Panicked by increasing political temperature in the country, investors on the sentiments-driven stocks market ‘dumped’ their shareholdings making the KSE100 index plunging to a level last seen more than five years ago in February 2009.
The benchmark index nosedived by a record 1,340 points or 4.7 per cent to close at 28,065.69 points as revolution-fame PAT leader Dr Tahirul Qadri declared to join Imran Khan in his “Azadi” march slated for August 14.
“The KSE100 Index witnessed a major fall since February 2009 again on account of political uncertainty,” said InvestCap analyst Abdul Azeem.
The heat of the situation can be observed through dull trading activity in the last week that marked low trading volume and a drop of hundreds of points in KSE100 index, he added.
Ever since the politics of agitation has got momentum with August 14 approaching fast, the KSE index has shed some 933 points. Monday’s biggest dip takes this number to 2,273 points.
The risk-averse equity investors also were cautious towards the outcome of a corpse commanders’ meeting summoned by Army Chief General Rahil Sharif at General Headquarters (GHQ) with an agenda not specified by the ISPR in its one-line statement issued on Sunday.
“(The) market witnessed (a) panic-like situation and declined by 4.7 per cent,” viewed Samar Iqbal of Topline Securities.
The fall, she said, was highest ever in terms of points but not percentage. What was adding fuel to the fire, Azeem said, was Monday’s corps commanders meeting in Rawalpindi. The meeting of all-powerful army commanders was fuelling up uncertainty in the local bourses, he added.
“Post meeting announcement would play a pivotal role in setting up the direction of the market going forward,” said the analyst.
While many fear a possible military coup, analysts at Topline Research think otherwise. “Military coup (is) common in Pakistan but seems difficult,” viewed Vahaj Ahmed of Topline.
With active media and judiciary, the analyst deems a military intervention as difficult. “Looking at Pakistan’s past record, military takeover may not be completely ruled out,” he warns, however.
With the armed forces actively chasing militants in North Waziristan, an unconstitutional step like coup may not be suitable, said Vahaj. “All major political parties including PTI are against the military rule,” he added.
About investors’ approach, Samar said the investors feared that pressure was mounting on Sharif government. “Thus due to political instability many stocks closed down at five per cent lower limit,” she said.
Trading volumes at the ready-counter were recorded at what the analysts said a decent at 215 million shares. “Serious investors bought shares on dips amid hope that current crisis will get over soon,” opined the analyst.
Azeem hinted that stocks index may see further losses in the days to come given the “huge panic” created among investors by Monday’s major fall.
Investors, the analysts said, were slashing their positions on the back of rising temperature on political front. “Two parties have already announced the million march which is expected to drag down (the) index further,” viewed Azeem.
Most of the time, the analyst said, the equity market reacted more quickly on major news as compared to any other economic indicator’s reaction.
Vahaj expected that market could correct up to five per cent. “Activities at the weekend have added more uncertainties. (That) is not good for Pakistan market still up 16 per cent in 2014 to date,” he said.
As political hustle and bustle intensifies, the stocks observers advised the risk-averse investors to employ a “wait and see” strategy till the stabilization of the political situation.