumbled 2.12 percent to a three-year low on Monday, as investors succumbed to panic selling fearing rate hike in the upcoming monetary policy meeting while penalty of $5.8 billion in Reko Diq verdict by an international tribunal also spooked sentiments, dealers said.

Salman Ahmad, head of institutional sales at Aba Ali Habib, said that an expected rate hike on the back of IMF conditions inflated selling pressure in the market, which forced values to decline across the board.

The Inter­national Centre for Settle­ment of Investment Disp­utes (ICSID) imposed a penalty of $5.8 billion in its Reko Diq verdict over the weekend, with no clarification from the government to justify the imposition thus far. This also spooked the investors, he added.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 2.12 percent or 714.14 points to close at 32,958.35 points level. KSE-30 shares index followed suit with a low of 2.26 percent or 360.85 points to end at 15,574.00 points level.

Of 321 active scrips, 33 moved up, 278 retreated, and 10 remained unchanged. The ready market volumes stood at 69.191 million shares, as compared with the turnover of 55.509 million shares in the previous session.

Analyst Ahsan Mehanti from Arif Habib Corporations said, “Panic gripped investor sentiments as they weighed the financial impact of the Reko Diq, $5.8 billion penalty, verdict on Pakistan.”

Also, falling rupee parity, uncertainty over the central bank’s policy rate statement (due today), and dismal $1.7 billion foreign direct investment numbers for FY19 played a catalytic role in the bearish close, he added.

Analysts expect the central bank to increase the interest rate by 50-150 basis points in today’s (Wednesday) meeting to tame inflation during the current fiscal year.

Only few hoped that the interest would not go up as the government has already raised the interest rate by 150 basis points; one of the actions taken before the IMF board approval, a leading analyst said.

After factoring in the increased gas and electricity tariffs, which were raised starting July 1, the inflation numbers next month would possibly hit the double digit level, the analyst added. To counter that the State Bank of Pakistan would likely increase the interest rate, but it would make severe dents in the industrial cycle as well as the economy, where the numbers were already not encouraging.

An analyst from BMA Capital Management said that lower than expected interest rate hike (expectation of one percent hike) and any positive development from Imran Khan's visit to US could act as key triggers in the sessions ahead.

The highest gainers were Atlas Honda Limited, up Rs14.94 to close at Rs319.94/share, and Hinopak Motors, up Rs8.50 to finish at Rs310.00/share.

Companies that booked highest losses were Sapphire Fiber, down Rs23.69 to close at Rs1,011.31/share, and Service Industries Limited, down Rs20.00 to close at Rs455.00/share.

Maple Leaf recorded the highest volumes with a turnover of 5.546 million shares. The scrip lost Rs1.1 to close at Rs21.02/share.

The lowest volumes were witnessed in Fauji Foods Limited, recording a turnover of 1.549 million shares, whereas the scrip lost Re1 to end at Rs11.92/share.