PSX hurt after MSCI kicks it downstairs

KARACHI: Stocks wilted on Wednesday on pessimism after MSCI Inc kicked the country’s capital market downstairs to frontier market amid persistent rupee rout, traders said.

Pakistan Stock Exchange's (PSX) benchmark KSE-100 Share Index lost 333.25 points or 0.71 percent to end at 46,396.71 points, checking a day high of 46,875.05 points and a low of 46,307 points.

Ahsan Mehanti, an analyst at Arif Habib Com, said, stocks fell across the board after MSCI downgraded to frontier market reclassification with a thin weight of 1.9 percent.

Rupee instability and investor fears over probable foreign outflows following the MSCI downgrade weighed the stocks down, he said. KSE-30 Shares Index also dropped 187.41 points or 1.00 percent to 18,559.63 points, following the benchmark.

Traded shares increased 54 million to 477.86 million from 423.75 million shares. Trading value grew to Rs14.69 billion from Rs11.28 billion. Market capital, however, decreased to Rs8.159 trillion from Rs8.218 trillion. Out of 524 activities in the session, 160 posted gains, 344 losses, while 20 remained neutral. Muhammad Arbash at Topline Securities said after a slight positive opening the index came under pressure as MSCI downgraded Pakistan from emerging markets to frontier market, which led to an intraday low of 402 points.

Major stock negativity was witnessed from LUCK, ENGRO, and OGDC, which collectively dented the Index by 171 points.

The highest increase was recorded in shares of Nestle Pakistan, which rose Rs90.75 to Rs6,164.50 per share, followed by Allawasaya Tex that lost Rs81.39 to close at Rs1,166.71 per share. Rafhan Maize was the worst hit stock as it fell Rs280 to Rs11,000 per share, followed by Sapphire Textile that dropped Rs40 to Rs1,050 per share.

Analysts said the MSCI downgrade had a negative impact on the sentiment of investors, who were already expecting such a decision.

MSCI’s conclusion follows feedback received from market participants from its recent Consultation on a market reclassification proposal for the MSCI Pakistan Index.

The top global index provider will reclassify the MSCI Pakistan indexes from emerging markets to frontier markets in one step, coinciding with the November 2021 Semi-Annual Index Review (SAIR).

Based on a simulation using pro forma data as of August 31, 2021, this would lead to the inclusion of four securities in the MSCI Frontier Markets Index with an estimated index weight of 1.90 percent.

There has been an impact on the foreign inflows as foreigners have sold equities worth $730 million (net) since Dec 31, 2019, and $159 million (net) this year already.

“We expect the selling pressure from foreign funds to persist till at least November 2021, and may ease off post the rebalancing,” said Syed Atif Zafar, an analyst at Topline Securities. Zafar said the reclassification to the frontier market might turn out to be beneficial for Pakistan in terms of a reduction in foreign selling.

TPL Corp Ltd led the volume chart with 39.04 million shares. It gained 24 paisas to rerach Rs25.52 per share. Telecard Limited was the second most traded name with 37.42 million shares. It also closed Rs1.54 higher to reach Rs23.11 per share.

Stocks that recorded significant turnover included Ghani Global Holdings, PIAC (A), PTCL, TPL Properties, K-Electric Ltd, Azgard Nine, WorldCall Telecom and Kohinoor Spinning.

Turnover in the future contracts rose to 126.65 million shares from 98.81 million shares traded in the previous session.