Saturday July 13, 2024

Late recovery pulls Pakistan stocks out of early freefall

Despite setback, market demonstrated resilience, managing late-stage recovery, closing 1.87% lower

By Web Desk
February 09, 2024
A broker talks on a phone as he watches latest share prices at the Pakistan Stock Exchange in Karachi on January 27, 2023. — AFP
A broker talks on a phone as he watches latest share prices at the Pakistan Stock Exchange in Karachi on January 27, 2023. — AFP

The Pakistan Stock Exchange (PSX) faced significant turbulence today, plunging over 2,000 points initially due to the uncertain outcome of the recent general elections. 

Despite this setback, the market demonstrated resilience, managing a late recovery and closing 1.87% lower at 62,943 points.

Market analysts, including Muhammad Sohail of Topline Securities, attributed the initial decline to the "unexpected" election results, which deviated from pre-election expectations. The benchmark KSE-100 index experienced a 3% loss at its lowest point, triggered by uncertainty leading to a sell-off.

The previous day's positive closure, fueled by pre-election optimism, shifted to caution among investors amidst the uncertain political landscape. Despite the early plunge, the PSX rebounded throughout the day, closing approximately 0.54% higher than its lowest point, indicating a degree of resilience possibly fueled by expectations of a stable post-election government.

S&P Global Ratings is poised to reassess Pakistan's credit rating soon, with the potential for an upgrade to 'B' contingent upon the new government's commitment to fiscal reforms and adherence to the IMF program. 

However, dollar-denominated Pakistani government bonds experienced a slight depreciation as initial election results emerged, reflecting ongoing uncertainty.

It's crucial to acknowledge Pakistan's fragile economic recovery amid ongoing militant violence and a deeply polarised political environment. Moody's Investor Services highlighted the importance of a timely announcement of election results in reducing political uncertainty. Grace Lim, Analyst at Moody's, emphasised its significance for a country facing challenging macroeconomic conditions.

While General Elections 2024 in Pakistan remained generally peaceful, questions over the electoral exercise's credibility persisted due to the absence of the mainstream political force Pakistan Tehreek-e-Insaf (PTI) and a delay in result issuance. 

Preliminary and unofficial results indicated PTI-backed independent candidates leading in several National Assembly constituencies. The PSX's volatility reflects the intricate interplay of pre-election expectations, uncertain outcomes, and ongoing economic and political challenges in Pakistan. Long-term stability hinges on the new government's actions and commitment to addressing critical issues.