Pakistan’s Stock Exchange (PSX) plummeted over 1,200 points on Monday amid a high inflation reading and global equities slump.
After opening the day at 41,630.93 points, it fell to 40,409.38 points, registering a 3.02% steep decline by market close – one of the worst performances in recent months.
The plunge followed a 2.4% decrease last week.
Economists link the recent dives mainly to the rising Consumer Price Index (CPI) reading, which stands at 14.6% – the highest since Prime Minister Imran Khan took power in August 2018 – and partially to the slump in global markets.
“The stock exchange fell mainly due to higher-than-expected inflation numbers,” Mohammad Suhail, head of Topline Securities, told Anadolu Agency.
“Investors sold shares as they believed that interest rate reductions would now be delayed,” he said adding that the government’s recent changes in economic policy were not translating into revenue collection.
Ahsan Mehanti, a Karachi-based analyst, saw a “minor role” of the coronavirus in Monday’s PSX plunge. China’s stock markets plunged to an all-time low in more than four years amid a surge in deaths due to the outbreak.
“Stocks closed record bearish amid major selloff in Asian equities on worries over economic impact of coronavirus and dismal data of 14.6% inflation in January likely to impact SBP [State Bank of Pakistan] policy,” he told Anadolu Agency.
“Foreign outflows and weak global crude oil prices, concerns over impact of hike in local gas tariff on corporate earnings and uncertainty over outcome of IMF review amid higher fiscal imbalance played a catalyst role in record fall at PSX,” he said referring to ongoing talks between Pakistan and the IMF for release of the third tranche of a $6 billion bailout package.
Embroiled in an economic crisis, the government is struggling to contain the depreciating value of the local currency and deteriorating equity market, which once plunged to nearly 35,000 points, compared to around 51,000 it hit in 2017 during the Nawaz Sharif government.
The Pakistani rupee has already plunged to an all-time low against the U.S. dollar of 154 rupees on the open and interbank markets.
Last year, Islamabad sealed a $6 billion IMF bailout package to prop up the country’s ailing economy.
The latest devaluation is seen as a result of a key IMF condition for Pakistan to institute a market-determined exchange rate without any government interference.
Pakistan's current foreign reserves stand at around $16 billion.
Apart from the IMF, Pakistan has recently received loans from longtime strategic partners Saudi Arabia, the UAE, and China to shore up its depleting foreign reserves.
By Aamir Latif in Karachi