Fractured mandate puts stocks at slippery slope, KSE-100 down over 3.50pc
The market was hoping for a strong government which could produce sustained economic policies
KARACHI (Web Desk) – The benchmark KSE-100 Index tumbled over 2.70 per cent during on Monday as investors at the Pakistan Stock Exchange are grappling with the divided mandate emerging out of the Feb 8 elections and the resultant political uncertainty that will follow in the coming years.
The KSE-100 Index nosedived as soon as the session began and settled at 61,065.31 after shedding 1,878.43 points, or 2.98pc, against the previous closing of 62,943,74 when the session closed.
At one point during the trading, it had slipped to 60,647.67, thus shedding around 2,300 points which translates into a loss of over 3.70pc.
Meanwhile, one also has to see the effects of political instability on the rupee in the coming weeks and months as there are fears that the local currency may weaken against the US dollar in the given scenario, which will have devastating effects on economy and people.
Earlier on Friday, the benchmark index had dipped to 62,943.74 from 64,143.87, thus shedding 1,200 points during a session which at point saw the KSE-1000 losing around 2,200 points. The general elections were held on Thursday [Feb 8].
This response shouldn’t be a surprise as political stability is essential for economic progress, which Pakistan has been lacking for the last few years – a trend which the business community wanted to see reversed with a clear mandate and strong government.
With all the hopes for a stable government dashed, Pakistan will now have a coalition government comprising parties that have different economic priorities and policies at a time when the country needs to tackle the vital questions including the role of state-owned enterprises, the development model to be followed and how to provide relief to the masses crushed by inflation.
At the same time, record interest rates have paralysed the economy, meaning there is no economic activity to produce employment opportunities and lead to wage hikes amid the shrinking purchasing power.
Pakistan still awaits the release of the third and final tranche under the current IMF programme which will end on March 31, as the Washington-based top lender wants Islamabad to dispose of the lossmaking state-owned enterprises such the PIA and the Pakistan Steel Mills.
However, the coalition government will mean that there would be very little room for the future prime minister and the economic czar to fulfil the promises made with the electorates as the conflicting views of the partner parties are going to block any swift movement.
Meanwhile, more hikes in energy tariffs under the IMF pressure will going to the hurt the future government unless it comes with an effective alternative.