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Pakistan Stock Exchange records free fall during outgoing week

Dunya News

The index fell by 4.3 percent to close at 39226 points.

ISLAMABAD (Dunya News) – Pakistan Stock Exchange recorded a free fall during the outgoing week where share values reached almost nine-month low mark with recorded a decline of 1,772 points because of rising interest rates, worries on economic scenario, International Monetary Fund (IMF) strong words for the country’s economy and rising political temperature.

The market’s negative movement has been caused due to weak economic indicators, causing investors to panic. Foreign investors chose to move with the market during the week as they trimmed their exposures to turn out as net sellers.

The index fell by 4.3 percent to close at 39226 points, falling below 40000, last recorded in December 2017.

International oil prices soared to 4-year high in the preceding week, ahead of looming impositions of US sanctions on Iran’s crude. With supply not meeting the demand, oil has seen a rally in its prices.

The SBP’s decision to increase the policy rate to 8.5 percent by one percent in their recent monetary policy led to many sectors staying in red throughout the week.

Sectors most affected by the hike in rates were steel, chemicals, cement and fertilizer, whose bottom-lines are expected to shrink due to higher finance costs. They closed down 7.34 percent, 5.54 percent, 6.20 percent and 2.09 percent respectively.

The GoP decided to retract their decision and reinstated the ban on the purchase of properties and vehicles by non-filers. This led to negative sentiments in the automobiles sector, causing it to close down 7.48 percent on weekly basis.

Individually, the automobile scraps turned out among the major losers after Honda Atlas, Indus Motors and Pak Suzuki all closed 12.35 percent, 12.21 percent and 8.87 percent lower respectively.

A looming threat of another round of devaluation and interest rate hike leads us to continue with our cautious stance and recommend investors to keep an eye out for attractive valuations and maintain exposure in fundamentally sound blue-chips.

An analyst from Arif Habib Limited expects the market to remain range bound next week. Political noise following Shahbaz Sharif’s arrest can keep investors cautious while some clarity regarding IMF program may serve as a trigger for the market. Albeit, we advise investors to pick blue chip stocks with a positive long term outlook.

Details by Haris Zamir