Karachi, December 26, 2023: Pakistan stocks experienced a historic single-day drop, witnessing a staggering 4.11% crash as the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) plummeted by 2,534 points on Tuesday.
This significant downturn left the index at 59,171 points, a sharp decline from the last closing figure of 61,705 points on December 22, 2023.
Analysts from Arif Habib Limited reported that the stock market had now dropped by 11% from its peak of 66,427 points. Expressing concern over this substantial downturn, they noted that Pakistan had reached some longer-term levels, emphasizing the importance of monitoring key thresholds.
The analysts pointed out that the levels of 60,000 points for KSE-100 and 20,000 for KSE-30 are particularly significant, and they are now closely watching for signs of bottoming and a potential resumption of an upward trend. The focus for the upcoming week will be on the main indices, including KSE-100, KSE-30, and KSEALL, for any signs of divergence that could signal a tradable low.
The drawdown for the KSE-100 has now exceeded -10%, historically considered a turning point in bull markets. This sharp decline has raised concerns about the overall market sentiment and its potential impact on investor confidence.
Adding to the concerns, Pakistan finds itself on the watch list from FTSE for potential demotion from Secondary Emerging to Frontier market status. Over recent years, Pakistan has witnessed a gradual decrease in its index weight within FTSE Russell global benchmarks. This decline has led to the market falling below the minimum investable market capitalization exit level threshold required to retain a Secondary Emerging market status.
As of June 30, 2023, the total investable market capitalization of Pakistan in the FTSE Emerging All Cap index was USD 3.01 billion. The minimum investable market capitalization exit level threshold, required to maintain Secondary Emerging market status, is USD 3.49 billion, as of the November data. The latest available data as of November 30 indicates that Pakistan’s investable market cap stood at USD 3.788 billion, just below the Nov 30 closing.
To mitigate the risk of a FTSE downgrade, Pakistan is now in a critical position where a substantial rally is needed into the year-end. The coming weeks will be crucial for market participants and policymakers as they navigate these challenging conditions and work towards restoring investor confidence in the Pakistani stock market.
