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September 29, 2020

Stocks melt 2.3 percent amid rising political heat

Business

September 29, 2020

Stocks on Monday hit a tailspin after the arrest and indictments of leaders of from the two top political parties set off panic-selling at a massive scale as investors fear a government-opposition face-off will be detrimental for economy, dealers said.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 2.30 percent or 960.28 points to close at 40,740.95 points, while volume decreased to 407.194 million shares, compared to 435.017 million shares in the previous session. The capital market was subdued since the opening bell, but selling accelerated following the arrest of opposition leader Shahbaz Sharif. At one stage the market was down in excess of 1,000 points, touching the session low of 40,644 points. Arif Rehman, director research at Fortune Securities, said, “The slide of last week continued with index seeing some more slippages owing to lack of triggers and some developments on the political front”.

“The heightened political noise and call of agitation against the government during the recently held All Parties Conference spooked the sentiment,” Rehman added KSE-30 shares index also sagged 2.01 percent or 354.17 points to end at 17,251.51 points level.

Muhammad Saeed Khalid, head of research at Shajar Capital, said, “The market slumped during the day mainly on political uncertainty, particularly related to the arrest of Shahbaz Sharif arrest in the second half”. “The investors sold aggressively mainly to book capital gains to avoid further downside in the market,” Khalid said.

Trading activity was recorded in 418 scrips, of which 57 gained, 351 lost, and 10 remained unchanged. AA Soomro, managing director at KASB Securities, said, “Political noise dominated as Shahbaz Sharif's arrest jolted investors confidence because a potential tug-of-war between the government and the opposition may worsen the situation”.

"To be fair, the index was ripe for correction after moving +50 percent from the March's bottom. The high beta stocks without short-term earnings visibility are being filtered the most as many companies share prices fell to their near floor values,” Soomro added. "With manageable currency, stable current account deficit, and low interest rate pulling investors in, we believe macro headwinds are not that severe and the market will eventually overcome this in a few days,” Soomro added. Analyst Ahsan Mehanti from Arif Habib Corporation, said, “Stocks closed sharply lower on political uncertainty, surging power tariff impacting industrials”.

Foreign outflows and investor concerns over weak earnings outlook amid falling exports, oil prices, and late session institutional profit-taking on political noise dented the stocks, Mehanti added.

Muzzamil Khan from BMA sales desk said, “The market was down across the board fearing more political uncertainty after PPP leaders Asif Ali Zardari and Faryal Talpur were indicted in a mega money laundering case and the PML-N’s Shahbaz Sharif was arrested by the NAB”. Any dip in the market should be considered as an opportunity to accumulate fundamentally strong scripts, Khan added.

Sapphire Textile, securing Rs42.92 to close at Rs927.99/share, and MithchellsFruit, rising Rs24.51 to finish at Rs351.44/share, were the highest gainers of the day, while Rafhan Maize, down Rs100 to close at Rs8,300/share, and Colgate Palmolive, losing Rs98.99 to close at Rs3050.00/share, ended up as top losers. With 48.688 million shares, Hascol Petrol led the volumes chart, but fell by Rs1.41 to end at Rs20.50/share, whereas PTCL with 10.937 million traded shares was at the bottom, losing Rs0.49 to end at Rs11.20/share.