PSX plummets ahead of monetary policy meeting

• Investors lose morale as IMF loan impasse lingers.
• Market braces for an increase in SBP policy rate.
• Benchmark index hits intraday low of 539.88 points.

KARACHI: Stocks Friday had a hard landing as investors hedged their bets by ridding themselves of risky holdings, bracing for up to 200 basis points (bps) hike in the State Bank of Pakistan (SBP) policy rate — scheduled to be announced Monday.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Shares Index lost 423.60 points or 1.09% to close at 38,407.98 points. During the intraday trade, the index went as high as 38,982.77 points and as low as 38,291.70 points.

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) will meet on Monday, January 23, to discuss the policy rate.

Governor SBP Jameel Ahmad will announce the monetary policy decision at a press conference on the same day after the MPC meeting.

In its last policy meeting in November 2022, the MPC hiked the rate by 100 basis points to 16%. It has pushed the rates higher by a total of 625 bps since January last year.

Topline Securities, in a note, said range-bound activity was observed in the first half of the trading session; however, the market came under pressure in the second half.

“This decline can be attributed to further increase in T-Bill and PIB (Pakistan Investment Bonds) yield in the secondary market ahead of the monetary policy announcement on Monday, where market expects policy rate to increase in the range of 100-200bps,” the report said.

The brokerage said the TRG Pakistan, Pakistan State Oil (PSO), Lucky Cement, Bank Al-Habib Limited, and Engro Fertilizers, lost value to weigh down on the index by 147 points.

“Participation declined on day-on-day basis as investors preferred to remain on the sidelines before the monetary policy,” the Topline report said.

KSE-30 index also shed 176.82 points or 1.23% to 14,222.78 points compared with 14,399.60 points recorded in the last session.

Arif Habib Limited (AHL), in its daily market report, said the market opened in the green but bears drove it into the red in the first session as investor participation was low due to the uncertainty surrounding the talks for the revival of the IMF programme.

Pakistan's economy has crumbled alongside a simmering political crisis, with the rupee plummeting and inflation at decades-high levels, but devastating floods and a global energy crisis have piled on further pressure.

The reserves, which hit their lowest level since February 2014, will now only provide import cover worth 0.82 months, as the country tries to lessen imports amid a greenback shortage.

Foreign exchange reserves held by the SBP increased by $258 million to $4.601 billion, the central bank said, without specifying the source of the inflows.

According to an SBP statement, total liquid foreign reserves held by the country stood at $10.44 billion, whereas net foreign reserves with commercial banks stood at $5.84 billion.

The SBP reserves have finally bucked the trend after a decline of $3.6 billion during the last 8 weeks, Arif Habib Ltd said in a note.

SBP-held forex reserves have plunged to the lowest level since February 2014 after a decline of 22.11%.

Pakistan is in dire need of foreign aid to reduce its current account deficit as well as ensure enough reserves to pay its debt obligations for the ongoing financial year.

“The second session began with the same negative sentiments, but due to the weekend, investor-booked profit that led the market to make an intraday low of 539.88 points,” the AHL report said.

It said Volumes on the mainboard remained reasonable, with third-tier companies dominating the volume board.

Sectors contributing to the performance include commercial Banks (-82.1pts), technology & communication (-60.8pts), cement (-58.8pts), exploration and production (-53.4pts), and oil marketing companies (-41.0pts).

Volumes shrank by a whopping 64 million shares to 93.450 million shares from 157.822 million, while value dropped to Rs3.508 billion from Rs6.406 billion.

Out of 314 companies active in the session, 103 closed in green, 194 in red and 17 remained unchanged.

Pakistan Petroleum Limited led the volume chart with 8.309 million shares with a decline of Rs1.16 to Rs72.92 per share. It was followed by WorldCall Telecom with 5.645 million shares that closed lower by two paisas to Rs1.11 per share.

JS Research said the bourse remained under pressure throughout the day where selloff was witnessed across the board.

"Going forward, we expect the selloff to continue and recommend investors to avail any downside as an opportunity to buy in the technology, cement and exploration and production sectors," the brokerage said.