PSX goes into crash mode amid vote doubts, but stages late clawback

The Pakistan Stock Exchange (PSX) witnessed significant fluctuations today, initially plummeting over 2,000 points due to the uncertain outcome of the general elections held on Thursday amid a nationwide blackout of internet and mobile services, leaving voters and candidates disconnected.

However, the market managed to recoup some losses by the day's end, closing 1.87% lower at 62,943 points.

Market analysts, such as Muhammad Sohail of Topline Securities, attributed the initial decline to the "unexpected" election results, which deviated from pre-election expectations.

This uncertainty triggered a massive sell-off, with the benchmark KSE-100 index losing 3% at its lowest point.

The PSX on Wednesday had closed on a positive note, fueled by pre-election optimism and hopes of an improved credit rating for Pakistan. 

However, investors exhibited extreme caution due to the uncertain political landscape, which limited trading volumes.

Despite the early plunge, the PSX managed to claw back some losses throughout the day, closing roughly 0.54% higher than its lowest point. 

This suggests a degree of resilience within the market, potentially fueled by hopes for a stable post-election government.

S&P Global Ratings is expected to reassess Pakistan's credit rating soon, with potential for an upgrade to 'B' contingent upon the new government's commitment to fiscal reforms and adherence to the IMF program.

Furthermore, dollar-denominated Pakistani sovereign government bonds experienced a slight depreciation as initial election results emerged, reflecting lingering uncertainty.

The country's economic recovery remains fragile, amidst ongoing militant violence and a deeply polarised political environment.

While the timely announcement of election results, as emphasised by Moody's, could contribute to reduced uncertainty, long-term stability hinges on the new government's ability to address these underlying challenges.

In conclusion, the PSX's volatility today reflects the complexity of the interplay of pre-election expectations, uncertain election outcomes, and ongoing economic and political challenges in Pakistan.

While the market exhibited some resilience, long-term stability will depend on the new government's actions and its commitment to addressing critical issues.

The South Asian country is striving to find a way out of an economic crisis while it struggles with rising militant violence in a highly polarised political environment.

On the other hand, Moody’s Investor Services (Moody’s), a global credit ratings agency, said that timely announcement of election results would reduce political uncertainty in Pakistan.

“A timely announcement of the results, leading to a smooth formation of a new government will reduce policy and political uncertainty,” Bloomberg quoted Grace Lim, Analyst, Moody’s Investors Service in Singapore, as saying on Friday.

“This is crucial for the country that is facing very challenging macroeconomic conditions, with fragile balance of payments, weak growth and high inflation.”

Pakistan's General Elections 2024 remained mostly peaceful but internet and mobile outage and extremely slow release of unofficial results raised questions over the credibility of this vote.

As per preliminary and unofficial results, Pakistan Tehreek-e-Insaf-backed independent candidates were ahead of their rivals in several National Assembly constituencies on Friday.