Pakistan’s stocks are headed for the worst weekly drop since June as political tensions add to concern that the rally that made it Asia’s best-performing market was overdone.
The benchmark KSE100 Index fell 0.3% to 39,872.88, taking losses last week to 3.4%. The retreat comes amid rising tensions between India and Pakistan and a looming demonstration in Islamabad on November 2 against Prime Minister Nawaz Sharif. Valuations are near the highest since 2008 after a 21.5% surge in the stock gauge this year.
Top opposition leader Imran Khan is pressing Sharif to quit or offer himself for a probe after leaked files from a Panama law firm showed his children used offshore companies to make investments.
He has denied any wrongdoing. The government on Thursday banned protests or big assemblies in the capital city for two months and arrested his supporters, Dawn news reported, while India’s foreign ministry last week summoned Pakistan’s envoy in New Delhi over the “espionage activities” of a high commission staffer in India. Pakistan rejected the allegations.
“First we had an escalation at the border with India, so that kind of spooked the market a little,” Chief Executive Officer Farid Ahmed Khan, who oversees about $450mn at HBL Asset Management, said in Karachi. “This lock-down reports coming added fuel to the fire.”
Pakistani equities have fallen about 4% from a record on October 20.
The stock gauge is set for its fifth annual gain this year, the longest winning streak in almost a decade.
The market received a boost in June when MSCI announced that it would reclassify Pakistan as part of its benchmark emerging-market index from May 2017.
The planned demonstration this week is emblematic of the persistent challenges to Sharif’s authority throughout his latest term.
“Things are getting nasty,” Shah Mahmood Qureshi, senior member of Khan’s party said by phone. “The government wants confrontation but we’ll remain peaceful and hold protest whatever it takes.” Khan’s protest is unlikely to lead Sharif’s ouster, Sasha Riser-Kositsky, an Asia analyst at Eurasia Group, said in a note on Thursday. “Sharif will remain in power as long as he maintains the grudging support of Pakistan’s military.”