PSX bleeds 911 points amid political uncertainty

Observer Report

Stocks extended their decline for a fourth day when the KSE-100 index plunged by another 911.92 points, or 2.09 per cent, to settle at 42,779.76 points on Thursday.

After the market opened at 43,691.68 points, the index hit an intraday high of 43,891.00 but entered the red territory as the day wore on. It recorded an intraday low of 42,688.20 – down 1,003 points.

The bear rampage has heavily dented the stock market since the start of the week with the KSE-100 index dragged down by 3,057 points, which market watchers said had wiped off all the gains since January 1.

On Wednesday, the PSX had lost 531.23 points, or 1.20pc, breaking the 44,000 psychological support and settling at 43,691.68 points.

The gathering clouds on the political horizon spooked investors who decided to unwind positions ahead of the heated events of election of chairman and deputy chairman of the Senate, scheduled for tomorrow, followed by the opposition’s threat of a long march.

KASB Securities Chairman Ali Farid Khwaja said there were multiple reasons for the decline.

He said concerns about political uncertainty were likely to remain until there was clarity on the Senate chairperson elections front, which are said to be a close contest between the ruling PTI and the opposition.

Secondly, the news about new taxes and removal of tax incentives given to the construction sector and other industries including IT, REITS, mutual funds, etc. “is creating a bit of a panic”, he noted.

Thirdly, Khwaja said, “the scare of inflation has returned, especially with oil prices reaching $70. The market is starting to price in expectation of an interest rate hike.

“This will lead to a sector rotation out from cyclical stocks such as cement and steel into banks and oil and gas,” he added, saying the trend could also broadly lead to capital flight from equities into bonds.

The political situation in the country remains uncertain after the ruling PTI government faced an upset on the Islamabad Senate seat last week, where opposition’s Yousuf Raza Gilani defeated Finance Minister Hafeez Shaikh by five votes, forcing Prime Minister Imran Khan to go for a vote of confidence from the National Assembly.

Zubair Ghulam Hussain, CEO of Insight Securities, said they advised profit-taking around the 45,900 levels, following which the market has been down by 6.5pc in four straight sessions.