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PSX plunges over 1,378 points to hit 2.5-year low as politics weighs

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2 years ago

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  • Political tumult panics investors into shedding holdings.
  • All sights set on IMF amid depleting forex reserves.
  • Macroeconomic concerns dampen sentiment.

KARACHI: Pakistan stocks Tuesday plunged to a 30-month low as the country’s extremely riotous political situation freaked economy-wary investors into stampeding towards the exits, resulting in whopping losses, traders said. 

The KSE-100 Shares Index, the benchmark of the country’s capital market, lost 1,378.54 points or about 3.47%, to close at 38,342.21 points.

Analysts say the dissolution of the Punjab Assembly and the prevailing crisis in the country amid continuous demand from Pakistan Tehreek-e-Insaf (PTI) for snap polls panicked the market into this vicious selloff.

The delay in the revival of the International Monetary Fund’s (IMF) loan programme and the ongoing political uncertainty in the country caused the bloodbath in the stock market.

PSX plunges over 1,378 points to hit 2.5-year low as politics weighs

Prime Minister Shehbaz Sharif-led government has been under pressure to revive the IMF programme but the “harsh conditions” set by the Washington-based lender have made it almost impossible for the country’s financial managers to proceed.

Meanwhile, the depleting forex reserves with the State Bank of Pakistan below the $5 billion mark — enough for less than three weeks of import — is making the investors jittery.

Talking to Geo.tv, Tahir Abbas, Head of Research at Arif Habib Limited, said the investment momentum was extremely negative.

The analyst pinned Tuesday’s tailspin partly on the IMF loan impasse and partly on the political crisis.

“Players are unable to see any efforts made by the government to resume the programme due to which they are not taking fresh positions,” he said.

Abbas added that news reports suggesting that the Khyber Pakhtunkhwa assembly would be dissolved today further dented investors’ sentiment.

Khurram Schehzad, CEO at Alpha Beta Core, said the IMF programme stalemate —a consequence of Pakistan’s dragging its feet on fulfilling the loan conditions— was one of the main triggers of the selloff as right now rapidly-depleting foreign exchange reserves were seemingly Pakistan’s biggest economic problem.

“The political uncertainty has increased due to the dissolution of the Punjab Assembly. There is a question mark on the federal government whether it will remain in power or not. The preexisting negative sentiment has now worsened,” Schehzad said.

He said the deeper the political uncertainty in the country, the higher the volatility in the market.

“However, if the government succeeds in reviving the IMF programme and reversing political uncertainty, the trend can take a turn for the better,” the analyst said.

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Robust activity lets PSX climb above 115,000 level again.

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On Friday, the Pakistan Stock Exchange (PSX) resumed its upward trend, crossing 115,000 points once more.

The PSX had strong action in the morning session, as the KSE-100 index increased by 1,000 points to 115,138.

The notoriously volatile PSX closed Thursday at 114,037 points, up 594 points.

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Meanwhile, in the interbank market this morning, the US dollar fell 7 paisas to Rs278.65 against the Pakistani rupee.

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SBP will announce monetary policy on January 27.

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The State Bank of Pakistan (SBP) will release its monetary policy on Monday.

The Monetary Policy Committee (MPC) of the SBP will convene on the first day of the following week to make decisions on monetary policy.

The Monetary Policy decision will be announced by Governor SBP Jameel Ahmad at a news conference on the same day after the MPC meeting, according to an official release.

In December, the central bank reduced policy rates by 200 basis points (bps) to 13 percent.

“In November 2024, headline inflation fell to 4.9 percent year on year, meeting the MPC’s estimates. This decrease was mostly caused by the ongoing decline in food inflation and the phasing out of the impact of the gas tariff increase in November 2023,” SBP stated in an official release.

“However, the Committee noted that core inflation, at 9.7 percent, is proving to be sticky, while consumer and business inflation expectations remain volatile.” To that end, the Committee restated its previous assessment that inflation may remain volatile in the short term before stabilizing within the target range.

“At the same time, growth prospects have slightly improved, as evidenced by a recent increase in high-frequency indicators of economic activity.” Overall, the Committee concluded that its approach of gradual policy rate decreases is keeping inflationary and external account pressures under control while promoting long-term economic growth.

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Finance Minister Meets With World Leaders at World Economic Forum in Davos

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During his attendance at the World Economic Forum in Davos, Switzerland, Finance Minister Muhammad Aurangzeb has met with officials of organisations and leaders of many nations.
Bangladesh’s Chief Advisor, Muhammad Younas, met with Mohammad Aurangzeb.
On the fringes of the World Economic Forum’s Annual Meeting 2025 Opening Banquet, there was an informal meeting.
Additionally, the Finance Minister met with Anwar Ibrahim, the Prime Minister of Malaysia.
Both leaders discussed economic cooperation and bilateral ties.
Muhammad Aurangzeb also had a meeting with Dp World’s Rizwan Soomro and Yuvraj Narayan.
They talked about how to strengthen Pakistan’s logistics and infrastructure systems to support trade.
“The Pakistani government is committed to advancing joint projects and values partnerships in both business-to-business and business-to-government cooperation,” the finance minister added.

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