Stocks dive deeper into red on SBP autonomy push

Stocks suffered more blows on Tuesday as the politically beleaguered government’s decisions to cut central bank’s strings and deny tax concessions to companies sparked a massive selloff, dealers said.

Pakistan Stock Exchange’s (PSX) KSE-100 Shares Index slumped 1.84 percent or 828.15 points to close at 44,222.91 points. Daily traded volume and value clocked in at 492.285 million shares (up 7.06 percent DoD) and Rs23.43 billion (down 5.33 percent DoD) respectively.

Toplline Securities attributed this bloodbath to the SBP (State Bank of Pakistan) autonomy bill, withdrawal of income tax exemptions, and rising bond yields.

Investors focus remained on the upcoming monetary policy expected to be announced in the latter half of this month after which UBL, MCB, HBL & BAHL closed the day in the green and positively contributed ~47pts to the benchmark index, the brokerage added.

KSE-30 Shares Index lost 1.59 percent or 300.13 points to close at 18,570.60 points.

“The cabinet has given approval to remove corporate tax exemptions to recover Rs150-200 billion in coming months,” an analyst at Pearl Securities said.

“Meanwhile, mutual funds redemption continues to exert selling pressure across the board,” he added.

As many as 419 scrips were active, of which 58 advanced, 343 declined and 18 remained unchanged.

Saeed Khalid at Shajar Capital said market plunged tracking the Asian equity selloff amid escalating political turmoil in the country.

“The benchmark index slumped 1,105 points during the day mainly due to aggressive selling in construction and power sector.”

Despite news about rising OMCs margins by the ECC along with the recovery in the international crude oil prices, heavy selling was witnessed in the oil scrips mainly on the profit taking activity, Khalid said.

Similarly, Khalid said fears of tax reversals/new taxes in Money Bill approved by the Prime Minister may also dampen market sentiment as investors await full and final impact of government measures to increase taxation.

Ahsan Mehanti at Arif Habib Corp said stocks closed lower on economic uncertainty and rising political noise.

Speculations on likely surge in SBP policy rate on higher CPI inflation and uncertainty over outcome of IMF conditions to restrict current circular debt, limit fiscal deficit at 7 percent, and hike in government bond yields proved a disastrous for stocks, Mehanti added.

Maaz Mulla at JS global Capital said the carnage was an upshot of likely redemptions in mutual funds.

Mulla said cement sector continued its downward fall where big players lost value to close in the red.

Moving forward, bearish sentiments are expected to persist because of political uncertainty, while potential redemptions in mutual funds are likely to cause further selling pressure.

Bata Pakistan, up Rs102.83 to close at Rs2,132.85/share, and Sapphire Fiber, up Rs43.12 to close at Rs884/share, were the top two gainers of the day.

Unilever Foods, down Rs499 to close at Rs14,000/share, and Nestle Pakistan, down Rs163.33 to end at Rs5,926.67/share, were worst losers.

In terms of trade volume, Ghani Global was on top with 41.23 million shares. The scrip gained Rs1.39 to close at Rs33.95/share. Unity Foods Limited was second with a turnover of 33.33 million shares. It shed Rs2.09 to close at Rs28.87/share. TRG Pakistan was third with 25.52 million shares. It shed Rs8.62 to finish at Rs137.16.