KARACHI (Web Desk) – Things haven’t changed at the Pakistan Stock Exchange which continued sliding after a long weekend with the benchmark KSE-100 Index shedding 1,316.47, or 2.13 per cent, during early trading on Tuesday.
By 10.29am PST, the KSE-100 Index was recorded at 60,388.62 against the previous closing at 61,705.09 as the market is a reverse gear since cross the 66,000 mark and setting a new all-time high on December 12.
Although experts have been describing the downward movement as year-end profit taking, they were hoping that the market would settle and remain above 64,000 after market correction. Others were marking 63,000 as the possible barrier.
However, the decline is massive by all standards with a nearly 10 per cent drop amid the political uncertainty caused by the upcoming elections – an exercise that will have long-lasting consequences for Pakistan.
Meanwhile, the market had steadied after crossing 66,000 on December 8 as official data revealed alarming sustained rise in inflation. It was followed the nosedive starting on December 13 – a day after the State Bank of Pakistan (SBP) decided to interest rates at 22 per cent.
The two developments meant that there won’t be any policy rate cut soon as prices are expected to rise further due to the imminent increase in gas tariffs.
With monetary tightening to remain the rule, the high interest rates, against which the business community is united due to the resultant crippling effects for economy, will continue impacting the investors’ confidence and market sentiment.
Earlier, local investors had rushed towards the stocks after a massive decline in property prices as the real estate too fell prey to the inflation effects, with reducing purchasing power resulting in fewer buyers and lower asking prices.
In fact, the market surge was produced by the interest shown by investors in particular sectors – energy sector covering oil, gas and power companies as well as banks – which was based upon the possibility of foreign direct investment (FDI) and the Islamabad meeting the IMF conditions by tackling the circular debt issue for raising the power and gas prices.
So, the investors may have been facing the current state of affairs – higher and sustained inflation along with interest rates – for the very reasons that had boosted their sentiments.
