Market Chaos: Pakistan Stock Exchange Plunges Amidst Indo-Pak Tensions

The Pakistan Stock Exchange (PSX) experienced a steep decline of over 6 percent on Thursday, with trading being halted temporarily due to speculations of increased military action by India near Karachi.

Even though these rumors were unfounded, the KSE100 index dropped a staggering 6,948.73 points, or 6.32 percent, coming to a halt at 103,060.30 before trading resumed.

Fatima Bucha from AKD Securities indicated that the market ambiance had steadied somewhat, but investors remained unsettled amid the ongoing geopolitical tension.

The plummet in the index was primarily attributed to significant negative contributions from vital sectors including cement, energy, banking, and technology.

In response to these developments, the Pakistani government implemented measures to stabilize foreign exchange reserves, notably enacting a 60-day ban on the import and export of precious metals, jewelry, and gemstones.

This temporary prohibition links to the standoff with India, as a strategic move to curtail metal flow. Concurrently, the State Bank of Pakistan urged currency dealers to meticulously oversee dollar outflows due to the looming conflict, which could spike demand for the currency.

Zaffar Paracha of the Exchange Companies Association of Pakistan remarked that the currency market had yet to see panic buying of dollars, though the threat of prolonged conflict poses economic risks for both nations.

Currency dealers noted that the majority of remittances to Pakistan, channeled through Indian exchange entities, especially from West Asia, might face disruptions if hostilities widen, suggesting that a full-blown war could see India leveraging these avenues to exert pressure on Pakistan.

(With inputs from agencies.)