KARACHI: PSX KSE-100 drops for a seventh straight session on Monday after Pakistan’s key stock market index fell by 3,791.05 points, or 2.29%, to end at 161,805.02 points from 165,596.07 points last Friday. There are no significant signs that the prolonged selling pressure on Pakistani stocks, which have been falling for seven sessions, will come to an end any time soon.
Throughout the whole day, the market was trading on a negative note without any attempt at recovery whatsoever. The intra-day high of 164,939.08 points was observed briefly around 10 am followed by a consistent slide that took the market to its intra-day low of 161,613.51 points before the market closed – something which is indicative of the total lack of buying interest prevalent in the Pakistani market at the moment.
Iran Talks Stall Markets Suffer
The decline of PSX KSE-100 is based on one geopolitical fact. No significant developments have taken place in the talks between the US and Iran, despite several weeks of efforts, which have left Pakistani and international investors in a state of ongoing uncertainty in which the worst possible outcome in terms of energy supplies in the region seems likely.
However, the situation involving the Strait of Hormuz increases the degree of uncertainty and brings about direct implications on energy supply. The persistent worry regarding the disruption of the flow of oil from the world’s most important energy choke point has kept the price of crude oil high, which is detrimental to Pakistan on many fronts.
Top Five Stocks Add Over 1,100 Points in PSX KSE-100 Decline
PSX KSE-100 falls on Monday, with the fall predominantly attributable to the top five companies listed on the exchange in terms of their size and liquidity. The top five companies include Oil and Gas Development Company, Meezan Bank, United Bank, Pakistan Petroleum, and Engro Holdings. These companies added 1,159 points to the PSX KSE-100 decline on Monday.
OGDC & PPL will come under direct pressure on earnings front because of geopolitical risks associated with the energy market regionally. Meezan Bank & UBL would come under indirect pressure due to wider risk aversion environment which makes investors reluctant to invest in financial sector stocks at times when macroeconomic uncertainty prevails. Engro Holdings is also an energy sector stock.
499.8 Million Shares Traded with Sellers Dominating Buyers
The PSX KSE-100 index declines came amid a good trading atmosphere that reflects the dynamics of the present selling pressure. The total number of traded shares amounted to 499.8 million while market turnover was recorded at Rs19.4 billion – numbers that clearly indicate an active involvement by market participants.
DSL was the highest trading stock at the volume of 40 million shares. This high participation shows the occurrence of price discovery in the market despite the presence of a strongly bearish trend in the market throughout the day.
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Seven Sessions of Endless Pressure
Geopolitical concerns and economic uncertainties have made investors anxious through six days of falling markets before the seventh came on Monday.
The PSX was hit by a drop of 902.77 points on Friday alone prior to Monday’s even more significant fall of 3,791 points. The combined impact of seven consecutive days of losses has led to the erosion of many of the gains that Pakistani stocks were able to make during the first six months of the financial year.
US-Iran Discussions and Budget Season Set Tone for the Future
It is the progress in talks between the United States and Iran and the trend in global oil prices that would determine if Pakistan stocks are able to hit rock bottom or lose for the eighth straight day.
Domestic considerations bring more uncertainty in this context. The investor mood is likely to be prudent before the announcement of the federal budget because the Pakistani equity investors usually take less risks in this time period. This added caution on the part of Pakistani investors along with the existing geopolitical uncertainties makes it difficult to initiate a sustainable recovery effort.
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