In Karachi, the Pakistan Stock Exchange (PSX) experienced a significant decline on Thursday, with the benchmark index plummeting over 1700 points or 3.83%. This drop was fueled by weak investor confidence stemming from the prevailing economic uncertainty in the country. As concerns grew about the economy worsening, investors sold off their shares amidst the rising rupee-dollar exchange rate.
From the start of trading, the KSE-100 index took a nosedive and slipped below the 45,000 level. The index's attempt to reach positive territory was hindered by the prevailing negative sentiment among investors. At 02:54 pm, the PSX stood at 44,475.06 points, reflecting a 3.83% decrease of 1,769.49 points compared to the previous day's close at 46,244.55 points.
Raza Jafri, the Head of Equity at Intermarket Securities, mentioned that the KSE-100 index is facing significant selling pressure due to a lack of confidence arising from the weakened economy. Investors are particularly influenced by the depreciating rupee, especially since the next review by the International Monetary Fund (IMF) is a few months away. The uncertainty around planned investment from the Gulf Cooperation Council (GCC) adds to the hesitation. Jafri added that while value buyers might return with a further dip, a meaningful valuation reevaluation requires clarity on politics and the economy.
Saad Ali, a Capital market expert, echoed similar sentiments, stating that the PSX is under pressure due to the consistent decline in the rupee's value, which worsens the inflation outlook before the upcoming Monetary Policy Committee (MPC) meeting in September. Ali also expressed concerns about potential public protests over power tariff increases, cautioning that any populist measures by the interim government could hinder talks with the IMF.
On a positive note, Ali mentioned that the ongoing MSCI rebalancing could attract foreign inflows, but he believed this wouldn't be sufficient to uplift market sentiment.