Lahore - With the Pak Rupee recording a new low against the US Dollar (at Rs144) on Friday and the State Bank’s unexpected Interest rate hike of 150bps afresh in investors’ memory, a fire sale ensued during Monday’s trading session.

The KSE-100 index lost 1335 points (or -3.3 percent), closing at 39,161 level. The index closed below 40,000 level for the first time in 25 sessions (Oct 25, 2018) and lost 1000+ points for the first time in 38 sessions (Oct 08, 2018).

Around 164 million shares worth Rs6.5 billion were traded at the exchange, with 292 of the 344 active scrips declining in value, only 39 advancing and 13 remaining unchanged.

Sector-wise Fertilizer, Commercial Banks and Cements were the worst performers as they ate away 629 points from the index, cumulatively. To note no sector closed in the positive in the session.

The fall came after the State Bank of Pakistan (SBP) raised key lending rate by 150 basis points (bps) to 10 per cent on Friday and a fall in the value of the rupee on the same day. The benchmark index has shed more than 3,000 points during the tenure of the current regime. The benchmark KSE-100 Index had closed at 42,447 points when the PTI government came into power.

Investor participation regressed drastically today as traded volumes fell 39 percent to 164mn, while traded value declined 73 percent to US$47mn.

In a notice to the exchange, Pakistan Refinery Ltd (PRL) announced that PSO has a total shareholding of 52.67 percent in PRL. Effective December 01, 2018, PSO holds 154,875,000, ‘Class B’ shares in PRL.

Experts said that the government is making preparations for increasing the prices of gas, which will result in an additional burden of Rs91 billion on the consumers. The Sui Northern Gas Pipelines Limited has requested the Oil and Gas Regulatory Authority (Ogra) to increase the gas prices.

The central bank’s latest measures are aimed at cooling down aggregate demand in the economy to fix it. The measures would accordingly lower down demand for commodities like fertiliser, steel and cement. It is due to this reason that the relevant stocks are facing massive selling at the exchange.

The analysts say the interest rate hike to a six-year high of 10 per cent and an all-time low rupee at Rs139.05 to the US dollar has made an investment in government paper much more attractive than stocks. Pakistan Investment Bond now offers a 12% return that has made stocks unattractive.

While the government has been pretty comfortable politically, the economy remains in the eye of the storm. The government has had to grapple with fast depleting foreign exchange reserves and ever-widening deficits.

The rupee closed at 139.06 to the dollar in the interbank market on Nov 30 — a depreciation of 3.8pc in its value. Bankers said the rupee plunge happened as the SBP silently watched the demand for dollars rising on imports and external debt payments. It was so intense and sudden that the dollar surged to Rs144 at one point on Friday before closing lower.

Also on Nov 30, the SBP raised its key policy rate by 150 basis points to contain inflation, a product of several economic factors, most notably a weaker rupee.

Spectators and analysts, however, had expected just a 1pc hike in the policy rate adding that the increase brings the policy rate into double digits amid reports that the move is linked to talks with the International Monetary Fund (IMF) on a bailout package.

The timing of the twin moves suggests Pakistan has finally started fulfilling some pre-conditions of a fresh IMF loan, though Finance Minister Asad Umar has said he is in no hurry to get it. The government does not disagree with the Fund’s concerns on economic fundamentals, bankers and analysts say.

Also, it does not disagree with the Fund’s prescription for curing our ailing economy: let the overvalued rupee find its real market worth, minimise energy subsidies, reduce development and non-development expenses, hike interest rates — and choose economic stability over growth in the process.