Political upheaval: KSE-100 suffers 1,250-point fall even as participation remains thin

A massive political crisis along with uncertainty on outlook combined took a toll on the Pakistan Stock Exchange (PSX), as the benchmark KSE-100 Index lost 1,250 points or 2.77% on Monday, erasing almost all gains from the previous week to close below the 44,000 level.

Last week, the market made substantial gains on account of decline in oil prices with the KSE-100 closing at 45,152.11 points, a week-on-week gain of 1,600.96 points or 3.68%.

However, significant political developments on Sunday switched market sentiment, as the index opened the day lower, and lost 1,000 points during the first hour of the trading session. It remained negative throughout the day, hitting an intra-day low of 43,821.31 (down by 1,330.8 points), with buyers awaiting clarity on the political front.

At close on Monday, the KSE-100 ended with a fall of 1,250.06 points, or 2.77%, to finish at 43,902.05.

On Sunday, National Assembly Deputy Speaker Qasim Suri dismissed the no-trust move tabled against Prime Minister Imran Khan, an anti-climax development after weeks of planning and lobbying by all political parties in the race to take the majority.

Moreover, President Dr Arif Alvi dissolved the National Assembly on Prime Minister Imran Khan's advice. Later, the premier was denotified as the prime minister, according to the cabinet secretariat.

“To guess what follows next will be trickier as everything depends on the Supreme Court (SC) and its hearing today,” said Arif Habib Limited (AHL) in a note.

“We believe the market will continue to look for clarity on the political front as that will set the tone for future strategy to handle the economy, as well as foreign policy. This clarity will only emerge once the Supreme Court decision comes through, we view,” it said.

Similarly, Topline Securities in its note said that ongoing political uncertainty has created a legal crisis in the short term, which will impact the stock market, bonds and commodities.

“We believe that the early resolution of the crisis and Supreme Court ruling on the matter will be critical for outlook on markets and economy.”

It may be mentioned that Pakistan's economy is already facing multiple challenges in the form of falling foreign exchange reserves, rising current account deficit and increasing commodity prices, said the brokerage house.

“Timely resolution of the matter and early election will allow new democratically elected government to take the much needed tough economic decisions,” it said.

On the corporate front, IGI Holdings, a wholly owned subsidiary of IGI Investments (Pvt) Ltd, informed the bourse that its BoD's approved to acquire upto 20% equity stake in Milvik Mobile Pakistan Limited subject to due diligence, completion of applicable corporate and regulatory approvals and execution.

Sectors dragging the benchmark index lower included banking (325.94 points), cement (261.90 points) and technology and communication (101.84 points).

Volume on the all-share index decreased to 170.48 million from 389.11 million on Friday. The value of shares traded also declined to Rs5.49 billion from Rs11.11 billion recorded in the previous session.

Telecard Limited was the volume leader with 17.39 million shares, followed by K-Electric Limited with 16.01 million shares, and TPL Properties with 12.56 million shares.

Shares of 305 companies were traded on Monday, of which 26 registered an increase, 268 recorded a fall, and 11 remained unchanged.

“Political uncertainty led to this downfall, which was expected after Sunday’s developments,” Sana Tawfik, vice-president of research and a senior analyst at Arif Habib Limited, told Business Recorder.