Malik Nasir Mahmood Aslam describes the volatility of
Pakistani stocks
The prevailing deep anxieties over the state of economy in the country have given rise to an almost long term depressive tendency in the volatile Pakistan stock exchange trade. The intense volatility experienced by the stock exchange is the logical outcome of the continuous instability in the country with apparently no end in sight of all the travails. The stock trade is found subjected to intense fluctuation that could be gauged by the fact that a bullish trend is hardly maintained before the bears snatch away the advantage. One can witness three days of bullish trend but then it is replaced by deep falls in stock prices negatively impacting the cumulative business sentiment in the country.
The lack of business confidence has played a major part in depressing the Pakistani national economic activity plunging the country in unprecedented economic problems. With all the indicators pointing towards further downward trend in the economy, the stock trade also is influenced by such negativity and remains inconsistent in its performance.
Just last week another bull-run was recorded at the Pakistan Stock Exchange (PSX) as the market resumed the trading session on a positive note and processed to make an intraday high of 1209.79 points after the government took positive measures to get in-line with the IMF prerequisites before the resumption of talks for the revival of the IMF Programme. Major confidence booster for the investors proved to be the free float of exchange rate determined by the market as volumes soared up across the board. However, after witnessing three consecutive bullish sessions, at end of the week, PSX closed on a negative note as investors opted to take profits. The market opened in the red zone and traded in the same zone with sluggish activity throughout the first trading owing to the rupee dollar parity and political instability. However, the bears took charge soon after as the index plunged down 440.97 points as investors opted to square-up their positions due to the rollover week. Volumes remained healthy as investors are optimistic about the upcoming IMF teams visit for the 9th review of the Extended Fund Facility from the IMF Programme.
The market sentiment is deeply influenced by the fast changing situation the country finds itself in as it shows strong recovery after the government’s decision to make tough decisions to seek IMF programme revival and was also helped by investor speculation over likely help from the United States to revive the programme as well as financial support from the United Arab Emirates and Saudi Arabia played a catalyst role in the bullish activity. It was a welcome recovery as the index had shed nearly 2,000 points in the previous week on political instability after Punjab and Khyber Pakhtunkhwa assemblies were dissolved. This instability deeply clouded investor perception and they were unwilling to be confident about the future prospects. Since the stock market is the primary pedestal of creating wealth, therefore, any fledgling activity on this platform negatively affects the cumulative economic performance of the country. It is more than clear that the investor confidence is badly required to be reoriented otherwise it would be almost impossible to restore it.
Unfortunately, the depressed state of stock trade in the country has been continuing since some time as it was reported that the PSX was one of the worst performers last year (2022) with the benchmark of share prices settling at 9.4 per cent down from 2021. It was reported that the stock market stayed under pressure because of economic and political problems throughout 2022. As 2022 witnessed a 22 per cent fall in the rupee’s value against the dollar, the dollar-based return of the KSE-100 index remained 29 per cent. It was however pointed out that the downward swing on the national bourse was in line with an international trend as global stock markets lost $18 trillion in 2022 with a drop of approximately 20 per cent in the World Index of MSCI and its performance was rated as the worst since the 2008 financial crisis.
Accordingly throughout last year trading activity on the PSX remained dull owing to macroeconomic issues in 2022. The average daily traded volume in the ready market PSX went down 52 per cent year-on-year to 230 million shares. Similarly, the average daily traded value dropped 59 per cent to Rs.7 billion which was the lowest level since 2019. In the futures market, volume and value per day were also down 33 per cent and 56 per cent. The stock market also underperformed in other assets with treasury bills, money market funds and property indices posted returns in the range of 12-14 per cent in 2022. As for the raising of fresh capital on the stock market, only three offerings took place in 2022 as opposed to eight a year ago. The number of offerings was also the lowest since 2019 when the PSX witnessed only one offering. Foreign corporate selling continued in 2022 with a net sale of $127 million. In the last seven years, foreign corporates have sold shares worth $2.5 billion. Local mutual funds and insurance companies also trimmed their equity holdings in 2022. TW
Volatile Pakistan Stock Exchange
ByMalik Nasir Mahmood Aslam
Seasoned social activist
Dated
February 5, 2023
Malik Nasir Mahmood Aslam describes the volatility of
Pakistani stocks
The prevailing deep anxieties over the state of economy in the country have given rise to an almost long term depressive tendency in the volatile Pakistan stock exchange trade. The intense volatility experienced by the stock exchange is the logical outcome of the continuous instability in the country with apparently no end in sight of all the travails. The stock trade is found subjected to intense fluctuation that could be gauged by the fact that a bullish trend is hardly maintained before the bears snatch away the advantage. One can witness three days of bullish trend but then it is replaced by deep falls in stock prices negatively impacting the cumulative business sentiment in the country.
The lack of business confidence has played a major part in depressing the Pakistani national economic activity plunging the country in unprecedented economic problems. With all the indicators pointing towards further downward trend in the economy, the stock trade also is influenced by such negativity and remains inconsistent in its performance.
Just last week another bull-run was recorded at the Pakistan Stock Exchange (PSX) as the market resumed the trading session on a positive note and processed to make an intraday high of 1209.79 points after the government took positive measures to get in-line with the IMF prerequisites before the resumption of talks for the revival of the IMF Programme. Major confidence booster for the investors proved to be the free float of exchange rate determined by the market as volumes soared up across the board. However, after witnessing three consecutive bullish sessions, at end of the week, PSX closed on a negative note as investors opted to take profits. The market opened in the red zone and traded in the same zone with sluggish activity throughout the first trading owing to the rupee dollar parity and political instability. However, the bears took charge soon after as the index plunged down 440.97 points as investors opted to square-up their positions due to the rollover week. Volumes remained healthy as investors are optimistic about the upcoming IMF teams visit for the 9th review of the Extended Fund Facility from the IMF Programme.
The market sentiment is deeply influenced by the fast changing situation the country finds itself in as it shows strong recovery after the government’s decision to make tough decisions to seek IMF programme revival and was also helped by investor speculation over likely help from the United States to revive the programme as well as financial support from the United Arab Emirates and Saudi Arabia played a catalyst role in the bullish activity. It was a welcome recovery as the index had shed nearly 2,000 points in the previous week on political instability after Punjab and Khyber Pakhtunkhwa assemblies were dissolved. This instability deeply clouded investor perception and they were unwilling to be confident about the future prospects. Since the stock market is the primary pedestal of creating wealth, therefore, any fledgling activity on this platform negatively affects the cumulative economic performance of the country. It is more than clear that the investor confidence is badly required to be reoriented otherwise it would be almost impossible to restore it.
Unfortunately, the depressed state of stock trade in the country has been continuing since some time as it was reported that the PSX was one of the worst performers last year (2022) with the benchmark of share prices settling at 9.4 per cent down from 2021. It was reported that the stock market stayed under pressure because of economic and political problems throughout 2022. As 2022 witnessed a 22 per cent fall in the rupee’s value against the dollar, the dollar-based return of the KSE-100 index remained 29 per cent. It was however pointed out that the downward swing on the national bourse was in line with an international trend as global stock markets lost $18 trillion in 2022 with a drop of approximately 20 per cent in the World Index of MSCI and its performance was rated as the worst since the 2008 financial crisis.
Accordingly throughout last year trading activity on the PSX remained dull owing to macroeconomic issues in 2022. The average daily traded volume in the ready market PSX went down 52 per cent year-on-year to 230 million shares. Similarly, the average daily traded value dropped 59 per cent to Rs.7 billion which was the lowest level since 2019. In the futures market, volume and value per day were also down 33 per cent and 56 per cent. The stock market also underperformed in other assets with treasury bills, money market funds and property indices posted returns in the range of 12-14 per cent in 2022. As for the raising of fresh capital on the stock market, only three offerings took place in 2022 as opposed to eight a year ago. The number of offerings was also the lowest since 2019 when the PSX witnessed only one offering. Foreign corporate selling continued in 2022 with a net sale of $127 million. In the last seven years, foreign corporates have sold shares worth $2.5 billion. Local mutual funds and insurance companies also trimmed their equity holdings in 2022. TW
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