Pakistani Stocks Plunged as Political Turmoil Continues
Muhammad Haris
Pakistani Stocks plunged for the second consecutive session as a power struggle continued in the federal capital on the formation of the government following general elections.
Pakistan Stock Exchange witnessed 9th largest decline on day to day basis
The index closed at 61,065 which suffered a loss of 1878 or 2.98%.
In the last 2 trading sessions index lost 3078 points.
The results came against the general perception as most of the views that PML (N) would likely form a government with a simple majority, easing ways to take tough decisions to boost the economy, analysts said.
In the last two sessions after the election share values at PSX eroded sharply
Per session loss in the shape of a market capitalization of Rs 213.5 billion.
In two sessions market capitalisation suffered a loss of Rs 427 billion.
A leading analyst said that the decline is due to political uncertainty surrounding the election results and the anticipated delay in the circular debt management plan.Pakistan Stock Exchange Sees Volatile Week Amid Government Formation Speculation
Ahsan Mehanti from Arif Habib said that stocks fell sharply due to election deadlock and political turmoil after the general election results.
Strong financial results and upbeat data on $$2.4 billion remittances surging by 26 percent in Jan’24 compared with the same period a year ago supported the index to close above a day low.
He said that Bloomberg’s views over default risks, Moody’s rating concerns over political instability, policy uncertainty, and high leveraging at PSX played a catalyst role in the bearish close.
Coalition Government in Making
The Election Commission of Pakistan (ECP) has announced the Pakistan Election 2024 results.
In the National Assembly, out of 264 seats Khan’s PTI-backed candidates got 92 seats (35%) while Sharif’s PML-N got 79 seats (30%) and Bhutto’s PPPP 54 seats (20%). Meanwhile, smaller parties and others have collectively secured 39 seats (15%).
As we reported in our update on February 9, 2024, according to initial unofficial results, the outcome differed slightly from pre-election surveys and expert analysis. It was anticipated that Sharif’s PML-N would be the largest party, possibly securing a majority or coming close to it.
In 2008 largest party (PPP) got 34% of the seats, in 2013 Sharif PML-N got 48% while in 2018 PTI got 43%. In this election, PTI-backed candidates got 35%.
Moreover, PTI candidates, who contested as independents without a single symbol, are being categorized by the ECP as Independents. Although these independents secured 101 seats out of 264, according to media reports, 5-10 independents do not belong to PTI.
Over the weekend, efforts have begun within the parties to form a coalition setup.
As per a joint statement by PML-N and PPPP over the weekend where top leaders from both parties convened to discuss the current political landscape and chart a course for collaboration.
Meanwhile, PTI has stated that there will be no talks with PML-N and PPPP to make a government or to make a government together with them. It is better to sit in the opposition than to make a government with them, according to reports in the news.
Coalition governments are not uncommon in Pakistan. The last 3 governments in 2008, 2013, and 2018 were all coalition governments.
Similarly, after the PTI government was toppled in April 2022 following a Vote of No Confidence, opposition parties under the umbrella of PDM formed the government which ruled for 16 months.
But their performance was not up to the mark though they managed to get a better than expected IMF SBA near the end of their tenure.
