The KSE-100 Index dropped by a record 3.6 percent in the week as the Pakistan Stock Exchange (PSX) shedded 1213 points and closed at 32,458 points. As a result of the downfall, the investors lost Rs230 billion. The foreign investors took benefit from the decline and bought shares worth 6.4 million dollars.
According to economic analysts, the stock market witnessed downfall because the State Bank of Pakistan (SBP) increased the interest rates and verdict was announced against Pakistan in the Reko Diq case. On the other hand, the price of the US dollar increased by Rs1.40 against the Pakistani rupee in the interbank market during the week and closed at Rs160.19.
The greenback gained Rs0.95 in the open market against the rupee and was traded at 160.70.
According to currency dealers, the price of the US dollar surged as the demand increased in the market.
Selling pressure in the local bourse intensified further this week. As per expectations the SBP raised the policy rate by 100 bps, settling at 13.25 percent. However the MPS radiated various positive signals that lent weight to the deduction that this may be the final rate hike by the SBP.
Moreover, monetary easing is a realistic possibility in the near future as inflationary pressure in the economy is expected to drastically recede during 2HFY20. In other news, political noise returned following arrest of another ex-PM in an alleged LNG scam. The KSE100 index closed at 32,459 points, declining 1,214 points WoW.
Sector-wise negative contributions were led by i) Oil & Gas Exploration Companies (227 points), ii) Fertilizer (174 points), iii) Commercial Banks (155 points), iv) Power Generation & Distribution (109 points), and v) Textile Composite (82 points). Scrip-wise negative contributions came from PPL (120 points), HUBC (69 points), ENGRO (58 points), OGDC (54 points) and POL (49 points).
Foreign buying was witnessed this week clocking-in at USD 6.44mn compared to a net buy of USD 5.91 million last week. Buying was witnessed in Cement (USD 3.7 million) and Banks (USD 3.2 million).
On the domestic front, major selling was reported by Mutual Funds (USD 19.3 million), however individuals remained net buyers of USD 9.9 million. Average Volumes settled at 106 million shares (up by 107 percent WoW) while average value traded clocked-in at USD 23 million (up by 83 percent WoW).
Other major news: i) Fertilizer prices increased, ii) Agreement with IMF: Government to further increase power tariff by Rs 3.5 per unit, iii) C/A deficit narrows 32pc to $13.5bln in FY19, iv) Interest rate hiked to 13.25pc, highest in eight years, and v) Fitch says IMF bailout deal to weigh on Pakistan’s growth.
Moreover, the scheduled visit of Prime Minister Imran Khan to meet US President Donald Trump next week will send positive signals to investors of share market. The PM is expected to meet President Trump next week for a reset in bilateral ties which is likely to play a pivotal role in rejuvenating sentiments of investors.
Moreover, arrest during the outgoing week of a leader of a proscribed organization has sent a positive signal to the international fraternity about Pakistan’s seriousness to address global pressure to dismantle terror networks and this should have a positive bearing on the FATF review in October.