The Pakistan Stock Exchange crashed at 9:25am on Friday as trading of shares halted for the third time this week. Index heavyweights from the chemical, engineering, power and oil and gas sectors led the recovery when the temporary halt was lifted.
The benchmark KSE-100 index, a gauge to measure market performance, shed 1,683 points and lost 4.6% of its value within five minutes of the market’s opening, sending the market down 20% from its highest level this year. In this time (since January), $10 billion was shaved off from the market’s value.
‘The meltdown is in line with the rest of the world,’ said Maheen Rahman, CEO of Alfalah GHP Asset Management.
On Wednesday, the World Health Organisation declared COVID-19 (the coronavirus) a pandemic and soon after stock markets across the world reacted to it.
The US stock market suffered its worst crash since 1987 as Americans realised the coronovirus will impose new limits on their daily lives, the Washington Post said in a report.
The Dow Jones industrial average, which tracks large companies across American stock markets, posted its largest one-day loss of 10%, worst since the infamous October day known as Black Monday, the newspaper said. As a result, trade in the US stock market was halted for the second time in a week for 15 minutes to stop panic selling.
In what analysts call a global route, Asian markets followed suit. Stock markets in Japan, China, Hong Kong, India, and Singapore were down 7.5%, 3.5%, 5.8%, 9.4% and 5% respectively with trading temporarily halted across many markets in the region.
The story at the Pakistan Stock Exchange was no different.
“The KSE-100 is now down more than 20% from its recent high of 43,600 points so it’s officially a bear market, you can call it a crash too,” said Raza Jafri, director of research at Intermarket Securities.
There is no agreed threshold to determine what qualifies as a market crash but leading financial services website Investopedia.com says it’s a double-digit percentage drop in a stock index over a few days and is often unanticipated. By this standard, if stock prices fall by at least 10% over a few days it could be an indication of a market crash.
The KSE-100 fell 13% in a week or since March 5 and was trading at a five-month low of 34,273 points before trade was halted.
It was the third time this week that trade had to be halted. If the KSE-30, which tracks the performance of 30 large and most liquid stocks, moves 4% up or down from its opening value for five minutes, the rule is that trade must be halted for 45 minutes so investors can take fresh positions.
The KSE-30 index, which rarely comes into the news, fell 4% on Monday within seven minutes of the market’s opening. On Thursday it fell as much again around 2:15pm and today (Friday) it was down 4% within minutes of its opening.
The last time, the market crashed was 11 years ago. Then called the Karachi Stock Exchange, the market peaked to the 15,760-point level in April 2008 before it started falling abruptly, prompting regulators to put a floor (not allowing the index to fall below that level) at 9,144 points four months later.
When the floor was lifted that December, the index came crashing down to the 4,782-point level, losing nearly half of its value in just 15 sessions.
In contrast, when the temporary halt was lifted today, the market recovered sharply as OGDCL, which has 4.1% weight in the index, led the recovery helped by Mari Petroleum (1.8% of KSE-100) and others including Engro Chemicals, ICI and Pioneer Cement.
The KSE-100 was back above 36,000 points and closed the week 104 points higher than its opening value on Friday.