Stocks spooked by spectre of mini-budget amid rate hike buzz

Stocks fell on Thursday as jitters over new taxation measures, likely to be introduced through a so-called mini-budget, mounted selling pressure in most of the products-driven sectors, amid renewed fears of a further tightening of counter-inflation monetary stance, dealers said.

At Pakistan Stock Exchange (PSX), benchmark KSE-100 shares index lost 0.39 percent or 159.84 points to close at 40,724.40 points, whereas KSE-30 shed 0.41 percent or 77.27 points to end at 18,713.45 points.

Ahsan Mehanti from Arif Habib Corporations said, “Stocks closed bearish on investor concerns over dismal data on petroleum products’ sales, weak financial results in cements, autos, and higher CPI (consumer price index) inflation in Jan 2020”.

“Banking sector outperformed on strong financial results and Moody’s stable outlook on Pakistan Banks.” Foreign outflows, weak global crude oil prices and worries over likely tougher IMF third review amid government’s revenue shortfall led to the losses, Mehanti added.

Of 349 active scrips, 137 gained, 194 lost, and 18 ended unchanged. Volumes receded to 127.803 million shares, compared to 146.091 million in the previous session.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said the market declined with low volumes. “Increase in cut off yields on PIBs (Pakistan Investment Bonds) made an adverse impact on the sentiment of the market players.”

On the other hand, reports of revenue shortfall in the seven months and yet another revision of the revenue target for overall fiscal year sent out a depressing message for stocks, Ahmad said.

“Fears loom large that the central bank may scale up interest rate to counter a runaway inflation,” he added. The index touched the day-high of 41,162 points by midsession, but selling from financial institutions and some leading insurance and banking companies dragged it down in the latter half.

A leading trader said as expected equities showed dull performance due to lack of clarity on future of gas prices and taxation measures to be introduced after ongoing IMF review. “There are expectations of a mini-budget after IMF review which could keep inflation expectations on the higher side, shelving a monetary easing,” the trader said.

He added the PIBs yields also inched up in the auction held on Tuesday, which could keep investor sentiment in check in the coming weeks as it might lead to an increase in NSS (National Savings Schemes) rates, due to announced by end of this month.

Despite increase in crude oil prices that snapped almost a five session-decline, the oil and exploration sector showed weak performance.

Arif Habib Limited in a market roundup said, “The market opened on a positive note and went up by 278 points during the session, mainly owing to oil & gas sector scrips, E&P (exploration and production and OMCs (oil marketing companies)”. International crude oil prices prompted investors to build positions in oil and gas chain, brokerage house added.

Sapphire Fiber, up Rs44.89 close at Rs793.20/share, and Pakistan Tobacco, up Rs40 to finish at Rs2,040/share, were the top gainers of the day, while Service Industries Limited, down Rs30.90 to close at Rs900.05/share, and J.D.W. Sugar, down Rs19.74 to close at Rs309.27/share, ended up as the major losers.

Hascol Petroleum emerged as the volume leader with a turnover of 11.323 million shares; however, it lost Rs1.51 to end at Rs24.18/share. Pakistan International Bulk’s volumes were the lowest at 3.226 million shares, but the scrip gained Rs0.02 to end at Rs11.17/share.