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Coronavirus hits Pakistan Stock Exchange: Bloodbath amidst mounting fears

Karachi Stock Exchange experienced a bloodbath on Monday as fears of coronavirus spreading across China and other Asian countries grow. More than 2600 people have died in China alone and cases have been reported from Iran and Afghanistan. Pakistan has closed its borders with Iran and PIA has cancelled its flights to China and Japan. Earlier Stock Markets had started to relax when Pakistan did not fell into FATF Black List and tensions between govt and allies had eased.

KARACHI, February 24 – The Pakistan Stock Exchange (PSX) has been experiencing a bloodbath on Monday following a spike in new coronavirus cases that refuelled investor anxiety about China’s disease outbreak.

More than 2600 people have died in China due to Coronavirus, deaths have been reported from France, Italy, United States and now from Iran and Afghanistan. World Health Organization (WHO) had finally declared the Coronavirus epidemic as a Global Emergency though Chinese National Health Commission insists that significant spread beyond China is not likely. So far, no known case of coronavirus has been detected in Pakistan.

But Karachi stock markets were in panic on Monday. The continuous dull and drab activity with bulls and bears managing to secure an upper hand in turns amid absence of several other triggers pushed the benchmark KSE-100 Share Index level below 40,000 after massive drop of 819.55 points or 2.04pc.

The SBP in the latest monetary policy statement kept the interest rate unaltered and pushed selling in the leveraged sectors such as cement and steel

As of 11.24 am, the Index reached 39,429.67 adopting a negative trajectory for the latest session. The market opened at 40,238.25. The apex of the day remained 40,249.22 (the previous close on Friday) and 39,425.56, the lowest so far.

Fears of FATF Black List & Coronavirus

In the previous week, the market struggled for its sustainability as confusion and uncertainty surrounded potential investors until Friday when the FATF maintained Pakistan’s status in its grey list of countries with inadequate controls to restrict money laundering and terror financing. Fears that Pakistan may slide into FATF Black List were proved untrue. But lingering concerns of FATF together with uncontrollable spread of coronavirus that has adversely affected the Asian economy, in particular, have restricted the stock market to grow.

Read more: Coronavirus reaching Pakistan: Can Pakistan fight it like China did?

Among other persisting factors were the large suspension of imports from China, which had been hammering the stock market. Also rumours of strife and political disagreements between coalition parties in the government were affecting the business confidence. However, most of these fears were settled after meetings of allies with the ruling PTI.

Positive sentiment: PM postponed increase in gas & electricity prices

On a positive note, investors were relieved as the prime minister announced no change in gas and electricity prices until at least the next budget against rumours of an earlier increase. Moreover, the foreign exchange reserves continued to rise for the 20th week, crossing the $12.5bn mark.

Going forward, market gurus expected the bourse to trade sideways to positive as they react to the Friday decision of the FATF review. Further, the approval of IMF’s third tranche and ban imposition by the government on export of essential food items so as to control rising inflation along with deferment of hikes in utility rates till June 2020 is also expected to impact the market trend positively.

Investors may also be encouraged by the improvement in macroeconomic indicators such as the current account deficit shrinking by 72pc in 7th month of the financial year (FY20). The market may also take cue from the developments such as the planned visit of China’s president to Pakistan and the conclusion of the US-Taliban peace talks.

Read more: Imran Khan reiterates Pakistan’s support fighting against Coronavirus

Since mid-January, investors have been adopting extremely cautious behaviour after more headlines cover mounting deaths due to coronavirus, a plunge in global crude oil prices, unchanged main policy rate by the State Bank of Pakistan at 13.25 percent for the next two months and the overall political uncertainty in the country.

The SBP in the latest monetary policy statement kept the interest rate unaltered and pushed selling in the leveraged sectors such as cement and steel. Concerns over higher than expected reading of inflationary pressures and political uncertainty sparked by coalition partners of the government also kept investors away from the market.

GVS Desk with input from Agencies (Online/TR/FF)