The PSE plunged sharply on Thursday, amid worries that tensions between the United States and Iran could worsen. The S&P 500 Index tumbled by 6,042.26 points, or 3.21% to 182,338.12 points.
The market initially acted in optimism, posting an intraday high of 188,923.39, up 543.01 points (0.29%), but soon turned negative, hitting a session low of 181,961.14, down 6,419.24 points (0.41%).
AAH Soomro, an independent investment and economic analyst, reported, “It was jittering because it appeared there was some potential Iran and US conflict and tensions were heating up seriously.” He further noted that a weaker than expected earnings report from Fauji Fertiliser Company had triggered a big drop in the stock, giving it a 3,500-point decline in one go. Soomro added, “It’s a good correction as the earnings season isn’t particularly exciting and it also provides a good consolidation point for investors.”
And then US President Donald Trump warned Iran that time was running out to avoid American air strike. The alert, as well as the presence of a US naval strike force in region waters, caused risk premiums in the region and increased volatility in markets.
On the domestic front, the SBP kept the policy rate unchanged at 10.5%, with headline CPI of 5.6% in December up from the expectations and core inflation below 7.4%. The MPC highlighted sustained economic activity, a growing trade deficit from higher imports, weaker exports and a remittance-based stable current account. Keeping inflation and external pressures under control, the SBP chose to maintain rates to balance price stability with stable growth.
On Wednesday, the KSE-100 posted modest gains of 177.53 points (0.09%), to 188,380.39, equivalent to an increase of between 188,179.51 and 189,183.88 before falling short.
As international tensions continue to play havoc on local markets, it is recommended that investors be cautious, stay alert to geopolitical developments and consider the general economic factors that may affect Pakistan’s financial situation in the coming weeks. Read more: Best business liability insurance