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Pakistan stock market sheds over 3,000 points in two consecutive sessions amid uncertainty after polls

KARACHI: Pakistan’s stock market has lost more than 3,000 points in two consecutive sessions, traders and analysts said, amid uncertainty surrounding formation of a new government after Thursday’s indecisive vote.

Thursday’s vote presented no clear winner, with independent candidates, most backed by former prime minister Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) party winning 101 parliamentary seats, according to official results.

Three-time former prime minister Nawaz Sharif’s Pakistan Muslim League-Nawaz (PML-N) bagged 75 seats, while former foreign minister Bilawal Bhutto-Zardari-led Pakistan Peoples Party won 54 seats. Currently, major parties are scrambling to form alliances in their bid to secure the simple majority of 169 seats.

Amid a lack of clarity about the future, the benchmark KSE100 index of the Pakistan Stock Exchange (PSX) has remained in negative in the last two consecutive trading sessions after the Feb. 8 election.

The index shed 3,079 points, or 4.8 percent of its value, in the last two sessions on Friday and Monday due to the uncertainty, while it recorded its ninth highest day-on-day (DoD) decline of 1,878 points on Monday, closing at 61,065 points.

Analysts say the current drop at the Pakistani bourse has broken the traditional trend of rallying after the elections.

“Normally, we have seen in the past that post elections market normally goes up or enjoys the clarity, the direction and who’s coming to form the government,” Khurram Schehzad, chief executive officer (CEO) of the Alpha Beta Core financial advisory firm, told Arab News.

“But this time around, this is a little unprecedented because as the results came in, nobody could even guess who’s going to make the government.”

Schehzad said either of the two sessions posted a loss of Rs214 billion ($767 million) in market capitalization, with the cumulative loss in both sessions recorded at Rs427 billion ($1.53 billion).

Analysts say investors typically expect a majority party to form the government, but Thursday’s vote did not present a clear winner.

“So, this uncertainty, lack of direction, lack of clarity, actually leads to investor nervousness, the volatility in the market,” Schehzad explained.

Zafar Moti, CEO of Zafar Moti Capital Securities, also attributed the current bearish trend to the post-election uncertainty, saying the market was doing “quite well technically and fundamentally” before the elections.

“There’s still nothing wrong with our market. We are giving out best payouts, best dividends and best results. And in between these times when Dr. Shamshad was on board, we saw a 67,000[-point] level of peaks also, which was highest in our lifetime,” he said.

Moti said an expected coalition government had still not taken shape in the country three days after the polls.

“Our situation is getting grimmer because this government with so many coalition partners, it’s not taking shape and the results were still giving jitters to the investors,” he added.

Before the elections, foreign funds were getting jitters, but now Pakistani fund managers were giving orders to sell off, according to Moti.

Ahsan Mehanti, CEO of the Arif Habib Corporation securities and brokerage house, said some of the support the key index received during the trading was from strong financial results and “upbeat data on $2.4 billion remittances, up by 26 percent, in January 2024.”

To a question about future outlook of the equity market, analysts said the market needed a “clear direction” after the formation of the government.

“Unless and until we see a peaceful transition of new government and the government without any honeymoon period starts working, the capital market will be in doldrums for coming week,” Moti said.

Schehzad concurred with Moti, saying: “We can see this to continue for the next few days until the new government comes in and someone forms the government and gets some clarity on the IMF (International Monetary Fund) program, on the overall economic management.”

Pakistan’s current $3 billion IMF bailout program is set to expire next month after which the country will have to negotiate a fresh bailout.

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