Bears gripped the Pakistan stock market as the benchmark KSE-100 index bled over 1,000 points in intra-day trading on Monday owing to concerns of ballooning external deficit stemming from the government’s decision to keep oil prices unchanged.
At 10:34 AM, the benchmark KSE-100 index was trading at 42,522.62 points, after a fall of 963.84 points or 2.22%.
The government on Sunday ruled out increase in prices of petroleum products amid a market forecast of hike in the rates by up to Rs86 per litre after the curtailment of fuel subsidies.
As the government continues with the subsidy on fuel and energy prices, investor sentiments took a hit as expectation of increase in external deficit triggered panic at the PSX.
Although global oil prices slid marginally on Monday, both contracts traded close to $110 per barrel. Brent crude futures amounted to $109.89 a barrel at 0356 GMT while US West Texas Intermediate (WTI) was being sold at $108.94 a barrel.
Global oil prices pared early gains as investors took profit from a surge in the previous session, albeit in the shadow of supply fear as the European Union prepares an import ban on Russian crude and with limited increase in OPEC output.
Moreover, Asian share markets struggled on Monday to sustain even a minor rally after shockingly weak data from China underlined the deep damage lockdowns were doing to the world’s second-largest economy.
Speaking to Business Recorder, BMA Capital Executive Director Saad Hashemy said that the equity market nosedived on the back of status quo in oil prices, which raised concerns of external deficit widening to unsustainable levels.
“In addition, the ongoing political and economic uncertainty aided the dip. Plus, there is widespread panic in the market over lack of developments on the International Monetary Fund (IMF) front,” he said.
However, the market analyst stressed that the equity market had turned attractive because stock prices had dived to low valuations and double digit dividends were being disbursed by companies.
This story was first published in Business Recorder on May 16, 2022.
