KSE-100 Index tumbles over 1.7pc as ADB points to effects of record-high inflation
Business
Record-breaking streak ends a day after State Bank of Pakistan decided to maintain interest rates
KARACHI (Web Desk/Dunya News) – The Pakistan Stock Exchange witnessed a massive decline after briefly reaching a new milestone during early intraday trading on Wednesday as the benchmark KSE-100 Index at point shed around 2,000 points, or 3.5 per cent, after a weeks-long historic surge.
The across-the-board losses coincide with a latest Asian Development Bank (ADB) report, which says that Pakistan’s overall recovery is still constrained by moderate confidence and high inflation eroding purchasing power.
It is a sign that the market has moved towards correction or profit-taking after the local investors rushed towards the stocks due a persistent decline in the property sector – a trend that may soon be reaching the level of overinvestment.
This viewpoint is strengthened by the State Bank of Pakistan’s decision a day earlier to keep the key policy rate at 22pc, which, although strengthening the impression that there won’t be any more interest rate hikes.
But at the same time also made it clear the persistent inflation won’t allow any rate cuts soon as the top financial institutions and central banks are still arguing for monetary tightening.
The KSE-100 Index had settled at 65,280.16 after shedding 1,146.62 points, or 1.73pc of its value, by the time trading was closed after turbulent session.
Earlier, the benchmark index, just six minutes after the session started, had reached 67,093.96 against the previous closing of 66,426.78.
Businessmen are eager to see rate cuts as the high borrowing cost has made it impossible to manage the cost of doing business at a sustainable level, meaning there are neither any expansion nor plans to set up new ventures that in turn also produce the much-needed employment opportunities for the people hit hard by the rising cost of living.
At the same time, the paralysis experienced by the economy also resulting in stagnant wages at a time when the record-high and persistent inflation along with a week rupee due currency devaluation has been reducing the purchasing power at an alarming rate.
The market is also expecting direct foreign investment (FDI), especially by the Gulf States, to fuel the economy and the Saudi Arabia’s Aramco debut in Pakistan's retail fuels market on Tuesday through a 40 per cent stake in Gas & Oil Pakistan Ltd (GO) has also been welcomed.
However, the people will start experiencing positive effects only if there are new projects and job creation as any investment in or acquisition of the existing companies won’t benefit directly.
