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July 19, 2019

Stocks decline 2 percent on political, economic uncertainty


July 19, 2019

Stocks declined two percent on Thursday, as political uncertainty on arrest of opposition leaders and economic uncertainty on budgetary measures spooked investors, which triggered selling pressure from financial institutions and mutual funds, dealers said.

Salman Ahmad, head of institutional sales at Aba Ai Habib said, “The market went down as investors showed late reaction to increase in benchmark interest rate, moreover increase of electricity rate also sparked downward trend.”

Following the breaching of 32,800 levels, selling pressure was imminent. On Wednesday, the market had gotten support from some financial institutions whereas on Thursday it lacked support, which reduced the daily volume further erasing share values, Salman added.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 2.04 percent or 672.45 points to close at 32,309.54 points level. KSE-30 shares index followed suit with a low of 1.95 percent or 303.88 points to end at 15,274.54 points level.

Of 320 active scrips, 29 moved up, 275 retreated, and 16 remained unchanged. The ready market volumes stood at 87.413 million shares, as compared with the turnover of 111.558 billion shares in the previous session.

Analyst Ahsan Mehanti from Arif Habib Corporation said, “Stocks fell across the board on investor concerns over political uncertainty.” Upbeat data on $13.6 billion current account deficit contracting by 32 percent in FY19 and renewed hopes over positive outcome of Prime Minister Imran Khan’s visit to United States had invited midsession support.

However, concerns over weak global crude oil prices and global equity selloff played a catalytic role in the bearish close, he added. The share market remained under a strong bearish spell, where the index lost two percentage points on political worries on talks that several key members of political parties would likely be arrested in alleged corruption cases.

Another factor that forced the market to land in the negative zone was the continuous selling from financial institutions, especially mutual funds. According a leading analyst, a number of mutual funds have been suffering from redemption calls, forcing funds to sell their stocks to meet the requirement. A leading trader said the market also suffered because of the increase in three months, six months and one year tenor by almost one percent, as one year cut-off yield now stands around 14.10 percent, which hints at another interest rate hike in the next meeting after two months.

These developments spooked investors, who feel uncertain now despite the positive statement from the governor of the State Bank of Pakistan, he added. The highest gainers were Pakistan Hotels, up Rs8.78 to close at Rs184.53/share, and Al-Abbas Sugar, up Rs8.36 to finish at Rs189.97/share.

Companies that booked highest losses were Nestle Pakistan, down Rs300.00 to close at Rs6,800.00/share, and Indus Motor Company, down Rs43.54 to close at Rs1,074.44/share. TRG Pakistan Limited recorded the highest volumes with a turnover of 8.586 million shares. The scrip lost Rs0.97 to close at Rs12.67/share. The lowest volumes were witnessed in Sui Northern Gas Company, recording a turnover of 2.237 million shares, whereas the scrip lost Rs3.25 to end at Rs61.92/share.

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