The Pakistan Stock Exchange (PSX) witnessed extreme selling pressure on Wednesday, with the benchmark KSE-100 index dropping nearly 1,000 points two days after losing nearly 1,500 points in intraday trading.
According to the PSX website, the KSE-100 index started at 43,504.36 points. By 1 p.m., it fell nearly 1,000 points (2.28%) to 42,513.78 points.
Raza Jafri, head of equity at Intermarket Securities, said the federal government needed an urgent decision. “The government has been dragging its feet so far, eroding investor confidence and leading to panic sell-offs.”
He stressed the need for the International Monetary Fund (IMF) program to resume quickly to help the market find a foothold. “If the program continues to be delayed, buyers will continue to be ashamed,” he added.
Meanwhile, First National Equities CEO Ali Malik blamed the political uncertainty of the market downturn.
“The fixed rate of return has reached 14%. If it expands, the market will recover faster from here. Currently our market is cheap in terms of profits all over the world, but the situation is domestic,” he said.
Today’s drop comes two days after PSX witnessed a meltdown where the KSE-100 lost 1,447.67 points.
Shares plunged as investors expressed concerns about the country’s ability to repay its debt amid depleted foreign exchange reserves.
Dawn’s editorial on Wednesday noted that the most important factor undermining investor sentiment was the failure of the new coalition government to come up with a credible plan to make tough political decisions to solve economic problems. For example, it remains undecided about the withdrawal of financially unsustainable energy subsidies, which is a ‘pre-action’ that the IMF wants to take before agreeing to resume funding.
In a recent meeting with the new finance minister, the IMF linked the continuation of the loan program with the withdrawal of fuel subsidies introduced by the previous government. However, Prime Minister Shevaz has twice rejected plans to raise fuel prices by current oil and gas regulators.
PTI announced on February 28 that it would freeze gasoline and electricity prices for four months (until June 30) as part of a series of measures to provide relief to the public.
The PML-N coalition government severely criticized the government led by Imran Khan for “derailing” the IMF program through fuel subsidies, but did not withdraw the subsidies after taking the initiative for a month. The finance minister has repeatedly said that these subsidies are not feasible and the government is spending 120 billion rupees a month.
Ismail said the price of gasoline should be Rs245 per liter under the agreement the former government had with the IMF. However, the PML-N-led government is still selling it at 145 rupees per liter and will do everything it can to keep that price, he added. .
Moreover, the editorial noted that former Finance Minister Ishaq Dar, who opposes the IMF’s ‘dictatorship’, had disagreements over how to handle the fund within the PML-N, in that they wanted new loans on ‘softer’ terms. “If the Treasury’s ties are untied in London, then Treasury Secretary Miftah Ismail has tied his hands.”
Meanwhile, the dollar broke an all-time high against the rupee earlier today, breaking the 190 rupee level.
The US dollar was valued at Rs1.44, breaking above the close of Rs188.66 on Tuesday. The dollar hit an all-time high when it crossed 189 rupees on April 1.
Ahsan Mehanti, director of Arif Habib Group, told Mettis Global: “The rupee is under pressure from high oil import costs and speculation awaiting Saudi packages.
Jafar Paracha, secretary-general of the Pakistan Foreign Exchange Companies Association, said delays in negotiations with the International Monetary Fund (IMF) are putting pressure on foreign exchange reserves.