Meltdown at PSX: Marred by political upheaval, KSE-100 falls below key 40,000 barrier

Marred by political upheaval and a vulnerable economic situation, the Pakistan Stock Exchange (PSX) witnessed a bloodbath as the benchmark KSE-100 Index lost over 1,100 points on Tuesday.

The KSE-100 Index settled at 39,832.45, a decline of 1,138.37 points or a percentage change of 2.78%. This is the lowest closing since July 21, 2022, when the benchmark index settled at 39,831.75.

The index even hit a low of 39,533.03 during intra-day trading, a fall of 1,438 points or 3.5%, before posting a minor recovery.

KSE-100 loses over 330 points as political uncertainty persists

Across-the-board pressure was witnessed as investors looked to offload their holdings in the face of rising political volatility and economic uncertainty in Pakistan.

Index-heavy sectors including, automobiles, chemicals, cement, commercial banks, technology and textile all closed in the negative.

The market has been under pressure for some time. Just last week, the PSX witnessed massive selling pressure as the benchmark KSE-100 Index lost over 550 points over domestic and international developments. It gained to finish higher on Friday, but began this week on a negative note again.

Market analysts believe the pressure is likely to continue in the face of rising political noise along with an uncertain economic situation.

“Announcement by the Pakistan Tehreek-e-Insaf (PTI) that it will dissolve Punjab and Khyber Pakhtunkhwa assemblies is leading to market pressure,” Sana Tawfik, analyst at Arif Habib Limited (AHL), told Business Recorder.

“The pressure has increased especially after Monday's development,” she said.

Louder political noise comes in tandem with a dire economic situation as foreign exchange reserves deplete to a critical level, while talks with the International Monetary Fund (IMF) continue to get delayed.

Meanwhile, analysts also said that the World Bank's approval of $1.692 billion for flood-relief activities in Sindh should have had a positive impact but political noise is overshadowing the positive news as well.

“The market is expected to remain under pressure till December 23 until clarity is achieved on the political front,” added Tawfik.

Arsalan Siddiqui, Head of Research at Optimus Research, said the ongoing political turmoil is causing panic in the market.

“Delay in the IMF programme is also an issue,” he told Business Recorder. “IMF's conditions are difficult to meet and government's willingness to take the required measures to appease the lender remains to be seen.

“If the IMF does not come on board, then the government's ability to meet Pakistan's liquidity needs would become a major concern.

"The market is likely to remain under duress until clarity on the economic and political fronts is achieved."

On the economic front, the Pakistani rupee lost Re0.18 or 0.08%, to settle at Rs225.12 against the US Dollar.

Capital Stake in its report said the indices kept shedding gains all day long while volumes surged from the last close.

"Uncertainty on the economic front, ongoing political tension and the possibility of dissolution of Punjab and Khyber Pakhtunkhwa assemblies, caused investors to panic," said the report.

Meanwhile, sectors painting the benchmark KSE-100 index red included, technology and communication (196.76 points), banking (104.79 points) and oil and gas exploration (100.32 points).

Volume on the all-share index increased to 265.3 million from 142.6 million on Monday. The value of shares traded inched up to Rs6.54 billion from Rs3.81 billion recorded in the previous session.

WorldCall Telecom was the volume leader with 33.59 million shares, followed by K-Electric Limited with 19.98 million shares, and Hascol Petroleum Limited with 12.53 million shares.

Shares of 341 companies were traded on Tuesday, of which 37 registered an increase, 283 recorded a fall, and 21 remained unchanged.