Stocks slump on economic team shakeup hearsays

Stocks on Monday plummeted to over a two-month low in scare-selling as investors were hit by the market talks that the country’s economic team was on the verge of yet another shakeup, dealer said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index lost 2.11 percent or 846.93 points to close at 39,296.70 points level, whereas KSE-30 suffered a blow of 1.97 percent or 363.86 points to end down at 18,090.65 points level. The last time the index closed at this level was on November 29, 2019.

Rumours were doing rounds that Governor State Bank of Pakistan Reza Baqir, and Adviser to Prime Minister on Finance Abdul Hafeez Shaikh were being removed. Later, media quoted sources as saying that Baqir and Shaikh were not leaving their posts.

Analyst Ahsan Mehanti from Arif Habib Corporation said, “Panic gripped investors amid rumours that prevailed at the PSX during Pakistan-IMF review talks ahead of release of next tranche”.

Investor concerns over slump in global stocks and crude oil prices, foreign outflows, dismal data on exports, high CPI (consumer price index) inflation for January 2020 weighed heavy on the equities, Mehanti added.

As many as 357 stocks were active in the day, of which 41 gained, 300 lost, and 16 ended neutral. Volumes were down at 180.766 million shares, compared to 193.536 million shares in the previous session.

Shahab Farooq, director research at Next Capital, said “Concerns continue on the IMF front with expectations of a mini-budget before the announcement of the annual budget for FY21 with increased tax incidence”.

Moreover the expectations of continued inflationary pressures were keeping the market lower, Farooq said. “Activity, however, remains very thin,” he added.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said, “The continuous decline in the world capital markets and crude oil prices transpired into the domestic market as well, trimming share values by a bigger margin”.

Furthermore, worries that IMF’s being critical of the tax collection that had been been falling short of the target may push the government to impose new taxes to bridge the gap, Ahmad said.

“The FATF (Financial Action Task Force) meeting ahead this week will be crucial for the market as well as for the overall country’s economy,” he said.

A dealer said the PSX as expected fell sharply because of IMF’s coming down hard on Pakistan for not being able to meet the given revenue collection target for seven months, which would result in the full year collection falling short by a mammoth Rs750 billion, leading to imposition of fresh taxes.

“Moreover, there were rumours that the financial management team [of the government] might see some changes, which would be second in just 18 months, sending negative signals to the market persons,” the dealer said.

Arif Habib Limited in a note said, “Inflationary pressures, political wrangling and in-progress normalisation of inverted yield curve proved detrimental to investor sentiment, as a result the market nosedived from 43,800 to 39,300 (a loss of 4500pts in general)”.

Top gainers of the day were Pakistan Tobacco, up Rs122.40 close at Rs2,162.40/share, and Unilever Foods, up Rs100 to finish at Rs7,800/share.

Nestle Pakistan, down Rs477 to close at Rs7,473/share, and Rafhan Maize, down Rs217.33 to close at Rs6,555/share were the major losers of the day.