PSX down 2,106.78 points or 5.51% early Monday morning

KARACHI: The stock market crashed in the early trading hours on Monday as confusion and uncertainty surrounded potential investors due to the rout in global equities, and sharper than expected downturn in world economies as the novel coronavirus outbreak continues to invade countries.

The Pakistan Stock Exchange’s (PSX) benchmark KSE 100-Share Index tumbled 2,106.78 points or 5.51pc, and reached 36,112.89 as of 9:37am. Meanwhile, the trading has been suspended.

Among other persisting factors, include the suspension of imports from China and adverse affects on the Asian economy have restricted the stock market to grow.

Investors last week continued to dump stocks and plough their money in safe haven assets, mainly gold.

According to experts, the stock market has been searching for a proper direction for healthy growth but several factors continue to dominate the sentiments of potential investors.

Equity markets collapsed Monday as the rapidly spreading coronavirus fans fears over the global economy, while a crash in oil prices added to the panic with energy firms taking a hammering.

As the deadly disease claims more lives around the world, dealers are fleeing out of riskier assets and into safe havens, sending gold and the yen surging and pushing US Treasury yields to new record lows.

While governments and central banks have unleashed or prepared to roll out stimulus measures, the spread of COVID-19 is putting a huge strain on economies and stoking concerns of a worldwide recession.

Trading floors were a sea of red, with Tokyo, Sydney and Manila plunging around six percent, while Hong Kong shed 3.5 percent by lunch.

Mumbai, Singapore, Seoul, Jakarta and Wellington were more than three percent down, Shanghai and Taipei shed at least two percent and Bangkok gave up five percent. The losses tracked sharp falls in Europe and Wall Street on Friday.

Driving the declines was a ferocious sell-off in the oil markets, sparked by top exporter Saudi Arabia slashing prices — in some cases to unprecedented levels — after a bust-up with Russia over production.

Both main oil contracts — which had already been under pressure over falling demand caused by the virus — dived around 30 percent, marking the worst drop since the 1991 Gulf War and the second biggest fall on record, according to Bloomberg News.

Saudi Arabia launched an all-out oil war Sunday with the biggest cut in its prices in the past 20 years, Bloomberg News reported, after OPEC and its allies failed to clinch a deal to reduce output.

A meeting of main producers was expected to agree to deeper cuts to counter the impact of the coronavirus — but Moscow refused to tighten supply.

In response, Riyadh slashed its price for April delivery by $4-$6 a barrel to Asia and $7 to the United States.

Russia’s decision not to comply had already battered prices and there are warnings that prices could continue to drive lower if the two sides do not reach an agreement.

“It’s unbelievable, the market was overwhelmed by a wave of selling at the open,” said Andy Lipow, at energy consultancy Lipow Oil Associates.

“OPEC+ has clearly surprised the market by engaging in a price war to gain market share.”

About The Author