The Pakistan Stock Exchange (PSX) experienced a tumultuous day on Thursday as fearful investors sold off their shares, causing the market to plummet by more than 1,700 points. This marks the fifth consecutive session of losses for the PSX, with factors such as rumors of interest rate hikes, economic uncertainty, and the continuous depreciation of the rupee contributing to the dismal performance.
By 2:49 pm, the KSE-100 index had dropped by 1,747.63 points to reach 44,496.92, a decrease of 3.78% compared to the previous day’s closing of 46,244.55.
Analysts have attributed the market downturn to concerns over economic uncertainties, including the decline in the value of the rupee and the potential increase in interest rates due to high inflation. The unresolved circular debt crisis in the power sector and the caretaker finance minister’s statement about the lack of fiscal capacity to provide relief on power bills have also played a role in the bearish close.
Rumors of an emergency meeting by the State Bank of Pakistan, where it is expected to raise interest rates by up to 300 basis points, further exacerbated the selling pressure in the market.
Despite the negative sentiment, some analysts believe that the bearish trend will be short-lived and anticipate a market recovery. The upcoming visit of the Saudi crown prince to Pakistan is seen as a potential catalyst for improving investor sentiment.
However, Yousuf M. Farooq, director of research at Chase Securities, highlighted that market sentiment has changed in recent days due to expectations of a rate hike. He noted that higher interest rates would increase the cost of capital but would also result in lower stock prices. Farooq also pointed out that the PSX is significantly undervalued compared to other crisis-ridden countries, with the market trading at low earnings multiples and demonstrating robust earnings, dividends, and buybacks.
To address the market’s current challenges, experts suggest focusing on controlling inflation and stabilizing the exchange rate. They emphasize the need for economic and political stability to restore investor confidence and attract investment.
In conclusion, the PSX experienced a significant decline as investors sold off their shares amid concerns about interest rate hikes, economic uncertainty, and the depreciation of the rupee. However, analysts remain optimistic about a potential market recovery and emphasize the importance of stabilizing the economy and exchange rate to regain investor trust.