Daily Times

Detesting investors are grappling over another domino effect of resurging Covid-19 in Pakistan, as market sentiments continued to dwindle at Pakistan Stock Exchange (PSX). The panic selling witnessed over the past four trading sessions at PSX benchmark Kse-100, resulted in nearly 3,900 points lost, which has raised fears of another stock market crash witnessed in March, earlier this year.

Pakistan’s stock market had witnessed a turbulent journey this year ever since the covid-19 pandemic has struck the world, which triggered global lockdown and halted economic activity. The stock market dropped over 23% or over 8,000 points during the peak of the first wave of Covid-19 in March (highest fall in the last 10 years). However, the index managed to recover all its losses by September, and touched nearly 43,000 index level during that month. The exhilarating recovery didn’t just defied pundits’ projections, but also posted one of the best returns across the global markets. Country’s stock market also managed to make headlines across the world, after it was tagged the best performer in Asia and the fourth-best-performing stock market in the world with 38.5% return on investment rate, according to the report by New York-based global markets research firm,marketcurrentswealthnet.com, titled Denmark and Pakistan: the surprising stock markets that outperformed in 2020.

The recent spell of panic selling has created qualms of another market crash among equity investors as Pakistan is set to embrace for the second wave of Covid-19, which may trigger another round of lockdowns across the country. Pakistan has witnessed an uptick in the Covid-19 positivity ratio in recent days, as last week Minister for Planning, Development and Special Initiatives Asad Umar claimed that the national positivity rate had exceeded three per cent after more than 70 days. Taking measures to contain the virus spread, the National Command and Operation Centre (NCOC) had announced a schedule for commercial and social activities in 11 cities most vulnerable to the virus. These cities include Karachi, Lahore, Islamabad, Rawalpindi, Multan, Hyderabad, Gilgit, Muzaffarabad, Mirpur, Peshawar and Quetta.

The market pundits however, are hopeful, that the PSX will be on the recovery course in the following trading sessions, noting that the recent upheaval at the index was not only triggered by the sudden rise in Covid-19 cases in the country, but was also a result of the series of major other factors.

According to the research reports of the major brokerage houses, the selling pressure witnessed during the previous few sessions was primarily trigger due to the trading activity which was knocked by the rollover week, wherein phenomenal activities of offloading the stocks purchased earlier at attractive valuation kicked in. Moreover, investors also stayed on the sidelines due to Financial Action Task Force (FATF) review -the virtual plenary of the FATF, which began on Wednesday , Oct 21st and continued and till October 23rd. The session was supposed to take the final call on Pakistan’s continuation on its grey list after a thorough review of Pakistan’s performance in fulfilling the global commitments and standards in the fight against money laundering and terror financing. Investors were expecting Pakistan to avoid the black list and stay in grey list, since from a total of 27 FATF mandates given by anti-money laundering body, Pakistan has so for cleared 21. Following the market expectations, the anti-money laundering body kept Pakistan in the grey list until February 2021.

Adding insult to the injury, the investors were also piqued due to rising political uncertainty and law order situation during October. The market sentiments took a hit last week after a deadly terrorist attack, which ripped through a seminary in Peshawar, killed at least 8 people and injured more than 110 people. Moreover, investors’ participation also receded over rising political as Pakistan Democratic Movement (PDM), a coalition of nearly dozens of political parties held large political gatherings in major cities to oust the PTI led government and resorted to confrontation with the national intuitions.

Taking cues from the foreign equity markets, the index also lost ground to global panic selling, as international markets retreated ahead of U. S presidential elections November 3rd and rising Covid-19. Last week, Global investor sentiments witnessed a brief meltdown as investors feared that a contested U.S election result would trigger a political power struggle in Washington. According to the Figures released by NCCPL , foreign investors sold $39.1 million worth of stocks during October, with foreign corporates doing the bulk of selling at $41.96 million.

In the midst of these series of events, should PSX investors be spooked? There is no absolute answer against uncertainty, however, the market may regain ground, soon after the effect of roll over week is over. The market is expected to digest exceptional corporate quarterly financial results which have cemented the investors’ confidence, moreover, fresh buying is expected in the following trading sessions as value hunters will enter the market to accumulate over sold stocks at attractive rates. The stock market will also respond to appreciation of Pakistan’s rupees’ against the dollar in the interbank currency market, and positive Balance of payments (BOP) figures, as according to the central bank, September was the third consecutive month where current account posted a surplus. Cumulatively, the country’s current account witnessed a record surplus of $792 million in the first quarter of the current fiscal year. While, major other economic indicators also indicate towards a strong market rally in the following sessions, as country’s exports grew 29% and remittances grew 9% over previous during the month of September.

Risk, uncertainty, speculation, spike and swoon may qualify as permanent aspects of Equity markets and Covid-19 may have exacerbated the existing equation, but instead of panic, equity investors must hold their gut tight and embrace discipline to avoid losses, because according to the Wall Street tycoon, Peter Lynch “The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn’t changed.”