Pakistan Stock Exchange plunges by over 6% over rumours of Indian strike near Karachi

Karachi: The Pakistan Stock Exchange plunged by over 6 per cent on Thursday with trading halted for an hour after rumours of escalation in military action by India near Karachi.

Although the rumours were unfounded, the benchmark KSE100 index tumbled 6,948.73 points, or 6.32 per cent, to 1,03,060.30, before the trading was halted.

Trading resumed with Fatima Bucha of AKD Securities confirming the situation on the floor had calmed down a bit.

“But the situation could get worse as investors are panicking due to the geopolitical situation,” she said. “No one is sure what is going to happen and how and if Pakistan will respond to India's aggression.” The downward trajectory of the index was largely driven by negative contributions from key stocks such as cement, energy, bank, and technology, which collectively dragged the index down.

Meanwhile the government has taken measures to keep its foreign exchange reserves stabilised.

It has imposed a 60-day ban on importing and exporting precious metals, jewellery, and gemstones from Thursday.

The temporary ban was imposed by a Commerce Ministry Order suspending SRO760 of 2013, which governs the trade of precious metals.

The restriction is linked to the recent impasse with India as a potential strategy to limit the flow of metals.

The State Bank of Pakistan has also informally advised all currency dealers in both inter-bank and open markets to closely monitor dollar outflows, as the escalating conflict could rapidly increase demand for the greenback.

Zaffar Paracha, general secretary of the Exchange Companies Association of Pakistan said if the currency market faced any shortage it could be managed but if there was a prolonged conflict it could damage both countries.

“For now we have not seen any panic buying of dollars, nor had demand escalated,” Paracha said.

According to a currency dealer, over 90 per cent of remittances to Pakistan come through Indian exchange companies, particularly from the West Asia — a channel that may face disruptions if the conflict between the two countries prolongs. “…In the case of a full-fledged war, these companies could be used by India as a tool to pressure Pakistan.” Currency dealers, speaking on condition of anonymity, said Indian exchange companies are the main handlers of remittances to Pakistan.