Stocks hammered on fears of global meltdown

Pakistan stock market is witnessing the worst recession in the country’s history due to global outbreak of the deadly coronavirus. Business activities are experiencing difficulties due to which the stock market is seeing a steady decline.

Market was halted for 45 minutes again, after the decline of 1,642 points in the KSE-100 Index. This happened for the fifth time in the last eight days of trading.

At the start of business, the stock market lost 2,081 points, the worst market downturn in the country’s history.

Pakistani stockbrokers monitor share prices during a trading session at the Pakistan Stock Exchange (PSX) in Karachi.

While the coronavirus has put people’s lives at risk all over the world, many countries’ economies and economic policies are also becoming increasingly vulnerable to these negative effects.

Pakistan is also one of the countries where stock markets, currency appreciation and foreign investment are hit hard. Perhaps this is why the interest rate has been slightly reduced after the sudden drop in investment from abroad.

Global markets in turmoil after oil prices crash

Experts attributed the decline in interest rates to the market downturn and the announcement by the Governor State Bank. As per the monetary policy issued by State Bank of Pakistan (SBP), the policy rate has been reduced from 13.25 to 12.50. Interest rate cut failed to excite investors amid fears of coronavirus and a possible lock down.

The biggest blow, however, was the government’s economic policy through which they tried to promote ‘hot money’ in the country.

‘Historic Trading Halts in the Stock Market’

Pakistan Stock Exchange (PSX) comes on the list of markets that have been suffering from severe trading in the last week. Investors associated with this market are currently in a state of fear and uncertainty that the market may suffer further losses in the days to come.

KSE-100 Index: Trade halted for third time in a week

PSX benchmark KSE-100 Index is considered as a measure of buying and selling of shares in the stock market. The 100 Index tanked around 5.6% by the end of last week. In the stock market term, ‘trading halt’ is implemented when the market has fallen more than five percent in a five-minute period.

A blow to the ‘hot money’ policy

The decline in the value of the rupee is attributed to the withdrawal of foreign investment from government securities.

Government securities saw an immense increase in foreign investment emissions in the first eleven days of March 2020. In general, this investment is known as ‘hot money’, which is invested in short-term government bonds.

KSE-100: Single largest slump in history of over 2,000 points

Government bonds are an attractive option for investors around the world due to high interest rates in Pakistan. A record decline in the share prices of oil and gas sector was seen after the reduction of crude oil prices in the global market.

Pakistan Stock Exchange, where investors and brokers invest billions of rupees a day, small investors here also invest a few thousands. This investor is called ‘day trader or retail investor’ in the stock market.

This day trader makes a profit by investing for a short time to earn little profits. The recent downturn in the stock market has adversely affected these day traders.

A large investor has high holding power and can wait for the market to grow without selling his capital for long, but retail investors do not have enough space to hold shares of a particular company for a long time.