KARACHI: The Pakistan equity market lost 3.7 per cent during the week ended February 25, 2022 on the back of major concerns over the Russia-Ukraine conflict, while range-bound activity is expected next week, analysts said.
An analyst at Pearl Securities said Russian president Putin ordered a military operation where forces launched a full invasion in Ukraine on Thursday, resulting in a bloodbath session in the global and domestic markets, as well.
“On the local political front, uncertainty floated, as opposition seems in the process of securing the number to oust the prime minister in a no-confidence motion, which lowered the investors’ sentiment.”
The Pakistan Stock Exchange KSE-100 shares Index shed 3.7 per cent, or 1,691.63 points, to close at 43,984.24 points. The KSE-30 shares index shed 4 per cent, or 712.87 points, to close at 17,091.06 points.
All share average traded volume during the week surged 20 per cent to 229 million shares/day as against 191 million shares/day traded last week.
Additionally, the geopolitical uncertainty lifted the international commodities prices to report at record high levels, which further threatened the bourses throughout the week. Going forward, analysts expect the market to remain volatile as the US announced extensive sanctions and export controls for Russia.
Wajid Rizvi at JS Global Capital said that the Russia-Ukraine conflict, leading to global commodity price spike, especially oil, posed a downside risk to the current account estimates.
Yusuf Rahman at KASB Securities said that Pakistan’s energy import bill was expected to surge to $20 billion in FY22 because of elevated oil and gas prices.
On an average, Pakistan imports around 15 million barrels of both crude and refined fuel each month, suggesting a $10/barrel increase in oil prices would enhance Pakistan’s monthly import bill by $150 million.
“Moreover, Pakistan’s increasing reliance on regasified liquefied natural gas (RLNG) is expected to exert additional strain on the country’s finances, as both oil prices and RLNG spot prices climb further.”
Elevated fuel prices have already pushed the domestic oil prices to their all-time high levels of Rs160/litre, instigating inflationary concerns within the economy.
With the global oil prices crossing $100/barrel, domestic oil prices could surge towards Rs180/litre if the entire increase is passed through.
Higher oil prices could considerably impact the country’s inflationary outlook, particularly after the second-round effects of inflation materialise.
Going forward, a range-bound activity is expected to continue, as investors remain concerned over the country’s macroeconomic situation.
