The Pakistan Stock Exchange (PSX) on Thursday, saw a strong selling pressure, with the benchmark KSE-100 index losing more than 2,000 points in intraday trading.
Soon after starting at 45,369.14 points, the market continued to fall, with the benchmark KSE-100 index down 2,005 points, or 4.42 percent, by 1:30pm. According to the PSX Rulebook; trading in all securities is halted for a specific duration if the index moves 5% above or below its latest close and stays there for five minutes.
Raza Jafri, the head of equities at Intermarket Securities, blamed the drop on the rising trade imbalance, saying it will put the rupee under pressure and lead to “aggressive” interest rate hikes.
“However, it is important to keep in mind that authorities have already commenced macro-course correction while global commodities are coming down due to Omicron [variant of the coronavirus]. There may be an element of one-offs in November imports too and coming months may show better numbers,” he added.
According to him, the market dip may be viewed as an opportunity.
The CEO of Topline Securities, Mohammad Sohail, agreed, claiming that the “shocking” import bill in November, as well as the central bank’s “aggressive borrowing” in yesterday’s T-bill auction, were to blame for the drop.
Meanwhile, Amin Yousuf, CEO of AKY Securities, observed that stock markets throughout the world were pessimistic as a result of governments enacting limitations to curb the spread of the Omicron variant. He also mentioned that a similar result was noticed on the PSX.
Yousaf said, The State Bank of Pakistan (SBP) increased the interest rate by 125 basis points at the T-bills auction, adding to investors’ worries. Furthermore, there was selling pressure in the market due to expectations of a further rise in the interest rate in the monetary policy statement on December 14, he noted.
In the meantime, the US dollar climbed to Rs176.30 in the interbank market after gaining Rs1.
Rise in trade deficit, inflation
A day earlier, the government issued preliminary statistics showing that the country’s trade imbalance increased by 162.4 percent in November, owing mostly to a more than threefold rise in imports compared to exports.
For the sixth month in a row, the merchandise trade imbalance widened, reaching $5.107 billion in November, up from $1.946 billion the previous month. In terms of value, this is the biggest trade deficit ever recorded in a single month.
The Pakistan Bureau of Statistics issued figures earlier this week showing that inflation increased to 11.5 percent from 9.2 percent, the largest increase in the preceding 20 months, owing to a record spike in fuel costs in October.
Import-led inflation was fueled by the significant rupee devaluation. Inflation, as measured by the Consumer Price Index (CPI), reached its highest level in 20 months, during which time global oil prices continued to rise gradually, eroding previous gains.