The Pakistan Stock Exchange (PSX) on Thursday witnessed the worst bloodbath in months as the benchmark KSE-100 index lost over 2,100 points.
Investor confidence took a blow owing to the huge trade deficit in November. Furthermore, a hike in yields of T-bills renewed concerns of a steep spike in the benchmark interest rate this month and triggered a selloff on the bourse.
Market participants are anticipating the import number for the previous month to reach an all-time high of about $8 billion which would further widen the swelling current account deficit.
The yields of T-bills saw a surge during Wednesday’s auction signaling further monetary tightening by the central bank in the forthcoming monetary policy announcement due December 14, 2021.
Both the factors together hammered the bourse and triggered profit booking from investors who rushed to safeguard their positions. As a result, the stock market observed the largest single-day decline.
In addition, the Pakistani rupee (PKR) was unable to halt its depreciation and sank to another all-time low value against the greenback, hitting Rs176.65 in the interbank market during intraday trading.
As per the Forex Association of Pakistan (FAP), the US dollar appreciated by Rs1.35 against the local currency at around 2:15 pm to hit a record high in the interbank market owing to a steep rise in Pakistan’s trade deficit.
The development led to panic in the market and worries pertaining to imported inflation aided bearish trading.
The KSE-100 index plunged since the start of the session owing to weak macroeconomic cues that caused jitters amongst the market participants. Rumors circulated pertaining to a historically high trade deficit in November and dampened the investor sentiment. The selloff fast-tracked towards the closing of the session and inflated the losses.
Towards the closing, the KSE-100 index recorded a drop of 2,134.99 points, or 4.71%, and settled at 43,234.15.
As per the National Clearing Company of Pakistan, foreign institutional investors were net sellers of Rs268.4 million worth of shares during the trading session.
As per reports, the Head of Research at Arif Habib Limited Tahir Abbas said that the loss was witnessed due to expectations of all-time high imports of $8 billion in November.
Abbas said, “This can widen current account deficit to an unsustainable level of $2.3-2.5 billion,” he said. “Besides, there seems to be no respite from the soaring import bill. However, $650 million was spent on vaccine shipments in November which can be curbed going forward.”
He highlighted that the cut-off yield on six-month T-bills surged to 11.5% on Wednesday’s auction in comparison with 10.1% in the previous auction which took place ahead of the announcement of monetary policy.
He added, that the increase signals yet another hike in the State Bank of Pakistan’s (SBP) benchmark interest rate in the upcoming monetary policy review scheduled for mid-December.
Abbas said that the market suffered the third-largest drop of 2,135 points in terms of index points.
Alpha Beta Core CEO Khurram Schehzad said that the stock market observed the sharpest fall of the calendar year 2021 on Thursday.
Overall trading volumes increased to 386.7 million shares compared to Wednesday’s tally of 241.1 million. The value of shares traded during the day was Rs14.1 billion.
Shares of 365 companies were traded. Towards the end of the session, 16 stocks closed higher, 338 declined and 11 remained unchanged.
WorldCall Telecom led the volume chart with 33 million shares, losing Rs0.18 as it closed at Rs2.01. Dolmen City followed with 23.6 million shares, losing Rs0.3 as it closed at Rs11.7, and Byco Petroleum with 22.8 million shares, dropping Rs0.61 to close at Rs5.95.