PSX sheds 714 points over monetary policy speculation

Benchmark index decreases 2.12% to settle at 32,958.35

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KARACHI:  The stock market faced heavy selling on Monday and the KSE-100 index nosedived over 700 points, dragged down by speculation about yet another hefty interest rate hike in the monetary policy announcement today (Tuesday). Market talk suggested that participants expected a hike of 100-150 basis points (bps) in the forthcoming monetary policy. On the other hand, the rupee again depreciated against the US dollar, which further dented investor sentiments.

 Earlier, trading began on a negative note and after a short period of stable trading, the KSE-100 index turned bearish and continued to fall throughout the day. Multiple negative triggers including protests by traders over budgetary measures and penalty of around $6 billion on Pakistan in Reko Diq case coupled with rupee depreciation sparked panic selling by investors. All index-heavy sectors closed the day in negative territory.

 Overall, trading volumes increased to 69.2 million shares compared with Friday’s tally of 55.5 million. The value of shares traded during the day was Rs2.36 billion. Shares of 321 companies were traded. At the end of the day, 33 stocks closed higher, 278 declined and 10 remained unchanged.

 Maple Leaf Cement was the volume leader with 5.5 million shares, losing Rs1.1 to close at Rs21.02. It was followed by TRG Pakistan with 5.3 million shares, losing Re1 to close at Rs14.36 and K-Electric with 4.5 million shares, losing Rs0.19 to close at Rs3.81.

 Foreign institutional investors were net buyers of Rs181.4 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan. At the end of trading, the benchmark KSE 100-share Index recorded a decrease of 714.14 points, or 2.12%, to settle at 32,958.35.

 The market saw a significant decline of 750 points during the trading session, which was caused by uncertainty over the monetary policy. As per revised schedule, the State Bank is set to announce the monetary policy on Tuesday where consensus estimate is for a hike of 100bps. An interest rate hike in line with expectations will take the policy rate to 13.25%.

 Economic slowdown amid protests by traders turned investors’ sentiments negative. Major volumes were seen in the cement sector totalling 11.5 million shares, followed by banks (7.5 million) and technology firms (7.2 million). Maple Leaf Cement topped the chart with 5.5 million shares, followed by TRG Pakistan (5.3 million) and K-Electric (3.2 million), the report added.

 The KSE-100 index nosedived to a 39-month low in Monday’s trading session as the benchmark index breached the 33,000-point level and closed with a loss of 714 points or 2.12%. Previously, the index went below the 33,000-point level in March 2016. Equities remained under pressure owing to expected hike in policy rate in the upcoming monetary policy meeting, which is scheduled for Tuesday.

 Street consensus of a 100bps hike in the policy rate will result in a cumulative increase of 750 basis points since January 2018, which will further make equities unattractive as investors will rush towards fixed-income securities.

 Negative sentiment was noted across the board. Out of the traded stocks, over 250 fell where top laggards were Pakistan Petroleum (down 56 points), Hubco (50 points), Engro (47 points), Fauji Fertiliser (46 points) and Oil and Gas Development Company (30 points). However, 35 stocks managed to close positive. Sector-wise, the fertiliser sector erased 135 points from the index, followed by commercial banks and exploration and production companies, which cumulatively removed 198 points.

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