KARACHI: State Bank of Pakistan (SBP) unexpected increase in the interest rate shook the investor’s confidence on the opening day of the week, as the stock market took a hit as soon as it opened on Monday with the benchmark KSE-100 index losing more than 700 points.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index had closed at 42,936.73 points last week.
SBPs unexpected interest rate hike takes toll on PSX, down by over 700 points However, once the market opened the stocks fell by 707 points or 1.65% and at 9:39am it was at 42,229 points.
Analyst Samiullah Tariq laid the blame on SBP’s decision to increase the interest rate as a key factor for the drop in KSE-100 Index.
“Market wasn’t expecting a rate hike. That’s why the market is reacting,” Head of Research at Pakistan-Kuwait Investment Company said.
At the time the decision was announced the markets had closed, which is why the KSE-100 Index today went in the red at the opening.
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.
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