Pakistan Equities Plunge as US Stocks Falls Most in Six Years

Over USD5.2 trillion has been wiped out from global stocks during the Dow’s stock market correction since January’s peaks.

(BE2C2 Report): Turmoil in the global equity and commodity markets dampened the investors’ sentiment at the Pakistan Stock Exchange (PSX) during the outgoing week as the KSE-100 index declined by 1.1 percent or 492 points week-on-week (WoW) to close at 43,808 points.

The Pakistan equities plunged after US stocks fell the most in more than six years, as the benchmark KSE-100 index declined by over 800 points or 2 percent during the early trades on Tuesday. The market recovered somewhat, however it failed to break the overall bearish trend with foreigners turning in net selling of $ 8.5 million during the week. The local mutual funds were also net sellers of $ 5.0 million.

The Stoxx Europe 600 Index headed for its worst week since 2016, erasing a year’s gains while China’s benchmark fell the most in almost two years. By the time of writing this note, MSCI World Index is already set for its biggest weekly drop since 2011. Asian markets fell more sharply on Friday. Tokyo’s Nikkei 225 lost 2.3 percent and Hong Kong’s Hang Seng gave up 3.1 percent.

The driving force behind this turmoil has been the declines in US markets, which reacted to the sharp rise in market interest rates. The S&P 500 has already erased its gain for the year, closed at a two-month low and is on track for its worst week since 2011.

The Dow plunged more than 1,000 points for the second time in four days. Finally, over USD5.2 trillion has been wiped out from global stocks during the Dow’s stock market correction since January’s peaks.

That amount exceeds the gross domestic production of the U.K. and Canada combined. In 2016, Canada’s GDP clocked in at $1.5 trillion, while the U.K.’s came in at $2.7 trillion.

In the same period, the S&P 500 shed some $2.5 trillion.

It’s important to note that corrections don’t necessarily point to long-term losses.

In the PSX, Oil & Gas Exploration and Cement sectors contributed 162 and 196 points to the overall decline in the benchmark index. In percentage terms, cement sector declined by 4.2 percent and Oil & Gas Exploration declined by 2.2 percent tracking declines in global crude oil.

According to Pakistan market analysts, the sentiments next will likely be driven by trends in the international markets, as global investors absorb the structural shift and reversal in Monetary Easing across US and UK.

Observers say as global economies recover, investors have grown increasingly worried about central banks around the world raising interest rates—a move that would make stocks a less attractive investment.

On Thursday, for instance, Bank of England Gov. Mark Carney said British regulators may have to ease off of the economic stimulus faster than expected, report the Fortune. “It will likely be necessary to raise interest rates somewhat earlier and to a somewhat greater extent than we had thought,” he said.

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