—PSX slides by 750 points as uncertainty looms over IMF bailout for PTI govt
—Rupee falls by 1.31 against dollar, analysts say govt should take investors and businessmen into confidence over policies
KARACHI: The Pakistan Tehreek-e-Insaf (PTI) government has failed to restore the shredded investor confidence as uncertainty caused the Pakistan Stock Exchange (PSX) to plunge by 750 points on Monday, coupled with a decline in the value of rupee against dollar despite an International Monetary Fund (IMF) bailout in the offing.
On Sunday, PTI lost in three key National Assembly constituencies in the by-poll, which it had won earlier in the July 25 general elections. Two of these seats were bagged by Pakistan Muslim League-Nawaz (PML-N) and one by Muttahida Majlis-e-Amal (MMA). The by-poll results showed a dip in the popularity of the PTI owing to several unpopular decisions that it has taken during its almost two months in power.
Earlier, the federal government had categorically ruled in favour of an IMF bailout to restore the economy, preceded by a rupee devaluation in line with the requirements of the Fund.
Although the government made the announcement about the bailout, it had little effect on the investors’ confidence as they continued to remain absent, triggering a selling spree in the market on Monday.
The KSE 100 index sank over 1,000 points in intraday trading, falling below the psychological barrier of 36,600. The index touched intraday low of 36,274.25 and after losing 750.36 points, it settled at 36,767.57.
The KMI 30 index closed the day at 62,086.88 after depreciating by 2.07 per cent or 1,314.72 points, while the KSE All Share index declined by 1.59 per cent and settled the day at 27,325.32 after falling short of 442.13 points. Out of the total traded scripts, only 77 advanced while 250 declined.
In a major shuffle, the Oil and Gas Development Company Limited (OGDC -0.30 per cent) lost its position to Pakistan Tobacco Company Limited (PAKT -1.38 per cent). OGDC saw a decline of 16 per cent in its market capitalization over the past six months while PAKT swelled the same up by 30 per cent.
OGDC’s market capitalization now stands at Rs637,354.82 million as compared to PAKT’s market capitalization of Rs 638,725.00 million.
Trading volumes improved from 135.13 million in the previous session to 165.52 million. TRG Pakistan Limited (TRG -2.40 per cent) led the volume chart with a volume of 16.81 million shares, followed by Unity Foods Limited (UNITY +1.20 per cent) and K-Electric Limited (KEL -1.34 per cent), trading 8.82 million and 7.53 million shares, respectively.
TPL Insurance Limited (TPLI +4.55 per cent) released its financial results for the third quarter of Financial Year 2017-18 (3QFY18). An interim cash dividend of Rs2.00 per share was announced by the company. Revenue declined by 4 per cent in the quarter under review whereas earning per share depreciated by nearly 98 per cent from Rs0.45 in the last year to Rs0.01.
To add to the woes of the government, the rupee nosedived by Rs1.31 against the dollar in the inter-bank market as it was traded between Rs133.20-133.63, before closing at Rs133.25.
After an initial decline of Rs1.57 against the dollar, the rupee recovered Rs0.32 of its value to trade at Rs133.40 before closing at Rs133.25 in the inter-bank market on Monday.
In the kerb market, the rupee shed Rs0.7 against the dollar and was being traded at Rs133.70.
The KSE-100 index plunged over 1,200 points in intra-day trading on Monday to a two-year low of 36,274.25 points before recovering to close at 36,767.57 points, down 750.36 points from Friday.
“Volatility in the inter-bank dollar rate is due to the economic uncertainty, where some punters believe the currency could stabilize near current levels given the fact that we have knocked on the IMF’s door and their dollars appear to be around the corner,” said Pak Kuwait Investment Co AVP Research Adnan Sheikh.
“While on the flip side some (including myself) expect further depreciation as the currency is still overvalued, imports are still at par, and both the State Bank of Pakistan (SBP) and IMF have quoted higher levels for the dollar,” he added.
“As for the hawala and hundi systems, the exchange companies need to be regulated more stringently as they are the only supply of dollars to the public,” he explained.
While speaking to Profit, Topline Securities’ analyst Nabeel Khursheed said, “There is no cluelessness on part of the government which is contrary to what you see in the media. It has so far taken bold measures which were non-populist and has severely undermined the government’s position in the by-elections.”
“They have now officially approached IMF and hopefully, we will soon see a further update on the total bailout package and expected amount disbursement date. It’s only a matter of time,” he added.
He explained that to address the continuing uncertainty, what the government can do is to hold a press briefing with the finance minister to take investors and businesses into confidence.
“The rupee fluctuation has to do with speculations in the market as to when the government will get IMF support package,” he added.
On Friday, the rupee had regained a further Rs1.87 or 1.4 per cent against the dollar in inter-bank trading to close at Rs131.9318.
Inter-bank trading exhibited a volatile trend as the rupee strengthened by Rs1.40 against the greenback, as it regained its value from an all-time low of Rs133.6431 touched on Tuesday.
This is the fifth devaluation of the rupee since December 2017, which has seen the local currency losing a cumulative 27% of its value against the greenback.
On Thursday, the country’s foreign exchange reserves plunged by another $100 million to $8.3 billion which was barely enough to provide 1.5 months of import cover, as per the central bank.