KARACHI: A record-breaking 6,482-point plunge on Thursday stunned the Pakistan Stock Exchange (PSX), marking the largest single-day decline in the index’s history as investors feared escalation amid an ongoing standoff between India and Pakistan.
The bloodbath comes as Pakistan and India indulged in the worst fighting between them in decades this week, with India striking multiple locations in Pakistan on Wednesday after a deadly April 22 attack targeting tourists in Indian-administered Kashmir that New Delhi blames on its neighbor.
Pakistan, which denies any link to the Kashmir violence, said it had shot down five Indian fighter jets in retaliation. Thursday brought more violence as Pakistan said it had downed 25 drones from India overnight and New Delhi said it “neutralized” Pakistani attempts to strike military targets with drones and missiles.
“The market crash followed alarming geopolitical developments after ISPR Director General Lt Gen Ahmed Sharif Chaudhry announced that Pakistani forces had neutralized 25 drones sent by India,” Topline Securities said in its daily market review.
“He also confirmed that four army personnel were injured after one drone managed to partially strike a military target, despite the majority being intercepted.”
The statement sent shockwaves through financial markets, triggering widespread panic selling as investors rushed to offload positions, leading to a broad-based decline across sectors.
Pakistan’s benchmark KSE-100 Index started the day with a 1.7 percent rally but turned bearish and slumped as much as eight percent after reports of India’s drone strikes triggered panic selling at the bourse.
The stock gauge, bullish otherwise, ended the day with a 5.89 percent decline to 103,526, according to PSX data.
The selling pressure came largely from leveraged investors, Shahid Ali Habib, the chief executive officer at Arif Habib Ltd., told Arab News.
“Pakistan’s stocks are under pressure as it now seems that Pakistan will also go on to respond [to India] and that response will also escalate further,” he said.
“It’s not going to end actually soon and the escalation is happening.”
However, Habib said he expected a “sharp rebound” for Pakistan’s stocks once a third party like the US or longtime ally China mediated and defused the conflict.
The renewed geopolitical tension has caused Pakistan’s market to fall about 12 percent from April 23 to May 8.
The latest conflict with India is a setback for Prime Minister Shehbaz Sharif’s effort to revive the country’s debt-ridden economy through increasing revenues and exports with the help of an International Monetary Fund’s $7 billion reforms-oriented loan program.
