Pakistan equities close bearish amid heightened political uncertainty

KARACHI: Pakistan’s share market closed bearish on Monday due to political uncertainty after former Prime Minister Imran Khan announced he would dissolve the Punjab and Khyber Pakhtunkhwa legislative assemblies on December 23, 2022, to pressure the government into announcing snap polls, analysts and traders said.

Khan has campaigned for early elections since being ousted from power in a parliamentary vote in April, heightening political instability in the South Asian nation as it struggles to stave off financial default.

Khan's party controls two of the country's four provincial assemblies, while the other two are controlled by his political opponents, who also control the federal government under PM Sharif. The coalition government has said it will not hold national and local polls before they are due in November 2023.

Owing to continuing political uncertainty in the country, the key stock index, KSE100, fell by 330 points to close at the 40,970 level as investors opted to square their position in the market.  

Pakistan has also in recent weeks seen an uptick in militant attacks, as a months-long ceasefire with the Pakistani Taliban was called off by the group.

“Stocks fell across the board on political noise after the PTI [Khan's Pakistan Tehreek-e-Insaf party] called for the dissolution of provincial assemblies and [amid] concerns about security and unrest,” Ahsan Mehanti, Managing Director and CEO of the Arif Habib Corporation, told Arab News.

Pakistan is struggling to meet its external financing obligations in the face of low foreign exchange reserves that are barely enough to cover a month of imports. It is also beset by decades-high inflation.

The country has been trying to approach allies to seek financial support, and a ninth review of the International Monetary Fund for a 2019 bailout programme has been pending since September.

“Investor concerns over the outcome of Pakistan-IMF talks over the 9th review, global equity sell-off, and surge in Pakistan dollar bond yields played a catalyst role in bearish close,” Mehanti said.

In the currency market, the rupee closed unchanged at Rs224.94 in the interbank market and Rs234 for selling in the open market as compared to the United State Dollar amid thin trade.      

Owing to the looming political uncertainty, two major developments on Monday — the announcement that Indus Motors would shut down its plant and the discovery of new oil and gas reserves in Sindh province — could not change the market sentiment.  

The state-owned Oil & Gas Development Company Limited (OGDCL), a leading Pakistani exploration and production firm, announced the discovery of new oil and gas reserves in Sanghar district of Sindh amid an ongoing gas crisis in the country.

However, analysts said it would take at least eight months for the company to connect the reserves to the market.

“It may take at least eight months to come online and would increase the oil supply by 2.5% to 3%,” Tahir Abbas, the Head of Research at Arif Habib Limited, told Arab News.

Pakistan meets around 16 percent of its oil requirements from local exploration while the remaining are met through imports. 

Indus Motors, the maker of Toyota vehicles in Pakistan, also announced it would shut down its production plant from December 20 to 30, 2022, following the delayed approval of the import of vehicle parts. The delay, the company said in its stock filing, was due to the prior approval of imports imposed by the central bank on CKD (complete knock down) kits. 

 “In the auto sector, December is the month where historically sales slow down because people prefer to purchase and register vehicles in the new year,” Abbas said. 

“The supply of auto parts CKD is also due to the restrictions imposed by the State Bank,” he said, adding that demand was also depressed because of high car prices and slow economic growth.