Political uncertainty pulls down benchmark KSE-100 index

Benchmark KSE-100 index down by 1,000 points on political uncertainty

On Monday, the political uncertainty dragged down the benchmark KSE-100 index of Pakistan Stock Exchange (PSX) by nearly 1,000 points. During morning trade, the KSE-100 index lost 1054.58 points and dropped to 61,889.16 points from 62,943.74 points.

Chase Securities analysed that the unresolved political uncertainty during the weekend created pressure on the market. Director of Research, Yousuf M. Farooq, believed that volatility would remain until the situation on the political front was clarified.

Director of Research Next Capital Limited – Shahab Farooq briefed that investors preferred to be passive. He pointed out reasons for the loss in KSE-100 index which included uncertainty about formation of the next government and an expected weak coalition government against a strong opposition. 

Shahab Farooq added that concerns shown by the IMF regarding the proposed circular debt reduction plan and a decline in the international bonds of Pakistan also played a role in the losses. However, he believed an early formation of a government with a focus on economic challenges would rebuild investor confidence in market trading.

The unusual delay in finalising election results raised questions among investors about the formation of a stable political government, ultimately causing stocks to close on a negative note on Friday. The benchmark KSE-100 index plunged by 1,200 points on Friday over the delay in announcing the results of the general elections in 2024.

Situation of Government Formation

Pakistan Muslim League-Nawaz (PML-N) and Pakistan People’s Party started conversations to form a coalition government. Mutahida Qoumi Movement and Jamiat Ulma-e-Islam would also provide their support to PML-N.

Pakistan Tehreek-I-Insaf backed Independent candidates have bagged around 100 seats. However, political analysts believe that several candidates would turn to PML-N. PTI eyes to form government in Khyber Pakhtunkhwa. Chairperson Barrister Gohar Ali has shown intentions to formulate government in Punjab as well.

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