Benchmark KSE-100 index fell below 42,000-barrier during intra-day.
Analyst says interest rates at 16% is negative for corporate profitability.
KARACHI: The State Bank of Pakistan‘s unexpected increase in the interest rate shook investors’ confidence on the first day of the week, as the stock market took a hit with the benchmark KSE-100 index losing more than 850 points on Monday.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index had opened at 42,936.73, however, after losing 865.39 points, or -2.02% the index closed the session at 42,071.34 points.
Investors were concerned over the challenges faced by the beleaguered economy as cash-strapped Pakistan awaits funds from bilateral and multilateral partners.
The index remained on a downward trajectory, falling below the psychological barrier of 42,000 touching an intra-day low of 41,963.94 points.
In the morning, trading activity began on a negative note and the market fell steadily till midday when it touched its lowest mark for the day. Later, slight buying helped the bourse recoup some losses.
Benchmark KSE-100 index intra-day trading curve. — PSX data portal
Analyst Samiullah Tariq laid blame on SBP’s decision to increase the interest rate as a key factor for the drop in the KSE-100 index.
“[The] market wasn’t expecting a rate hike. That’s why it was reacting,” the head of research at Pakistan-Kuwait Investment Company told Geo.tv.
Capital market expert Saad Ali also blamed the “surprise interest rate hike” for the drop, adding that investors may be expecting more hikes given the inflation outlook.
“Interest rates at 16% or higher is significantly negative for growth and corporate profitability,” Ali told Geo.tv.
At the time the decision was announced by SBP, the markets had closed, which is why the KSE-100 index today went in the red at the opening.
Shares of 350 companies were traded during the session. At the close of trading, 47 scrips closed in the green, 294 in the red, and nine remained unchanged.
Overall trading volumes declined to 244.35 million shares compared with Friday’s tally of 177.29 million. The value of shares traded during the day was Rs6.97 billion.
K-Electric was the volume leader with 29.01 million shares traded, losing Rs0.17 to close at Rs2.60. It was followed by WorldCall Telecom with 22.51 million shares traded, gaining Rs0.06 to close at Rs1.36 and Dewan Farooqui Motors with 13.78 million shares gaining Rs0.06 to close at Rs11.87.
SBP hikes interest rate to 16% to curtail inflation
On Friday, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) Friday raised the key policy rate by 100 basis points to 16% — the highest since 1999.
The central bank, in a statement, issued after the meeting said that the decision reflects the MPC’s view that inflationary pressures have proven to be stronger and more persistent than expected.
“This decision is aimed at ensuring that elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis,” the MPC said.
The SBP noted that amid the ongoing economic slowdown, inflation is increasingly being driven by persistent global and domestic supply shocks that are raising costs.
Remittances under the Roshan Digital Account (RDA) increased from US $9.342 billion at the end of 2024 to US $9.564 billion by the end of January 2025.
The most recent data issued by the State Bank of Pakistan (SBP) revealed that remittance inflows in January totaled US$222 million, compared to US$203 million in December and US$186 million in November 2024.
Millions of Non-Resident Pakistanis (NRPs), including those who own a Non-Resident Pakistan Origin Card (POC), desire to engage in banking, payment, and investing activities in Pakistan using these accounts, which offer cutting-edge banking options.
Nearly 778,697 accounts were registered under the scheme by the end of January 2025, according to the data.
By the end of January, foreign-born Pakistanis had contributed US $59 million to Roshan Equity Investment, US $479 million to Naya Pakistan Certificates, and US $799 to Naya Pakistan Islamic Certificates.
A year-by-year breakdown of the depreciation value of residential and commercial built-up properties is included in the updated property valuation rates for Karachi that the FBR has announced.
The notification said that built-up structural values on residential property will be gradually reduced.
A residential home’s built-up structure, which is five to ten years old, will lose five percent of its worth.
In a similar vein, constructions between the ages of 10 and 15 will lose 7.5% of their value, while those between the ages of 15 and 25 would lose 10%. Built-up structures that are more than 25 years old will be valued similarly to an open plot.
Furthermore, age will also be used to lower the valuation of built-up properties, such as apartments and flats.
Structures that are five to ten years old will depreciate by ten percent, while those that are ten to twenty years old will depreciate by twenty percent. A 30% depreciation will be applied to properties that are 20 to 30 years old, while a 50% reduction will be applied to those that are above 30 years old.
In terms of commercial built-up properties, buildings that are 10 to 15 years old will lose 5% of their value, while those that are 15 to 25 years old will lose 8%. The value of properties that are more than 25 years old will drop by 10%.
In contrast, there would be a 15% boost in the value of commercial properties in the Defence Housing Authority (DHA) that face any Khayaban.
Remittances from Pakistani workers totalled US$3.0 billion in January 2025, representing a 25.2% increase from the previous year.
The cumulative remittances for July through January of FY25 were 20.8 billion dollars, up 31.7 percent from 15.8 billion dollars during the same period in FY24.
In January 2025, the United States of America contributed 298.5 million dollars, the United Kingdom contributed 443.6 million dollars, the United Arab Emirates contributed 621.7 million dollars, and Saudi Arabia contributed 728.3 million dollars.