Stocks crash as economic worries grip investors

KARACHI: Stocks on Thursday recorded their worst single-day fall in more than 20 months, with investors stuck in a selling frenzy over economic fallout from ballooning trade deficit and scares of another rate hike, dealers said.

“It was a ‘Black Thursday’ for the country’s capital market that suffered its third largest one-day loss ever,” a dealer said.

With a loss of 2,134.99 points or 4.71 percent, benchmark KSE-100 Shares Index plunged to 43,234.15 points at Pakistan Stock Exchange (PSX), testing a day high and a low of 45,369.14 and 43,089.07 points, respectively.

Khurram Schehzad, chief executive officer at Alpha Beta Core, said the decline of 2,135 points, the largest fall in the calendar of 2021, caused about $1.9 billion losses to investors.

“Among other reasons for this decline are massive November import bill and surprising increase in the secondary market interest rates under the IMF (International Monetary Fund) programme,” It was the third-largest decline in a session, Schehzad said.

Analysts said expectation of further monetary tightening and an expected all-time high current account deficit sparked panic selling across the board.

Zafar Moti, former director PSX, said capital market suffered a massive tragedy.

“There were talks about mini-budget and FBR (Federal Board of Revenue) chairman also gave a statement on it. Besides, T-bill options and concerns

ahead of next monetary policy meeting, seen increasing discount rate by above 125 basis points, affected the sentiment,” he added.

“Lower locks mechanism kicked in and the whole market was about to be closed for an hour but some scrips survived.”

Ahsan Mehanti, at Arif Habib Corp, said, stocks closed record lower on concerns over a sharp rise in T-bill and PIBs (Pakistan Investment Bonds) yields, $32.851 trade deficit for Jul-November 2021 widening by 68.6 percent, weak global equities, and slump in global crude oil prices.

“Rupee instability, NEPRA approval of hike in power tariff, uncertainty ahead of approval over terms of resumed IMF programme contributed to record fall.”

In line with the overall bearish trend, KSE-30 Shares Index also dropped 877.90 points or 4.99 percent to 16,697.96 points.

Traded shares, however, increased 145 million shares to 386.75 million shares from 241.06 million shares, while trading value rose to Rs14.06 billion from Rs9.22 billion. Market capital decreased to Rs7.418 trillion from Rs7.750 trillion. Out of 365 companies active in the session, 16 posted gains, 338 losses, while 11 remained unchanged.

Brokerage Topline Securities in a note said equities suffered a massive bloodbath during the session.

The market opened on a negative note making an intraday low of 2,282 points as investors were concerned over multiple things like soaring trade deficit and higher than expected secondary market yields, the brokerage said.

Sector-wise, cements were major laggards in the trading session as LUCK, MLCF, DGKC, CHCC closed at their respective lower circuits. Further, technology, energy, and fertilisers sector followed suit dragging the index further down.

The highest increase was recorded in shares of Unilever Foods, which rose by Rs1400 to Rs20,400 per share, followed by Shield Corp. that increased by Rs19.31 to Rs293.77 per share.

A major decline was noted in shares of Nestle Pakistan, which fell by Rs171.54 to Rs5,350 per share, followed by Rafhan Maize that decreased by Rs124 to Rs9,775 per share.

Arif Habib Ltd (AHL), a brokerage house, said the bloodbath struck as investors were unable to digest a series of outrageous economic indicators.

“First of all, highest ever monthly trade deficit number of $5.1 billion as exports clocked in at $2.9 billion and imports $8.0 billion. Secondly, the expectation of interest rate increase in the upcoming monetary policy as 3-month T-bill cut-off yields increased 229 basis points to 10.79 percent, 6-month at

11.50 percent, and 12-month paper’s yield came in at 11.51 percent,” the brokerage said.

It added that another factor that contributed to the slump was the expectation of a higher CPI (Consumer Price Index) number next month due to the low base effect and further devaluation of the rupee.

“Most stocks closed on their lower circuit and moving forward, we expect the market to remain volatile and recommend a cautious approach,” said AHL the report.

WorldCall Telecom was the volume leader with 33.01 million shares, followed by Dolmen City that recorded a turnover of 29.58 million shares.

Turnover in the future contracts increased to 88.11 million shares from 72.31 million shares.