PSX hits nine-month low after Shehbaz's arrest
Meltdown in the market was attributable to a number of negative news
KARACHI (Dunya News) – The capital market on the last session of the week recorded hefty decline and reached to almost nine month low mark with red signs dominated the proceedings where index plunged by 2.1 percent with political temperature to rise after NAB’s move to arrest former chief minister of Punjab Shahbaz Sharif.
Hamad Aslam, director research of Elixir Securities said that onslaught in the market continued as investors remained gloomy due to lack of clarity from the government on how it plans to tackle the Balance of Payment crisis.
Harsh statements from IMF on the requirements to significantly depreciate Pak Rupee and increase interest rates also dented sentiments for investors who eagerly await announcement of Pakistan’s entry into the IMF Program.
During the second half of the day, ex- Punjab CM Shehbaz Sharif’s arrest by the National Accountability Bureau (NAB) added fuel to the fire.
Resultantly, the market closed down at 39,226 (lowest level since December 21, 2017), registering a decline of 2.1 percent for the day –biggest since July 9, 2018.
“We believe selling in the market will continue for now, amidst expected slowdown in GDP Growth, decline in real corporate earnings and increasing returns on competing asset class i.e. fixed income instruments (due to hikes in interest rates)” Hamad Aslam said.
“Meltdown in the market was attributable to a number of negative news. First, OGRA finally announced a gas tariff hike. On top of that, IMF mentioned in its Thursday night s press release that Pakistan needs to further hike gas and electricity tariffs”, said Shumaila Badar head of research of Ismail Iqbal Securities.
IMF also said that further flexibility in exchange rate and tightening in monetary policy was needed to resolve the issues facing Pakistan. All of these suggestions created panic in the market as investors fear tough measures to resolve the current account and fiscal deficit will hamper economic growth in the medium term, she said.
Furthermore, foreign exchange reserves slipped to $14.9 billion last week, which is the lowest level since December 2014. Another reason for the meltdown today was the arrest of the National Assembly Opposition Leader by NAB.
– Details by Haris Zamir
