The Pakistan stock market was trading at 42,000 points in the last days of January 2020. However, according to today’s latest situation, the stock market has fallen below the level of 39,500.
The stock market has plunged more than 3000 points in the last one month, whereas the government is calling the recovery of 1312 points yesterday, as economic stability.
In this regard we contacted Mohammad Farhan, Senior Equity Sales Officer of MM Securities and he highlighted some important points that affected the bearish trend of stock market. The points are stated below.
The question is how the stock market fell by 3000 points in the last 1 month, from the end of January to the beginning of March. Let’s take an in-depth review of this situation.
The Stock Exchange
A stock exchange is a locale where financial products are traded, where producers and consumers or buyers and sellers meet and things are bought and sold.
For financial products, these things that are traded include stocks, bonds, commodities, currencies, derivations and so on.
The stock market is an important sector of the domestic economy, which directly impact by various media news and economic factors related to domestic and international affairs.
Why stock markets Crash?
Stock Market usually crashes due to a prolonged period of rising stock prices and excessive economic optimism, a market where price-earnings ratios exceed long-term averages, and extensive use of margin debt and leverage by market participants. Other aspects such as natural disasters, war, large-corporation hacks, changes in federal laws and regulations or highly economically productive areas may also influence a significant decline.
PSX situation (3rd March)
The stock market could not maintain the upward trajectory regained one day earlier and declined today over increasing economic instability and lack of positive triggers.
As above mention, PSX was trading at 42,000 points in last days of January 2020 and today the market closed at 39,199.68 points. The benchmark KSE 100 witnessed a decline of 96.62.
The total volume of the script was 175.61 million valued at Rs 7.571 billion.
Reasons for PSX decline
Some of the major reasons stated by Mohammad Farhan, Senior Equity Sales Officer of MM Securities are:
Hang General Pervez Musharraf
A Special Court in Islamabad handed General Pervez Musharraf death sentence under article 6 of the Constitution, after which the market fell.
The stock market trading at 41,000 points dropped 948 points on the 100-index on December 19. The stock market closed at 40,655 points on that day.
Coronavirus
The main reason behind the crash of the world markets is the newly originated virus namely coronavirus. In December last year, the new coronavirus was diagnosed in Wuhan – state of China. It is also important to understand how our neighbor China affects the international economy.
China is one of the major exporters and importers in the world. After the coronavirus was diagnosed in China, state of emergency was triggered and created a curfew-like environment in all the virus-affected areas, including the province of Hubei, which stopped import and export.
Due to this process the Chinese stock market was badly affected and the economic ties with other countries were also affected.
So far the coronavirus has caused billions of trillions of damage to markets worldwide, including China, Japan, the US, Italy, the United Kingdom, India and Pakistan.
All of this has a direct impact on Pakistan as well. However, at the end of last month, the coronavirus has also entered our homeland, which is understood affected by the stock market.
Sheikh Rasheed statements
Irresponsible statements of federal minister Sheikh Rasheed has also had negative effects on the stock market.
In November 2019, Sheikh Rasheed predicted the Pak-India war until December. The minister’s prediction may not have been fulfilled, but the stock market continued to trade negative on that day.
General Qamar Javed Bajwa
The way the judiciary raised the issue of extensions of Army Chief General Qamar Javed Bajwa, also affected negative on the stock market.
What’s Next?
Prime Minister Imran Khan Government, with all its honesty, programs for the poor, youth and an initiative of income and assets program for small businesses, seems to be failing to improve the economy. The stability of the government is the solution to every economic problem in the country, including the stock market. Policymakers have to use the carrot and stick approach to penalise the non-compliant listed companies and incentivise businesses to list their companies in the market.
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