Bears dominate PSX as KSE-100 index loses 1,800 points over political uncertainty

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This image shows activity on the Pakistan Stock Exchange on Monday. — Screenshot via PSX data portal
This image shows activity on the Pakistan Stock Exchange on Monday. — Screenshot via PSX data portal

The Pakistan Stock Exchange (PSX) on Monday was dominated by bears that dragged its benchmark KSE-100 index down by 1,800 points, with analysts attributing the losses to “political uncertainty”.

The KSE-100 index closed at 61,065.31 points, down 1878.43, or 2.98 per cent from the previous close of 62,943.74 points.

The highest point today was noted to be around 9:40am where the index reached 62,634.37 points. Meanwhile, the lowest point was noted around 2:50pm at 60,647.67.

It should be mentioned that the index had plunged 1,200 points on Friday over the delay in announcing the results of general elections, to settle below 63,000.

Yousuf M. Farooq, director of research at Chase Securities, said that the market opened under pressure today due to “unresolved political uncertainty over the weekend”.

Farooq noted that volatility would remain until there was clarity on the political front.

He highlighted that oil exploration companies “experienced pressure” amid rumors of the International Monetary Fund (IMF) discussing the circular debt resolution plan with the next government.

However, on a positive note, he noted that remittances for the month of January had clocked in at $2.4 billion while a current account surplus was also “anticipated”.

“This could alleviate speculative pressure on the rupee and support the market in coming days.” he said.

Awais Ashraf, director of research at Akseer Research, said, “The delay in the formation of the government due to lack of lack of clear mandate for one party creates uncertainty among investors”.

“The likelihood of the continuation of the Pakistan Democratic Movement formation raises concerns on initiation of stricter reforms necessary to curtail fiscal deficit,” he said.

Exploration and production companies — such as Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) — experienced the largest decline due to delays in the approval of the circular debt clearance programme from the IMF, he said.

Shahab Farooq, director of research at Next Capital Limited, said the PSX opened in the negative with weak sentiments as “investors are preferring to be on the sidelines for now”.

He cited “persistent uncertainties” surrounding the formation of the next government, expectations of a “weak coalition government with a “strong opposition”, the fall in Pakistan’s international bonds and the “red flag” raised by the IMF regarding the proposed circular debt reduction plan as the reasons for the losses.

“Early formation of a government with a focus on economic challenges is likely to rebuild investor confidence in a market trading at attractive valuations,” he said.

Mohammed Sohail, chief executive of Topline Securities, said stocks plunged 1,000 points after “coalition government uncertainty and news of delay in resolution of circular debt management plan”.

On Friday, stocks had finished the tumultuous three-session election week on a negative note as the “unusual delay” in announcing election results created uncertainty among investors about a smooth return to a stable political government.

As a result, the KSE 100-share index came under renewed selling pressure settling the short week below 63,000. On Friday, the equities fell like a house of cards and the index plunged by 2,300 points intraday as an inordinate delay in election results triggered aggressive selling.

However, the index got some support after the Election Commission of Pakistan announced more results towards the closing of trading and the news of a likely sovereign rating upgrade by Standard and Poor’s (S&P) to “B” from “CCC+” helped the market closed the session with a trimmed loss of 1,200 points.

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