Stocks Plunge 1,335 Points After Rupee Devaluation, Rate Hike

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Stocks plunge suffered the worst single-day decline of 1,335 points (3.30 per cent) in 16 months and closed at 39,160.60 on Monday.

The broad-based equities collapse wiped out PKR 241 billion from shareholders’ wealth. Investors freaked out of equities right from the start, marking the fifth week of stocks rout in a row.

Fragile investor sentiments over the depleting foreign exchange reserves and lack of clarity on balance of payment position were shattered further by the bewildering episodes witnessed last week.

The whopping 150 basis points hike in policy rates by the State Bank against market consensus anticipation of 100bps; the shaky rupee and volatile commodities prices in international market had already clouded the market outlook. Investors’ fears were exacerbated by the huge foreign selling of stocks worth $32.6 million due to MSCI re balancing on Friday.

A visibly worried trader mumbled that the benchmark index had caved in by 3,286 points or 7.7 percent in 72 trading sessions since the incumbent government took oath to run the affairs of the state.

Although the stock market plunge succumbed to enormous selling pressure on Monday, PSX Managing Director Richard Morin assured that the risk management measures were in place as always; nothing unusual was reported on the broker settlement or default.

Traders said that the investors jettisoned shares and sought the safety of fixed income assets in a bid to improve risk profile. Amjad Waheed, CEO of NBP Funds — the country’s biggest mutual fund with PKR 115 billion under management — asserted that 5-10 percent of unit holders may have switched to money market funds from equity in the last one year, but on Monday it was business as usual with no run on redemption.

While none of the sectors at the bourse managed to close in green, as many as 88 stocks closed at their ‘lower circuits’ — the maximum permissible 5 percent decline in share price over the earlier session. Sector-wise, fertilizer, commercial banks and cement took the brunt of the blow as they contributed 629 points to the index decline.

Figures released by the National Clearing Company showed a surprise $0.3 million stocks buying by foreign investors. Major selling of $5.86 million came from mutual funds and $3.40 million from the brokers’ proprietary trading. Banks absorbed $2.16 million of selling and insurance companies $.5.22 million.

Traded volume dipped 39 percent to 164 million shares while traded value declined 73 percent to $47 million. Scrip-wise, major decliners were Engro Corporation, down 4.95 percent, Habib Bank 3.90 percent, Fauji Fertilizer 4.99 percent, Lucky Cement 5 percent and Hub Power 4.45 percent, erasing 384 points.

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