Inventories tumble due to higher imports and trade gap

KARACHI:

The bears maintained their grip on the Pakistani stock market over the past week and the benchmark KSE-100 remained under pressure as the economics team’s failure to stop the soaring import bill and rapid expansion. of the trade deficit pissed off market players.

The combination of these two factors, coupled with double-digit growth in inflation, caused the KSE-100 index to drop 881 points, or 2% on weekdays, which closed at 43,233. an alarming import bill for November 2021 and a significant increase in limit yields at the recent treasury bill auction due to the higher Consumer Price Index (CPI) reading than expected, ”said a report from Arif Habib Limited. .

On Monday, stock trading started sharply higher due to the expected receipt of $ 3 billion from Saudi Arabia for a deposit at the State Bank of Pakistan before the end of the week. Additionally, investors opted to pick stocks after the KSE-100 index showed stability despite a drop in global markets last weekend due to the discovery of the Covid-19 Omicron variant.

A $ 10 a barrel drop in international crude oil prices also raised hopes of lower domestic prices for petroleum products, fueling bullish trading on the stock market.

The surge was short-lived as the market reversed the trend on Tuesday amid strong foreign sales before the reclassification of the Pakistan Stock Exchange, which was downgraded to the Frontier Markets Index by Morgan Stanley Capital International (MSCI). However, the stock market reclassification drew investors in and the index paused and climbed higher midweek.

Thursday’s session sounded the death knell for investors as the market plunged more than 2,100 points in the fourth-worst sell-off in stock market history due to soaring inflation and rising unforeseen imports.

Pakistan reported a record import figure of around $ 8 billion for November, signaling a further rise in inflation, a deterioration in the balance of payments and a widening trade deficit.

In contrast, November inflation entered double digits, standing at 11.5%. Additionally, a surge in Treasury bill yields at the last auction signaled further monetary tightening on the part of the State Bank of Pakistan in the upcoming monetary policy statement. All these developments shook the stock market and triggered a bloodbath.

There was a bit of a breather in the last session on Friday as the market ended on a flat note after investors swept aside the pessimism.

The continued weakening of the rupee also weighed on the trading environment, fueling selling pressure throughout the week. The currency closed the week at a new all-time low of 176.77 against the US dollar.

Average daily traded volumes rose 21% on weekdays to 319 million shares, while average daily traded value jumped 51% on weekdays to $ 90 million.

In terms of sectors, the downward contribution came from technologies and communication (198 points), cement (165 points), oil and gas exploration companies (101 points), textile composites (68 points) and food and personal care products (67 points).

In contrast, the sectors that contributed positively were commercial banks (59 points) and oil and gas marketing companies (20 points).

Foreign sales continued during the week, reaching $ 62.8 million, from $ 39.2 million in net sales the week before.

Significant sales were observed in commercial banks ($ 27.2 million) and cement factories ($ 14.8 million). Domestically, purchases were reported by businesses ($ 25.7 million), followed by individuals ($ 16 million).

Posted in The Express Tribune, December 5e, 2021.

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