Key Takeaways
- The KSE-100 Index dropped by 1,989.95 points or 1.13% at the opening of trading on Monday.
- Key sectors such as automobile assemblers and commercial banks saw significant selling pressure.
- Regional geopolitical tensions and rising oil prices dampened investor confidence.
The Pakistan Stock Exchange (PSX) experienced a sharp decline in its benchmark KSE-100 Index, with the index dropping by 1,989.95 points or 1.13% at the opening of trading on Monday morning. The massive selling pressure was evident across various sectors, including automobile assemblers, cement, commercial banks, fertiliser, oil and gas exploration companies, OMCs, and power generation.
According to the weekly market review, the PSX has been under heavy selling pressure for a second consecutive week due to escalating regional geopolitical tensions and a significant rise in international oil prices. The KSE-100 Index declined by 3.5% on a week-on-week basis, shedding 6,438.97 points to close at 175,802.80 points.
The conflict between the United States and Iran has intensified, with the US military launching its ninth consecutive day of attacks against Iran, which in turn struck targets across the region. This escalation has led to a rise in oil prices, with Brent crude climbing above $90 a barrel for the first time in over a month. U.S. crude also rose by 2.3% to $84.39.
The increase in fuel costs has raised concerns about inflation, despite recent positive consumer price data from the US. Futures markets now anticipate 29 basis points of Federal Reserve rate hikes by year-end, with a 60% chance of a rate rise as early as September. This shift has caused yields on 30-year Treasuries to surpass the psychological 5.0% barrier, potentially attracting funds away from equities and toward fixed income.
The global market reaction was mixed, with Asian share markets slipping amid fears of inflation and tech earnings reports. Japan’s Nikkei was closed for a holiday, while MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.3%. Chinese blue chips rose by 1.4%, but South Korea’s chip-heavy market lost an additional 4.2% after diving almost 9% last week due to retail investors being squeezed out of leveraged positions.
Investors remain cautious, questioning the sky-high valuations for chip and AI stocks. The Philadelphia Semiconductor Index has shed 10% in a single week, leaving it 20% down from its June record high. This volatility underscores the current market sentiment and the impact of geopolitical tensions on investor confidence.
