Stocks shed over 3pc on depressing World Bank report

Stocks doubled over on Monday to throw up massive gains as a World Bank report on COVID-19 pandemic’s likely devastating impacts on Pakistan’s economy, sent investors gasping for air in yet another frenzied selling rout, dealers said.

Analyst Ahsan Mehanti from Arif Habib Corporation said, “Stocks closed sharply lower as investors weighed dismal World Bank report forecasting Pakistan’s GDP growth at as low as 1.3 percent and fiscal deficit at 9.5 percent, pressure in oil scrips and industrials, amid slumping global crude oil and falling exports pressuring rupee-dollar parity”.

On the other hand, deepening concerns over a sharp rise in foreign outflows and ongoing rupee instability also brought the stocks under immense selling pressure, Mehanti added. Pakistan Stock Exchange’s (PSX) KSE-100 shares index lost 3.12 percent or 1000.22 points to close at 31,032.99 points level, while its KSE-30, tracking the benchmark index, shed 3.39 percent or 480.95 points to end at 13,724.25 points level.

Of 338 active scrips, 47 moved up, 270 went down, and 21 did not change. Volumes stood at 153.875 million shares, as compared to 127.065 million in the previous session.

Ovais Ahsan, CEO Optimus Capital Management said, “The market lost over 3 percent as investors reacted negatively to a World Bank report warning that Pakistan could face a recession with 2.2 to 1.3 percent contraction in FY20 GDP due to the pandemic”. Moreover, Ahsan said Hub Power hit its lower limit on news that the government would be seeking to renegotiate power purchase agreements with IPPs. “The banking sector was also a major decliner following comments by the SBP governor hinting at further rate cuts as inflation receded,” he added.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said “The World Bank report that the country is heading towards recession and negative growth is likely to be reported in the current fiscal year”. Ahmad added that fiscal deficit was also expected to balloon owing to higher expenditure on measures taken to contain coronavirus pandemic in the country.

“The uncertainty attached with corona also unnerved investors as figures are not flattening and this week is likely to be tough for the financial markets,” he said.

Another factor which dampened sentiments was the OPEC agreement where the production cut was likely to be less, but one thing was certain that a slowdown in the economic activities globally owing to COVID19 had dampened the demand for petroleum products, Ahmad added. Samiullah Tariq, director research at Arif Habib Limited, said “The report that the government has been asked to renegotiate the power purchase agreements weighed on the power producers and other companies belonging to their conglomerates”. Another factor was a small recovery witnessed in the crude oil prices as the cut made by the OPEC was lower than expected, which resulted in selling pressure in the domestic oil and gas exploration stocks, Tariq added. Today’s top gainers were Sapphire Fibre, up Rs45.41 to close at Rs681/share, and Indus Dyeing, up Rs43.81 to finish at Rs641/share.

Nestle Pakistan, down Rs426.50 to close at Rs6,163.50/share, and Bata Pakistan down Rs44 to close at Rs1,315.00/share, emerged as the main losers.

Hascol Petrol recorded the highest volumes with 16.966 million shares and lost Rs0.3 to end at Rs14.85/share.

The lowest volumes were witnessed in Oil & Gas Development Company, recording a turnover of 4.669 million shares, whereas the scrip lost Rs1.18 to end at Rs93.51/share.