Benchmark index has seen a massive decline after reaching a record high of 66,426.78 on Dec 12
KARACHI: The Pakistan Stock Exchange (PSX) experienced a significant downturn as the benchmark KSE-100 Index plummeted below the 60,000 mark, shedding 4.11% or 2,534.12 points on Tuesday, intensifying concerns among investors. The KSE-100 Index closed at 59,170.97, marking a substantial drop from its all-time high of 66,000 on December 12.
Analysts, initially attributing the decline to year-end profit-taking, had hoped for a market correction that would stabilize above 64,000 or possibly at 63,000. However, the ongoing slide, exceeding a 10% drop, is now exacerbated by escalating political uncertainty surrounding the upcoming elections, with far-reaching implications for Pakistan’s economic landscape.
The halt in the privatization process, a demand by the International Monetary Fund (IMF), until after the elections has further dampened market sentiment. Progress on this front is now contingent on the priorities of the next elected government.
The market had previously stabilized after crossing the 66,000 mark on December 8, following official reports of sustained inflation. However, a sharp nosedive began on December 13, a day after the State Bank of Pakistan’s decision to maintain interest rates at 22%. This move signals an absence of imminent policy rate cuts, particularly with anticipated increases in gas tariffs likely to contribute to rising prices.
Monetary tightening is expected to persist, impacting investor confidence and market sentiment due to high interest rates, which the business community contends are detrimental to the economy.
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The initial surge in the stock market was attributed to local investors shifting from real estate to stocks after a decline in property prices. The interest in specific sectors, such as energy and banking, stemmed from expectations of foreign direct investment (FDI) and compliance with IMF conditions, including addressing the circular debt issue and raising power and gas prices.
As investors grapple with sustained inflation and interest rates, the current market conditions reflect the complex interplay of economic factors that initially buoyed investor sentiment. The unfolding situation underscores the challenges and uncertainties facing the Pakistan Stock Exchange, emphasizing the need for a comprehensive assessment of the economic landscape post-elections.
