ISLAMABAD (PEN) : Market dips by over 2,000 points as cement stocks face pressure from Khyber Pakhtunkhwa’s royalty hikeThe Pakistan Stock Exchange (PSX) experienced a sharp decline today, with the KSE-100 Index falling by 2,002.55 points, or 1.69%, closing at 116,439.62. This drop follows a high of 118,797.70, which marked a slight increase of 0.3% during intraday trading. However, the index quickly retreated to a low of 116,257.51, reflecting a 1.84% decrease from the previous session’s closing of 118,442.17.
Investor Sentiment Dampened by Cement Sector Developments
Market analysts point to the cement sector as a key factor behind the sharp decline. Investor confidence took a hit due to reports of the Khyber Pakhtunkhwa (KP) government increasing royalty charges on cement production, which has led to a fall in cement stock prices. According to Sana Tawfik, Head of Research at Arif Habib Limited, “The news of increased royalty in KP has caused a slump in cement stocks, pulling the market down.”
Tawfik further noted that additional factors contributing to the drop include low trading volumes ahead of the Eid ul Fitr holidays and the rollover week, which typically brings volatility to the market. “These three factors—cement sector concerns, low trading volumes, and rollover week—are the primary reasons for today’s decline,” she added.
PSX’s Recent Rally Interrupted
This sudden downturn follows a strong rally at the PSX in the preceding week, driven by investor optimism surrounding Pakistan’s negotiations with the International Monetary Fund (IMF) and anticipated reforms in the energy sector. However, the latest developments have slowed the market’s momentum.
In a blow to the real estate sector, the IMF recently rejected Pakistan’s request to lower transaction taxes for property purchases. Although earlier government statements suggested an agreement in principle to reduce withholding taxes by 2% starting April 1, the IMF clarified that no such concession had been approved. This is consistent with previous refusals from the IMF regarding tax reductions in other sectors, including tobacco and beverages.
Macroeconomic Indicators Show Mixed Signals
Despite the market’s recent setbacks, some positive signs persist. The Sensitive Price Index (SPI), which tracks short-term inflation, recorded a 0.35% decline in the week ending March 20, signaling easing inflationary pressures. Meanwhile, Finance Minister Muhammad Aurangzeb remained optimistic about the ongoing talks with the IMF, asserting that the negotiations were nearing completion with no significant obstacles in the way.
Although the PSX ended a six-session winning streak on Friday, with the KSE-100 Index falling by 327.60 points, or 0.28%, to 118,442.17, analysts remain hopeful that positive developments will help stabilize market conditions in the near future.
As Pakistan navigates these challenges, investors will closely monitor further updates on the IMF talks and potential changes in the country’s economic policies.
