Widening trade deficit and expectation of higher interest rates trigger broad sell-off in stock market
The Pakistan Stock Exchange (PSX) witnessed the third largest decline ever in terms of index points and the worst trading session since March 24, 2020 on Thursday, with the benchmark KSE-100 Index nosediving 2,134.99 points (-4.94 percent) to close at 43,234.15 points.
Lofty import figure of around $8 billion for November and a spike in yields of treasury bills shattered investor sentiments and renewed fears of a steep hike in the benchmark interest rate on December 14 and aided the sell-off at the bourse. The market opened on a negative note and free fall continues till the end of the session.
The KSE-100 Index moved in a range of 2,281.67 points, showing an intraday high of 45,369.14 points – the last day closing point – and a low of 43,087.47 points. Among other indices, the KSE All Share Index shed 1,324.99 points (-4.28 percent) to close at 29,628.67 points, while KMI All Share Islamic Index shed 1,079.91 points (-4.87 percent) to close at 21,075.02 points.
A total of 366 companies traded shares in the stock exchange, out of them shares of 18 closed up, shares of 335 closed down while shares of 13 companies remained unchanged. Out of 96 traded companies in the KSE-100 Index, one closed up, 93 closed down and two remained unchanged.
The overall market volumes increased by 145.68 million to 386.75 million shares. Total volumes traded for the KSE-100 Index increased by 128.4 million shares to 213.44 million shares. The number of total trades increased by 36,856 to 131,783, while the value traded increased by Rs4.84 billion to Rs14.06 billion. However, overall market capitalisation decreased by Rs332.27 billion.
Among scrips, WTL topped the volumes with 33.02 million shares, followed by DCR (29.58 million) and BYCO (22.83 million). Stocks that contributed significantly to the volumes include WTL, DCR, BYCO, UNITY, and GTECH, which formed around 31 percent of total volumes.
The major sectors taking the index toward south were commercial banks with 360 points, cement with 314 points, oil & gas exploration companies with 240 points, technology & communication with 212 points and fertilizer with 204 points.
The most points taken off the index were by LUCK which stripped the index of 150 points followed by SYS with 119 points, HUBC with 101 points, HBL with 91 points and PPL with 77 points. No sector took the index towards the north.
According to experts, the market expects the import number for the past month would widen the ballooning current account deficit.Similarly, a surge in yields of T-bills on Wednesday’s auction signalled further monetary tightening by the State Bank of Pakistan in the forthcoming monetary policy announcement on December 14, 2021. These two factors jointly hammered the bourse and sparked profit booking from investors who rushed to safeguard their positions. Resultantly, the stock market witnessed the largest single day decline on March 24, 2020.
On the other hand, the rupee failed to take a breather and sank to a new all-time low value against the US dollar. The development triggered panic in the market and fears of imported inflation supported bearish trading.
Arif Habib Limited in its closing note said that the cut-off yield on six-month T-bills spiked to 11.5 percent on Wednesday’s auction compared to 10.1 percent in the previous auction which took place before the announcement of monetary policy. The increase indicates yet another hike in the benchmark interest rate by the State Bank of Pakistan in the upcoming monetary policy during mid-December, it said.It said the market experienced the third largest decline (2,135 points) ever in terms of index points.