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November 22, 2019

Stocks plumb 2.46pc as interest rate cut seems unlikely


November 22, 2019

The capital market declined 2.46 percent on Thursday, as rising treasury bill yields convinced the investors that the central bank would likely maintain status quo on interest rates in its upcoming policy announcement, dealers said.

Analyst Ahsan Mehanti at Arif Habib Corp said stocks fell sharply lower on institutional selling amid policy uncertainty ahead of the State Bank of Pakistan (SBP) policy statement on Friday (today).

“Global equity selloff, expectations for a status quo in the SBP policy rates announcement and concerns over economic uncertainty played a catalytic role in the bearish close,” he added.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index shed 2.46 percent or 936.37 points to close at 37,101.31 points level. KSE-30 shares index followed suit and lost 2.59 percent or 454.27 points to close at 17,106.81 points level.

As many as 384 scrips were active of which 69 advanced, 304 declined, and 11 remained unchanged.

The ready market volumes stood at 232.569 million shares as compared with the turnover of 327.637 million shares a day earlier.

Analyst Maaz Mulla at JS Global Capital said, “Market came under pressure as Wednesday’s treasury bill auction (three months and one year) saw yields increase, which suggested that the SBP might adopt a status quo stance in its Monetary Policy Committee meeting.” Topline Securities in its post-market note said the index recorded the highest decline in terms of points in the fiscal year till date. In the treasury bill auction, yields have increased by 30bps in three-month, and 46bps in 12-month bills owing to higher expected CPI inflation, which has further reinforced the market consensus that policy rate cut was unlikely in the upcoming MPS, the brokerage house said.

Financials were the major laggards, where Meezan Bank and National Bank closed on the lower circuit.

Among E&Ps, Pakistan Petroleum Limited went down 2.4 percent, Pakistan Oilfields fell 2.4 percent, while Oil and Gas Development slipped lower by 1.3 percent.

Further, Engro was down 2.5 percent and Fauji Fertilizer closed 2.1 percent lower, exerting pressure on the index. In cements, DG Khan Cement, Kohat Cement, and Lucky Cement closed lower too.

An analyst from Arif Habib Limited said news of implementation of Axle Load policy as directed by Islamabad High Court broke the day, post market opening, which impacted cement and steel stocks. “Selling pressure kept building up with investors concerned about growing political wrangling. Index heavyweights took the toll, which caused panic among investors,” the analyst added.

Moving forward, analysts believe the market would remain under pressure as investors were convinced there would be no reduction in the policy rates.

Companies reflecting highest gains included Nestle Pakistan, up Rs96.99 to close at Rs6,321.99/share, and Island Textile, up Rs69.90 to close at Rs1,560/share.

Companies reflecting most losses included Unilever Foods, down Rs345 to close at Rs6,900/share, and Colgate Palmolive, down Rs89.99 to end at Rs1,850.01/share.

Highest volumes were witnessed in K-Electric with a turnover of 12.131 million shares. The scrip shed 14 paisas to close at Rs4/share.

Pak Elektron was second with a turnover of 10.32 million shares. It shed Rs1.12 to close at Rs22.39/share. TRG Pak was third with a turnover of 9.512 million shares. It shed Rs1.15 to finish at Rs21.85/share.