KARACHI: Pakistan’s equity market took a massive hit during the week after the arrest of former Prime Minister Nawaz Sharif and money laundering investigations against top leaders of the Pakistan Peoples Party (PPP).
The benchmark Karachi Stock Exchange (KSE) 100 index closed the weekend session on Friday down by 686 points at 37,167 points, against 37,853 points recorded on Thursday. The index made an intraday high of 38 and a low of 935 points owing to political upheaval in the country.
Former Pakistani prime minister Nawaz Sharif was sentenced to seven years in prison on Monday and fined $25 million on corruption charges. A Joint Investigation Team (JIT) formed on the orders of the Supreme Court to probe money-laundering allegations against former president Asif Ali Zardari and others recommended that 16 criminal cases be opened up against the leader.
The JIT said in a report that approximately 29 fake bank accounts had been used to launder Rs.42 billion.
“The KSE-100 index continued its bearish trend from last week and continued to trade in the red this week. Announcements of $3 billion being deposited by the U.A.E. last Friday failed to ignite confidence in investors,” said Misha Zahid, a stock analyst at Arif Habib Limited.
“Political instability in the wake of ex-PM Nawaz Sharif’s arrest, submission of the Joint Investigation Team report on money-laundering investigations against PPP leaders and their names being enlisted on the Exit Control List (ECL) caused a stir in the investment climate," Zahid added.
On Wednesday, the federal government decided to put 172 politicians, bureaucrats and others on the ECL, including Zardari, his son and PPP Chairman Bilawal Bhutto Zardari, and Chief Minister of Sindh Syed Murad Ali Shah.
“It is a natural phenomena that the market takes pressure from incidents such as putting the name of high profile persons on the ECL,” Fahad Irfan, Head of Research at Alfalah Securities, told Arab News. However, he said the ongoing political turmoil would be short-lived and fundamentals will take over eventually.
The equity market has declined by 1,084 points or 2.8 percent during the current week as compared to the previous week.
“Investors were left dejected due to several factors this week, including a $591 million decline in the State Bank of Pakistan’s foreign exchange reserves, strong political tension in the country and weak macro indicators,” said Nabeel Khursheed, an equity analyst at Topline Securities.
The Pakistani stock market was declared the best performing Asian bourse in 2016 as investors got 46 percent stunning returns. The benchmark index was able to hit an all-time high of 52,876 points in May 2017.
The equity market’s benchmark KSE 100 Index has recorded a 5,579 points decline since September from 42,746.
Analysts believe that uncertainty regarding a bailout deal from the International Monetary Fund (IMF) has also rocked the market.
“The uncertainty period has been extended so much that it has created a lack of clarity on the government’s part to avail the IMF programme,” Fahad Irfan said.
Analysts believe that the ongoing bearish spell at the equity market will continue when Zardari is likely arrested next week.
“We expect the market to remain in the red on the back of political uncertainty," Zahid said. "On Monday ex-President Asif Zardari is due to appear in person in the Supreme Court. Though valuations appear attractive, investors are expected to remain cautious."