KARACHI: Equity investors are closely watching the upcoming State Bank of Pakistan’s Monetary Policy Committee (MPC) meeting on Sept 14, anticipating a 200 basis points hike in key interest rates and its potential impact on inflation and economic stability.

Simultaneously, all eyes are on an impending visit by a Saudi Arabian delegation, poised to unveil investment plans in Pakistan’s mineral, mining, and refinery sectors, market analysts said.

The benchmark KSE-100 index witnessed its highest weekly decline in points since Nov 26, 2021, with a drop of 2,358 points or 4.95pcon the last trading session on Friday (Sept 1). On Nov 26, 2021, it had declined by 2,375 points or 5.11pc.

Throughout August, the KSE-100 index grappled with persistent downward pressure, culminating in a 6.3pc decline, ultimately settling at 45,002 points.

Investor sentiment took a hit due to skyrocketing fuel prices and escalating electricity and gas bills, leading to nationwide protests within the business community. A weakening rupee, soaring inflation, a sluggish economy, and a dearth of positive indicators continued to exert pressure on the equity market throughout the month.

In August, consumer prices surged unchecked, with the second month of the fiscal year witnessing inflation at a staggering 27.4pc, primarily driven by relentless increases in energy prices.

The government pushed through a sharp hike in petrol prices by Rs14.91 per litre and high-speed diesel (HSD) by Rs18.44 per litre. Consequently, the price of petrol reached Rs305.36 per litre, and HSD climbed to Rs311.84 per litre. The rupee stood at Rs305.46 per dollar after losing 1.46pc or Rs4.46 from the previous week’s closing of Rs301.

Given these prevailing circumstances, investors are expected to exercise caution in their market positions. They are likely to gravitate towards safer investments, such as HUBCO, PARCO, E&P (Exploration and Production), power, and banking sectors, according to an expert at AKD Securities.

The significant week-on-week decline in the KSE 100 index is predominantly attributed to growing concerns about the impending monetary policy decision, with investors fearing a substantial policy rate increase by the SBP to counter the continuous depreciation of the rupee and combat inflation, fuelled by recent hikes in energy prices.

For the week, the average traded volume and value stood at 210 million shares and Rs8 billion, respectively. In terms of capital flows, insurance, foreign corporate entities, and overseas Pakistanis collectively net purchased equities worth $8m, $2.63m, and $1.17m, respectively, as of Friday’s close, a report from Topline Securities said.

Published in Dawn, September 3rd, 2023