PSX Losses Linger as Coal Crushes Cement

Stocks on Wednesday extended losses led by cement as record world coal prices are seen denting the sector’s profitability big time, dealers said.

After losing 293 points or 0.7 percent the KSE-100 Shares Index closed at 44,373 points at Pakistan Stock Exchange (PSX).

Topline Securities in a post market note said equities continued to decline as benchmark index settled down after opening sideways.

“The market witnessed profit taking where the index made an intraday low … cements sector declined the most on higher international coal prices,” it added.

Coal prices from major exporters have scaled all-time highs recently, with Australia’s Newcastle prices rising roughly 50 percent and Indonesian export prices up 30 percent in the last three months.

Market was also subdued the by global energy prices hitting their highest since November 2014, with investors anxious that spiraling energy costs could force State Bank of Pakistan (SBP) to raise interest rate quicker than expected to combat rising inflation.

Traders also said the broader market weakness remained as energy stocks widened their losses, gripped by fears of a protracted economic recovery.

“Inflation is putting pressure on SBP to start raising interest rates more, and we saw that in last monetary policy meeting, suggesting more could come more quickly,” a trader said. Brokerage Arif Habib Limited said selling pressure continued unabated at the bourse, courtesy of foreign investors.

Eye-watering commodities prices, especially of coal have had their bearing on cement and steel sectors stocks and had ripple effects on oil and gas marketing companies and exploration and production sectors due to concerns over potential increase in circular debt emanating from rising energy costs, it said.

According to the brokerage report, a key conditionality from International Monetary Fund (IMF) for resumption of loan programme has been upward revision in electricity tariff, besides an end to subsidies and increase in tax revenues.

“These measures in part or whole are expected to dent earnings growth of the corporate sector in the coming quarters, which is reflecting on stock prices as well,” Arif Habib Ltd said in its report.

Ripple effects of selling in cyclical as well as oil & gas chain were observed in the overall market with significant selling pressure in TRG Pakistan among technology sector stocks.

Among scrips, UNITY led the volumes with 25.7 million shares, followed by TELE with 20.1 million, and WTL that posted a trade of 16.8 million.

Sectors contributing to the performance included cement (-91pts), textile (- 36pts), banks (-35pts), technology (-30pts), fertilizer (-24pts) and e&p (+36pts).

Volumes declined from 334.6 million shares to 252.8 million (-25 percent day-on-day). Average traded value also declined by 26 percent to reach $59.0 million as against $79.2 million.

Stocks that contributed significantly to the volumes include UNITY, TELE, WTL, TREET and BYCO, which formed 35 percent of total volumes.

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