Benchmark index dives 1,336 points to below 28,000 despite policy rate cut
Stocks came in for heavy battering on Wednesday as the benchmark KSE-100 index slumped nearly 5% during intra-day trading with no respite from the spreading coronavirus in the country and across the world.
Pakistan Stock Exchange (PSX) suspended trade for two hours after the market fell to a multi-year low below 27,500 points. The slump was triggered by continued panic selling as investors weighed the economic impact of the industrial lockdown in almost the entire country.
Moreover, the absence of any concrete policy action to provide relief for the stock market, contrary to the expectation of investors, particularly the small players, pushed the index deep into the red zone.
The market faced selling pressure across the board despite the announcement of a financial support package worth Rs1.2 trillion by the government and a significant reduction of 150 basis points in the policy rate that reached 11%.
At close, the benchmark KSE-100 index recorded a decrease of 1,336.03 points, or 4.68%, to settle at 27,228.80.
“An interest rate cut is normally a cause for celebration for the stock market. However, this time the measure failed to address coronavirus fears amongst investors and the market traded sideways without looking at the other side since the start,” Next Capital Head of Foreign Sales Faizan Munshey said.
He said the market may maintain the downturn as long as the pandemic continued to take its toll on people and businesses.
Arif Habib Limited, in its report, stated, “During the last two consecutive sessions, the KSE-100 declined by 3,459 points (-11.3%), which is the highest two-day decline in history. However, it is the largest two-day decline in percentage terms since October 12, 1998 (-11.4%).”
The market registered the eighth halt to trading on Wednesday, which occurred at 12:20pm when the index was trading down 1,270 points.
“The market opened on a positive note with +100 points and trading in 4.35 million shares, which was primarily the result of a relief package announced by the prime minister on Tuesday,” it said. “The eventual decline in the index is explained by non-decisiveness on the part of government on incentives for the market, which the investors look forward to, pertaining to capital gains tax or a similar relief.”
Meanwhile, stocks that contributed significantly to the volumes include Maple Leaf Cement, K-Electric, The Bank of Punjab, Unity Foods and Fauji Cement, which accounted for 33% of total volumes.
Overall, trading volumes increased to 145.1 million shares compared with Tuesday’s tally of 98.8 million. The value of shares traded during the day was Rs5.5 billion.
Shares of 298 companies were traded. At the end of the day, 79 stocks closed higher, 205 declined and 14 remained unchanged.
Maple Leaf Cement was the volume leader with 14.5 million shares, losing Rs1.39 to close at Rs17.31. It was followed by K-Electric with 11.6 million shares, gaining Rs0.13 to close at Rs2.78 and The Bank of Punjab XD with 7.9 million shares, increasing Rs0.06 to close at Rs7.07.
Foreign institutional investors were net sellers of Rs779.4 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.