Stock market rises 5% in minutes for the first time
For the first time in its history, the KSE100 Index, a gauge to measure stock market performance, rose 5% within minutes of its opening on Friday and trading had to be halted for 60 minutes so investors could take fresh positions.
The bull run was triggered by Thursday night’s surprise rate cut by the central bank, which slashed the monetary policy rate by another 200 basis points, resulting in an overall drop of 4.25% since March 17.
The KSE-100 started on a bullish note, gaining more than 1,500 points by 10:52am when the temporary trade halt came into force.
If the KSE-30, which tracks the performance of the 30 large and most liquid stocks, moves 5% up or down from its opening value for five minutes, the rule is that trade must be halted for 60 minutes so investors can take fresh positions.
The market was trading above 32,800 points or a one-month high when trade was suspended.
This was the ninth time since March that the trade halt had to be enforced, but for the first time because of a rise in the market, the last eight trade halts were came into effect after a drop in KSE30 index.
The SBP, in an emergency meeting on Thursday, slashed interest rates, citing a negative economic outlook. Pakistan’s GDP is expected to contract 1.5% in the fiscal year ending June 30, 2020, the SBP said. The rate cut will help cushion the economic fallout from the outbreak and help jumpstart economic activity once the pandemic subsides, it said.
“Given the magnitude of the cut and its unexpected nature, we expect the Pakistan equity market to react positively, particularly if concerns on the currency do not reappear,” Intermarket Securities said in a note on Thursday evening.
The note said cyclical sectors, particularly cement, steel and autos should find most traction. “For banks, we flag that while there should be sharp margin compression on the cards, this should be partially offset by the likely realization of some capital gains on their bond holdings.”
They noted a few risks, including a further slowdown in GDP growth, a decline in corporate profits and prolonged trade disruption as a result of Covid-19 contagion.
This story will be updated later in the day
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