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Thursday, May 25, 2023

PSX lost 923 points amid hikes in fuel and energy prices

The selling trend continued in the Pakistan Stock Exchange for the second day as the KSE-100 index dropped 923.03 points to close at 41314.88, 2.23% down than yesterday.

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The downward trend in Pakistan Stock Exchange is being attributed to the enormous hike in fuel and energy prices.

The government announced on Thursday a 30 rupees hike in petroleum prices, which is the second hike of same amount in less than a week. The increase in the fuel prices have exacerbated the already high rate of inflation in the country. Moreover, the electricity rates have also been jacked up by 8 rupees per unit, adding to the troubles of the inflation-hit nation.

Read More: High petrol price forces govt to slash its fuel quota

The increments in the fuel and energy prices were announced in a late-night press conference by Finance Minister Miftah Ismail. The development is in line with the conditions set forth by the multilateral donor IMF for the resumption of Extended Fund Facility worth $6 billion, which has been stalled since April.

In a bid to relieve the public from the burden of global inflation caused by the Russia-Ukraine war, the PTI-led government had announced to freeze the fuel and energy prices till the next fiscal year through heavy subsidies.

The rolling back of subsidies on fuel and energy will help save the country from going bankrupt, nevertheless, the lower and middle class will face the brunt of another episode of inflation.

Besides the increase in fuel and energy prices, Moody’s downgrading of Pakistan’s economic outlook from stable to negative is another reason behind the negative trend in the PSX.

Read More: Moody’s demotes Pakistan’s economic outlook from stable to negative

While speaking to Dawn.com Aba Ali Habib Securities’ head of research Salman Naqvi pointed out several factors that contributed to the downwards trend in the stock market. The “market is under pressure due to uncertainties […] at political and economic fronts, the shifting of rating to negative from a stable position by Moody’s, skyrocketing inflation, rising interest rate on treasury bills and delay in the IMF”, he said.

Meanwhile, Mettis Global — a web-based financial data and analytics portal — has identified the widening trade deficit as the reason behind investor’s low confidence which in turn led to the enormous drop in the KSE-100 index. The country’s trade deficit has widened to an all-time high of $43.33 billion during the first 11 months of fiscal year 2021-22.

Read More: Pakistan’s balance of payments crisis to worsen: APTMA warns