Pakistan Stock Exchange continues to bleed
Market fell 10,000
points in two months
Pakistan
Stock Exchange on Monday March 16 lost another 2,416 points to close at 33,644.
The 100 benchmark index lost 6.7% in a single day to close at the levels last
seen on October 24-2019. The benchmark index has lost 17.4% since January 2020.
The Pakistani
stock market is under pressure from the selling by foreign investors. The
international investors are selling their shares and looking for save heavens.
The prices of oil are already down. So the investors are looking for alternate
safe options for their investments.
The index
has lost nearly 10,000 points from the recent high level of 43,218 on January
13-2020. The Stock market has lost 12% since the first reported case of
COVID-19 (coronavirus) on February 26.
The market capitalisation of the Pakistan
Stock Exchange (PSX) stood at Rs7.85 trillion on Dec 20-2020 when the first
case of the Coronavirus surfaced in China. But it stands now at Rs 6.54 trillion-a
signifying loss in the colossal sum of Rs 1.31 trillion in less than two months.
The massive
sell-off at the stock market has ruined investors, many having deprived of all
of their life savings. The small investors have hit the hardest as they lost hundreds
of billions of rupees within days.
Pakistan Stock
Exchange followed the global meltdown of markets from Wall Street to Asia. The
stock markets around the world has witnessed sharp fall in the shares and
volumes. The investors are panicking on the reports that coronavirus is going
to have bigger impact on the world economy than estimated earlier. The world
economy is expected to slow down and fears of another recession are growing.
The spread
of coronavirus in different countries is expecting to affect
aviation-tourism-retail and other businesses. The lock down in different
countries will have impact on world production and trade.
The last
week saw the investors dumping shares at stock market and taking refuge in gold
and dollars. Last week was catastrophic as stock market continues to bleed. It
started from the first trading day when a bloodbath was witnessed that sent
shares reeling and the benchmark KSE-100 caved in by 2,302 points or 6.41 per
cent-one of the heaviest loss in a single day during the last decade.
All of that
happened in just 7 minutes of the start of trading. The episode was repeated on
Thursday and Friday. The first day of this week saw the same panic and anxiety.
The market was rescued from crash by the new circuit breaker regulation made
effective from December last year that provides the ‘’trading halt’’ mechanism
which is triggered if the market capitalisation based KSE-30 index sinks by 4pc
during the session and is unable to wriggle out of it in 5 minutes.
It provides
a cooling period of 45 minutes which enables brokers to collect mark-to-market
margins from leveraged players to mitigate systemic risk at the market. On all four
occasions (Monday, Thursday, Friday, and again Monday) trading was brought to a
halt and resumed after 45 minutes.
Khalid Bhatti
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