KARACHI: The Pakistan Stock Exchange (PSX) on Monday suffered its worst single-day decline in history. Amid the mad rush to jettison shares, investors saw the equity values hit their lower circuits.

The KSE-100 index plunged by 2,375.97 points, representing the steepest ever decline point-wise in a single day and a loss of 6.59 per cent, the heaviest one day drop in percentage terms, second only to the crash of 7.45pc witnessed on May 20, 2002.

A massive sum of Rs382 billion was wiped off the market capitalisation.

The index settled at 33,685 points at the close of the market, which calculated to a fall of over 20pc since its recent high of 43,200 points on Jan 13. Many analysts concurred that according to standard definition in financial markets, 20pc plunge, amid widespread negative investor sentiment and fear, puts a bourse in the bear territory.

In the first 15 minutes of trade, the market capitalisation-based KSE-30 index conceded more than 4pc and as investors watched with batted breath, both indexes continued to slide. The circuit-breaker regulation was triggered and when the KSE-30 index failed to rise over 4pc in the next five minutes, trading was called to a halt. It was for the fourth time in two weeks that trading had to be brought to a halt. But unlike Friday when the market had shown recovery after the cooling period of 45 minutes, the index on Monday continued to slide as investors dumped risky assets and sought the shelter of safe havens.

Rupee falls against dollar, gold prices plunge

Suleiman Mehdi, the PSX chairman, affirmed: “All risk management measures were in place, margins were smoothly collected during the period of market halt and there were no defaults.”

Asked if the market could take another bear onslaught as seen on Monday, Mr Suleiman said there would scarcely be an issue on the risk management side.

Traders said that mutual funds were the major spoilers of the market as they ditched shares worth a huge $7.43m on Monday. A fund manager suggested that some major funds had to meet large redemptions while money also was switched from equities to the money market.

Since Monday last week, the rupee has lost Rs4.25 or 2.8pc as it fell to Rs154.253 on March 9 to Rs158.6 on Monday.

Prices of one tola and 10-gram gold plunged by Rs1,850 and Rs1,587 to Rs89,000 and Rs76,303, respectively, on Monday. The prices declined on the back of $60 per ounce fall in the world market to $1,470.

The figures released by the National Clearing Company of Pakistan showed that companies also offloaded stocks and much of the liquidity was mopped up by individuals, insurance companies and banks which swooped to pick up shares that had dropped to attractive valuations. Foreign investors were generally quiet with selling of meagre $0.91m worth of shares.

Some veteran investors and brokers were sore that the government could have acted in a proactive manner. “Unusual times call for unusual measures, which is why instead of keeping to the fixed date of March 17, the SBP could have announced its policy a day earlier,” they said and suggested that since food inflation in March and April was likely to be very low, a cut in interest rate of more than 100 basis points should be considered that would help corporate profitability.

They said the government should offer comfort to the investors by declaring measures and assuage concerns over the uncertainty of possible decline in global growth, the state of the country’s economy and warnings on corporate earnings.

The major hit sector-wise was taken by the banking, cement, fertiliser and exploration & production (E&P) sectors in which most shares closed at their lower lock. “Since the circuit breakers have been gradually raised to 7.5pc from 5pc, the erosion in stock prices was much higher,” said an equity analyst.

The sectors that were major drag on the KSE-100 index included banks (-689 points), E&P (-326 points), fertiliser (-281 points), cement (-220 points) and power (-155 points). Traded volumes at the market declined by a quarter percentage over the previous session at 215m shares, while the traded value fell far greatly by 42pc to reach $50.9m which market observers attributed to higher trading in blue chips.

Stocks that contributed significantly to the volumes included Bank of Punjab, Maple Leaf Cement, Unity, Pakistan Petroleum Limited and TRG, which formed 38pc of total volumes. There were just nine stocks that gained values against 319 shares that finished in the red on Monday. Stocks that mainly dragged down the index included HBL (-169 points), Engro (-140 points), Hub Power (-126 points), MCB (-124 points) and UBL (-115 points).

Published in Dawn, March 17th, 2020