PSX Falls More than 2,600 Points with Escalation in Trade War WorriesThe
Pakistan Stock Exchange (PSX) fell over 2,600 points on Wednesday, with some recovery recorded a day before that. This plunge has happened despite increasing apprehension that trade tensions between China and the US will escalate further.
At 10:49 AM, the KSE-100 index lost 2,640.95 points, or 2.29%, to 112,891.48 from the last close of 115,532.43. The downtrend of the market is attributed to the rising US tariffs on Chinese imports, which are set to increase to 104% today, as the US hardens its position following a promise by China to retaliate.
Awais Ashraf, AKD Securities’ research director, pointed out that the increase in US tariffs to 104% is raising recession risks. This is putting investors on edge, particularly as it can decelerate global growth. Yet, he also pointed out that declining commodity prices, led by oil, could benefit Pakistan’s external account in the longer term.
Yousuf M. Farooq, a director of research at Chase Securities, said that the domestic stock market is tracking international trends. The decline in petroleum prices is impacting oil-related stocks in Pakistan. However, according to Farooq, lower oil prices may lower export risks and benefit the economy of Pakistan.
Farooq also noted that Pakistan’s stock market remains strong, having fallen just 5.5% from its all-time high. Historically, during crises such as the 2008 financial crisis and the COVID-19 pandemic, Pakistan’s remittances have been stable, which may keep the country’s external account stable.
He also stated that India had recently cut the interest rate, and with inflation dropping in Pakistan with the declining global commodity prices, there could also be an opportunity for a local interest rate cut. The downward trend in oil prices can also provide the government with increased latitude to raise the revenue if it needs to.
This decrease in the PSX follows a steep fall earlier this week, when the market declined by 3,882 points as investors feared a global recession and potential retaliation from the US’s trading partners, such as China. On that day, the KSE-100 index saw an intraday record decline of 8,687.68 points before recovering some ground during the afternoon session.
Ali Najib, sales head at Insight Securities, stressed the need to watch market action after April 9, when the global trade tariffs are in full effect. He cautioned that these tariffs may cause higher market volatility, with risk-averse investor sentiment and losses in export-oriented stocks. But he indicated that safe-haven assets, such as gold, could benefit.
In the near term, the continued trade tensions may drive market correction as nations affected by the trade war retaliate with counter-measures, affecting global supply chains and earnings estimates.
