Shares on the Pakistan Stock Exchange (PSX) opened in the red on Monday, with the benchmark KSE-100 index falling below 40,000 points. Analysts attribute the decline to political and economic uncertainty and an expected increase in policy interest rates.
The KSE-100 lost 528.71 points, or 1.31 percent, to 39,794.74 at 1:48 p.m.
Mohammad Sohail, managing director of Topline Securities, said share prices fell amid rising political noise and investor concerns over the country’s low foreign reserves.
Ali Malik, chief executive of First National Equities Limited, noted that volumes are very low and buyer interest is lacking due to political and economic uncertainty.
He also explained the decline with expectations that the interest rate will be increased by 1-2 percent at the upcoming meeting of the Central Bank’s monetary policy committee, which, he said, would weaken the profitability of companies.
“The market is panicked. It is not stabilizing and the main reason is the dissolution of the Punjab Assembly and the no-confidence talks against Prime Minister Shehbaz Sharif,” commented former PSX director Zafar Moti.
He added that the increase in the benchmark interest rate will also have a negative impact on stock prices. He also cited the situation at ports where import containers have been stuck for weeks as the central bank imposed restrictions to limit the outflow of dollars amid a severe cash crunch.
“We cannot see the economy improving and the political crisis worsening in the future,” he said.
Alpha Beta Core CEO Khurram Shehzad also agreed with Moti’s view, saying he can’t see much improvement in the near term due to lack of clarity.
The stock market could rise again when the ninth review of the International Monetary Fund is completed and external inflows are visible, he said. “The sentiment is very weak, and investors are not aggressive, despite the good ratings,” he said.
The KSE-100 index closed down 684 points last week amid political uncertainty after Punjab Chief Minister Parvez Elahi formally advised the governor to dissolve the provincial assembly.
The Punjab Assembly was dissolved on Saturday and a caretaker chief minister is yet to be appointed.
Meanwhile, Khyber Pakhtunkhwa Chief Minister Mahmood Khan said that a summary of the dissolution of the provincial assembly would be sent to the governor on January 17 (tomorrow). He said that the country is heading towards general elections and asserted that PTI will win the upcoming elections.
Meanwhile, the country’s foreign exchange situation worsened as State Bank of Pakistan (SBP) reserves fell to $4.34 billion, the lowest since February 2014.
The country faced a serious deficit of dollars, which led to restrictions on the import of even food and industrial raw materials. The latest position of foreign exchange reserves indicates that the country does not have enough dollars to cover even one month of average imports.
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