September 3, 2019 (MLN): It has been 7 months since the Pakistani stock market embarked upon its long journey down a steep spiraling trend, an end to which is nowhere in sight, as yet.
That's right, August 2019 marks the 7th consecutive month of benchmark KSE 100's decline during which time the index shed 11,128 points in total, thus bringing the average monthly decline to approximately 1,580 points or 3.9% a month. Owing to a series of unfortunate events, the month of August observed a fall of 2,266 points or 7% over the previous month which was concluded 31,938 points against this month’s closing of 29,672 points.
The first 8 sessions at the bourse were heavily influenced by uncertainty caused by rising inflation, an expectation of further depreciation in PKR, implementation of IMF proposed structural changes and most importantly, the escalating tension at line of control (LOC) after India revoked the special status granted to the Indian Occupied Kashmir.
Together, this chain of unfortunate events spelled only one thing; a massive fall in bourse which materialized into a loss of 3,173 points at the KSE-100 index. As a result, the index touched its lowest point in the last 5 years having closed the session at 28,765 points.
Just when the investors were at their wits’ end, chairman Securities and Exchange Commission of Pakistan (SECP) Mr. Amir Khan’s visit to the Pakistan Stock Exchange (PSX) to analyze the horrendous performance of the equity market, burst through the dark clouds of pessimism like a ray of hope. In a matter of time, the index took a U-turn and spectacularly recovered around 3,100 points in only 4 sessions.
Be as it may, the jubilation on trading floors was ridiculously short-lived as the Financial Action Task Force (FATF)’s Asian Pacific Group (APG) on money laundering decided to place Pakistan on it enhanced monitoring list. This, along with the government’s decision to divest its stake in state-owned companies such as PPL and OGDC led the way towards a decline of over 2,000 points in the last week.
The KSE All Share Market Cap (in PKR) tumbled by Rs.305.3 billion or 4.7% over the month as it logged in at Rs.6.1 trillion down from Rs.6.4 trillion. The general atmosphere of distress panned out in shape of investors dumping their shares of Exploration and Production sector, Commercial Banks, Power Generation and the Auto sector on one another, as the five jointly stripped 2,081 points off the benchmark index. Within these underperforming sectors, PPL, OGDC, UBL, HBL, and BAHL emerged as the blue chips that went under the sharpest knife as together, these companies lost over 1,100 points in a month.
Among local market participants, mutual funds led to a sell-off that exceeded every category’s sell-off by a huge margin. The funds sold shares worth Rs.10.2 billion during the month while their purchases were worth Rs.4.8 billion. This translated into a net sale of Rs.5.4 billion for August 2019.
Accompanying the funds’ were insurance companies that also wet their feet in the ongoing sell-off and unburdened shares worth Rs.1.6 billion. To offset the impact, local individual investors bought Rs.4.4 billion worth of shares (net), while Banks/DFI’s bought Rs.1.3 billion (net) in value.
The domestic investors’ net trading resulted in a net purchase worth Rs.567 million during the month. On the other hand, foreign corporates remained inclined toward a net sell-off as they withdrew Rs.676.5 million during the month.
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