Pakistan stock market sheds over 2,200 points on opening after unexpected poll results — analysts

KARACHI: Pakistan’s stock market lost more than 2,200 points in the opening session on Friday, with analysts attributing the plunge to unexpected outcome of Thursday’s national elections.
The benchmark KSE100 index shed 2,326 points, or 3.6 percent of its value, to drop to 61,871 points as election results started pouring in on Friday morning.
Official and unofficial results showed independent candidates, many of whom were being backed by former prime minister Imran Khan’s party, to be leading the tally. With the vote count continuing, a clear picture was likely to emerge only later in the day.
Analysts said the initial results were contrary to the market’s expectations of a coalition government led by three-time former prime minister Nawaz Sharif’s Pakistan Muslim League-Nawaz (PML-N) party.
“Based on surveys, the market was expecting a PML-N-led coalition government, but based on initial unofficial results, this looks difficult,” Muhammad Sohail, CEO of Karachi-based Topline Securities brokerage firm, told Arab News on Friday.
However, the market closed at the 62,943 level, down 1,200 points or 1.8 percent, on political uncertainty amid delays over the results of general elections.
Considering a higher number of parties and independent candidates who contested national elections 2024, Pakistan was going to see the outcome of a largely polarized political landscape, according to a research report by Sherman Securities.
This scenario also reflected in various polls conducted during past the few days and the stiff competition between major political parties depicted signs of a large coalition government after the elections.
“We were expecting the results delayed but not that much. This situation makes investors cautious,” Farhan Mahmood, research head at Sherman Securities, told Arab News.
“This time it may take longer (35-40 days) to form a consensus as role of independents and smaller parties will be crucial.”
In the past eight elections, the process of the government’s formation typically took more than 20 days, with a maximum duration of 40 days from the election day to the election of the prime minister.
This historical context underscores the potential for extended negotiations and deliberations in the formation of the next government.
It is expected that the International Monetary Fund (IMF) will hold a second review of its nine-month $3 billion bailout program with the new government by the mid of March.
Global ratings agency Moody’s said timely results of Pakistan elections would policy and political uncertainty in the South Asian country, which has been embroiled in political, economic and security crises.
“A timely announcement of the results, leading to a smooth formation of a new government will reduce policy and political uncertainty. This is crucial for the country that is facing very challenging macroeconomic conditions, with fragile balance of payments, weak growth and high inflation,” Grace Lim, an analyst with Moody’s investors service, in a statement.
“The newly elected government will also have to put in place a longer-term financing plan to meet its very large external debt obligations for the next few years. We think that the government will need to negotiate for another IMF program, after the current one expires in April 2024.”
Until a new program is agreed, Lim said, Pakistan’s ability to secure loans from other bilateral and multilateral partners would be “severely constrained.”