Stocks at new 2-year low as coalition splits

The second largest party in the coalition announced late on Monday it was pulling out.

The benchmark Karachi Stock Exchange index ended down 3.9 per cent at 9,430.29 points, the sharpest one-day fall since July 28, after falling as much as 4.38 per cent. Tuesday’s decline took the market to a level last seen on August 28, 2006.

Investors said although the coalition’s break-up eliminated uncertainty about how the fractious alliance will work together, the split raised concerns on how outstanding political issues will be resolved, including the election of the next president.

Some investors said the persistent political uncertainty will deter foreign investors from putting their money in Pakistan for months to come.

The Pakistani stock market, which rose for six straight years from 2002, and was one of the top performers in Asia during that period, has tumbled 33 per cent this year on political tension and a weak economy.

Pakistan is struggling with soaring inflation, falling reserves, and widening trade and fiscal deficits.