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Thursday, February 15, 2024

PSX responds to the Fed interest rate hike

A day earlier, the Fed raised interest rates by 75 basis points for the third time in a row as a forceful action to control inflation.

The Pakistan Stock Exchange (PSX) fell for the fourth straight session this week as investors responded to the US Federal Reserve hiking the key interest rate again.

By 12:50pm, the benchmark KSE-100 index had dropped 489.30 points, or 1.19 percent, to 40,476.28 points.

According to Amir Shehzad, Director of First National Stocks Limited, equities around the world had declined following the US Federal Reserve’s decision, and the PSX had also fallen in accordance with the worldwide trend.

Read more: Minor change in oil prices on anticipation of hike in Fed rate

A day earlier, the Fed raised interest rates by 75 basis points for the third time in a row as a forceful action to control inflation.

Federal Reserve Chair Jerome Powell has stated that policymakers will continue to move aggressively to stabilize the economy and avoid a repetition of the 1970s and early 1980s, when inflation in the United States became uncontrollable.

PTI Chairman Imran Khan’s announcement of forming a new movement amid political instability, according to Shehzad, has further affected investor confidence.

Furthermore, as the rupee approaches a record low versus the dollar, investors were preferring to sell on fears of further rate hikes by the State Bank of Pakistan (SBP), he added.

Topline Securities CEO Mohammad Sohail had a similar sentiment. “The market is down primarily as a result of rising interest rates and plummeting currency.” This pattern has been witnessed globally since the Fed is rapidly raising interest rates, and all markets and regional currencies are falling,” he said.

Raza Jafri, Head of Research at Intermarket Securities, concurred that the KSE-100 was mirroring the downturn in global markets following the Fed move. “Domestic political noise is also affecting sentiment, and temporarily overshadowing positives such as a much-reduced current account deficit for August and positive statements from US Special Envoy for Climate Change John Kerry regarding potential US assistance for helping rebuild resilient infrastructure in Pakistan,” he added.