The Pakistan Stock Exchange (PSX) suffered at the hands of bears in the outgoing week as the benchmark KSE-100 index remained under pressure owing to the failure of economic team to curtail the widening import bill and rapidly widening trade deficit unnerved market participants.
In addition to these two factors, the double-digit growth in inflation, resulted in a fall of 881 points, or 2% week-on-week, in the benchmark index that closed at 43,233.
Constant weakening of the Pakistani rupee also impacted the trading environment, triggering selling pressure throughout the week. PKR closed the week at a new record low of 176.77 against the greenback.
Average daily traded volumes increased by 21% week-on-week to 319 million shares while average daily traded value spiked 51% week-on-week to $90 million.
A report by Arif Habib Limited states, “Market reacted negatively to the news of alarmingly high import bill for November 2021 and a significant increase in cut-off yields in the recent auction of T-bills due to the higher-than-expected Consumer Price Index (CPI) reading”.
The week started with stock trading kicking off with a sharp increase owing to expected receipt of $3 billion from Saudi Arabia for depositing in the State Bank of Pakistan (SBP) before the end of the week. Furthermore, investors choose to cherry-pick stocks following the KSE-100 index depicting stability despite a drop in global markets last weekend after the emergence of Covid-19 Omicron variant.
A $10-per-barrel drop in international crude oil prices triggered expectations of a reduction in domestic prices of petroleum products as well, driving bullish trading at the bourse.
The surge was short-lived as the market on Tuesday reversed the trend amid heavy foreign selling ahead of the reclassification of PSX which was downgraded to the Frontier Markets Index by Morgan Stanley Capital International (MSCI). It must be noted, the reclassification of the stock market attracted investors and the index climbed upwards during the middle of the week.
Thursday’s session wrecked havoc for investors as the market lost more than 2,100 points in the fourth worst sell-off in the history of PSX owing to an increase in inflation and an unforeseen surge in imports.
Pakistan reported the record high import figure of nearly $8 billion for November, which indicated a further increase in inflation, worsening of balance of payments and the widening of trade deficit.
Alternatively, November recorded double-digit inflation, standing at 11.5%. A spike in T-bill yields during the latest auction signaled further monetary tightening by the central bank in the upcoming monetary policy statement. These developments together hammered the stock market leading to a bloodbath.
Towards the end of the week, the bourse found some relief as the market closed on a flat note after investor sentiment improved during the final session on Friday.
Sector-wise, negative contribution came from technology and communication (198 points), cement (165 points), oil and gas exploration companies (101 points), textile composite (68 points) and food and personal care products (67 points).
Sectors that positively contributed were commercial banks (59 points) and oil and gas marketing companies (20 points).
Foreign selling persisted during the week which came in at $62.8 million in comparison to net selling of $39.2 million during the previous week.
Major selling was seen in commercial banks ($27.2 million) and cement firms ($14.8 million). On the domestic front, buying was reported by companies ($25.7 million), followed by individuals ($16 million).