Shares at the Pakistan Stock Exchange (PSX) plunged for the second consecutive day on Tuesday on the back of continued political and economic turmoil.
The benchmark KSE-100 index closed at 39,832.45 points, down 1138.37 points or 2.78 per cent. The index reached an intraday low of 1,437.79 points, or 3.51pc, around 3pm.
According to Arif Habib Limited, the index closed at a five-month low, a level last seen on July 21.
Dalal Securities CEO Siddique Dalal said the index fell due to a number of reasons, including fear of the dissolution of Punjab and Khyber Pakhtunkhwa assemblies and rising political confrontations which had damaged investor confidence.
Other factors that affected the market were mutual funds’ redemptions at year-end, worsening economic situation, pressure on the rupee, shortage of dollars and the delay in the completion of the International Monetary Fund’s (IMF) ninth review, he added.
“All these factors brought the market down and there is no hope of improvement in the future,” Dalal said.
“A lot of issues have accumulated, including dollar shortage, but the main reason remains political uncertainty and the impending dissolution of [two provincial] assemblies. There is pressure on foreign reserves as well,” First National Equities Limited Director Amir Shehzad commented.
Former PSX director Zafar Moti also agreed that the “obvious” reason for the stock market’s downward trend was political uncertainty. He also cited default rumours as a reason for the slump.
Moti lamented that unlike times of crisis in the past, when senior capital market members were brought together by the PSX management to sort issues and clarify rumours, nothing had happened recently.
PTI Chairman Imran Khan announced on Saturday that his party’s governments in Punjab and Khyber Pakhtunkhwa would dissolve their assemblies on Dec 23 to pave the way for fresh elections.
The Constitution did not allow elections to be delayed beyond 90 days of an assembly’s dissolution, he had said in a video address with Punjab Chief Minister Parvez Elahi and KP Chief Minister Mahmood Khan by his side.
However, in an attempt to thwart the dissolution, a delegation of PPP and PML-N lawmakers submitted a no-confidence motion against CM Elahi in the Punjab Assembly on Monday night.
Separately, a no-trust motion was also submitted against PA Speaker Sibtain Khan under Article 53 of the Constitution.
Meanwhile, the country’s economic situation is deteriorating by the day. The State Bank of Pakistan’s foreign exchange reserves are in a critical condition, declining by $11 billion during a year. In Dec 2021, the central bank’s reserves were $17.686bn which now stand at $6.7bn as of Dec 9, barely enough to cover a month’s imports.
The gravity of the situation has been exacerbated as the ninth review of a $7bn IMF programme is facing delays even as remote talks are being held between Fund officials and the government for the release of $1.18bn.
The talks, originally due in the last week of October, were rescheduled to Nov 3 and then kept on facing delays following gaps in estimates by the two sides.
Pakistan has to repay at least $13bn in the remaining part of the financial year. But it is unclear when it will receive more inflows from bilateral and multilateral institutions, giving rise to default fears.
The country was already in the grips of an economic crisis, facing decades-high inflation and dangerously low levels of forex reserves, when it was devastated by floods that killed at least 1,700 people and caused severe damage, estimated at around $30bn by authorities, to agricultural land and infrastructure.