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Saturday July 02, 2022

Another day of mayhem at stock market

The rupee dropped to a new record low, sliding 0.85 percent against the dollar. In the interbank market, the rupee closed at 194.18 to the dollar, compared with Friday’s close of 192.53

By Our Correspondent
May 17, 2022
Another day of mayhem at stock market. Photo: The News/File
Another day of mayhem at stock market. Photo: The News/File

KARACHI: Stocks and rupee both took a tumble on Monday as uncertainty grew over the government's economic plans to restart a stalled IMF programme and fear of more confusion sent investors scurrying for safety in assets like gold.

Dealers said Shehbaz Sharif’s government is yet to implement economic policies such as curtailing costly energy subsidies, introduced by the ousted PTI government in its last days. They added that the government’s reluctance to withdraw the subsidies as agreed with the IMF is worsening the situation.

The rupee dropped to a new record low, sliding 0.85 percent against the dollar. In the interbank market, the rupee closed at 194.18 to the dollar, compared with Friday’s close of 192.53. Since the arrival of the new government, the domestic currency has fallen by 11.07 rupees. The rupee also ended an all-time low of 196.50 per dollar in the open market. It finished at 194.70 in the previous session.

An exchange company official said PM Sharif also expressed concern over the rising value of the dollar in the foreign exchange market. Malik Bostan, president of Forex Association, said the dealers told PM Sharif in a meeting that trade deficit, delay in tranche loan from the IMF, political instability, excessive borrowing were reasons for rupee depreciation.

"Importers are opening more Letters of Credit (LC) while exporters' inflows are low due to which demand in the interbank market has increased and supply has decreased," Bostan told the Zoom meeting with the PM.

"Exchange companies are not increasing the dollar rates and dollar rate in the free market cannot be reduced until the dollar rate in the interbank market is reduced."

The Pakistan Stock Exchange's (PSX) benchmark KSE 100-share Index shed 1.88 percent or 819.14 points to close almost at 17 months low of 42,667.32 points. Traded shares increased by 42 million shares to 250.446 million shares from 208.112 million shares. The trading value rose to Rs8.908 billion from Rs6.972 billion. Market capital shrunk to Rs7.076 trillion from Rs7.199 trillion.

Sectors contributing to the index performance include banks (down 171.9 points), cement (fell 125.1 points), E&P’s (shed 110.1 points) and technology (lost 108.1 points).

Gold prices jumped Rs700 per tola to reach another all-time high level Rs136,600. Analyst Khurram Schehzad at Alf Beta Core said a lack of clarity on the new government’s economic plan and the rising political temperature are badly affecting stocks.

"Investors expected some decisions (on adjustment in petroleum prices) yesterday. Need to move fast and take the markets and investors into confidence if there are any alternate plans, otherwise, the outcomes are scary," Schehzad said.

Analysts said fears of the country's sovereign rating being downgraded also weighed on the local unit. "There will be soon a ratings downgrade from international rating agencies, which will impact our global bonds, interest rates and debt-taking ability," Schehzad added.

Brokerage Arif Habib Ltd in a post market note said the benchmark index “witnessed a bloodbath session, selling spree continued across the board which pulled the market in the deep red zone as prevailing political uncertainty and rupee depreciation again stripped investors' confidence which translated into panic selling."  

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