On Monday, shares at the Pakistan Stock Exchange (PSX) fell sharply, with the KSE-100 index dropping over 1,100 points, reflecting a trend seen in global markets.
By 2pm, the KSE-100 index had declined by 724.96 points, or 0.93%, settling at 77,501.02 points from a previous close of 78,225.98. It eventually closed at 77,084.48 points, down 1,141.50 points or 1.46% from the prior close.
Topline Securities’ CEO, Mohammed Sohail, attributed the bearish trend at PSX to global market movements, noting a less intense selling pressure locally. He mentioned that investors are waiting for global market stability before making moves.
Chase Securities’ director of research, Yousuf M Farooq, linked the market reaction to a global sell-off driven by concerns over a US economic slowdown and a potential rate hike by the Bank of Japan.
Reuters reported that at least two Bank of Japan board members advocated for an early rate increase, highlighting a hawkish stance that could lead to further hikes.
Farooq also mentioned a brief rally in oil stocks following the appointment of Muhammad Ali as a special assistant to the Prime Minister, aimed at addressing circular debt issues. Conversely, cement stocks in Punjab faced pressure due to new sector taxes.
Tahir Abbas of Arif Habib Limited pointed out that the market faced downward pressure from both global sell-offs and domestic political uncertainties. AKD Securities’ Awais Ashraf echoed this sentiment, noting that the KSE-100 index was impacted by global equity downturns but expected less severe effects on local stocks due to their low price-to-earnings ratios and reduced foreign involvement.
Globally, markets were in turmoil, with Japan’s Nikkei dropping 12.40% and the Topix down 12.48%, as fears of a US recession led to significant sell-offs. European stocks also fell, with France’s CAC 40 down 2.1% and Spain’s IBEX 2.8%.
US Treasury bonds saw increased demand, with 10-year yields hitting 3.723%, the lowest since mid-2023. Market expectations now include a 78% chance of Federal Reserve rate cuts in September, with analysts predicting up to 122 basis points of cuts this year.
Goldman Sachs has raised its 12-month recession odds to 25%, anticipating 25 basis point cuts in September, November, and December, while JPMorgan forecasts a 50% chance of a US recession and expects a 50 basis point cut in September and another in November.
