Economy

Stock hummers 3.6 pc on Straining Pakistan-India Relations

Karachi, March 1, 2019: The aftermath of the Pulwama attack on 14th Feb, 2019, Pakistan and India have been at loggerheads with each other. Since the said attacks, the KSE100 index has faced a severe hammering of 3.6 percent, a report by Arif Habib Research said. 

Event

  • Pulwama Attacks: – On February 14, 2019 a suicide bomb blast killed more than 40 Indian paramilitary personnel and injuring at least 70. The terror attack took place in Pulwama, about 20km from Srinagar, capital of Indian Occupied Kashmir (IOK). Jaish-e-Muhammad (JeM), claimed responsibility for the bombing.

 Demand from the Indian side following the Pulwama Attacks

  • India demanded Pakistan to take credible and visible action over the suicide attack

Response from Pakistan

  • On 19thFebruary 2019, PM Khan in a televised address to the nation emphasized Pakistan’s desire for peace and will to resolve the issue through dialogue. Pakistan demanded India provide actionable evidence and Pakistan is ready for any investigation into the attack. The PM, however, asserted that Pakistan would retaliate, if attacked.

   Reaction from India

  • India weighed options after Kashmir attack: Diplomatic isolation and military strikes were discussed amid domestic pressure to respond in kind to the Pulwama terror attack.
  • India withdrew most-favoured nation (MFN) status to Pakistan after the Pulwama incident and hiked the customs duty to 200 per cent on all goods imported from Pakistan – 
  • India suspended key bus service to Muzaffarabad, the capital of the Pakistani territory of Azad Kashmir.
  • India decided to “stop” the flow of its share of water to Pakistan from rivers under the Indus Waters Treaty (IWT).
  • Various other measures were taken as anti-Pakistan sentiment was hyped up by the leading BJP and the media. Pakistani nationals were ordered to leave India within 48 hours on 19th Feb, 2019. PSL matches were banned from being broadcasted. India threatened to boycott the 2019 Cricket World Cup fixture later this year.
  • On February 26, 2019, Indian Air Force jets entered Pakistani airspace. Facing timely and effective response from Pakistan Air Force, Indian aircrafts released payload in haste while escaping which fell near Balakot. India called them ‘preemptive strikes’ on suspected Jaish-e-Muhammad camps. India claimed to have killed around 300 militants which Pakistan vociferously denied and was refuted by various investigations by numerous international media organizations.

 Response from Pakistani armed forces

  • On February 27, 2019, Pakistan Air Force (PAF) struck at non-military targets in IOK across the Line of Control, and shot down two jets of the Indian Air Force (IAF) inside the Pakistani airspace after the LoC was violated once again, the Foreign Office and the military spokesmen said. Pakistan also arrested one IAF pilot.

 Pakistan announced the release of the Indian pilot to de-escalate tensions

  • On February 28, 2019, Prime Minister Imran Khan announced to release Indian pilot Abhinandan Varthaman on Friday as a peace gesture. The pilot was captured by Pakistani forces after his jet was downed on Thursday (27thFeb, 2019).

 Situation likely to be resolved following interventions from international leaders

  • As per news reports, Saudi Foreign Minister is expected to arrive in Pakistan todayUAE Crown Prince Muhammad Bin Zayed has also called both leaders of Pakistan and India to exercise restraint. We believe India will consider the return of the soldier as their victory and would take this event as an opportunity to de-escalate the situation.
  • Yesterday (28thFebruary, 2019), President Trump in a news briefing following his meeting with Kim Jong-un (Supreme Leader of north Korea) in Vietnam, started his discussions by commenting that the US is actively involved in de-escalating tension between India and Pakistan. Mr. Trump announced that “reasonably decent” news is coming in from the two countries and that the situation’s intensity will be defused very soon. The stock market took a sigh of relief to the positive developments of yesterday, rising by 362 points
  • According to AHL report, as elections are upcoming in India, the hype might continue, but we believe military de-escalation would help normalize lives of common men in both countries including resumption of passenger flights which have been suspended presently.  Intervention of international powers is likely to play a very critical role in defusing the tension between the two nuclear-armed countries.
  • AHL index target for Dec-19 is maintained at 47,000 points with preferred sectors being E&P, Fertiliser and Banking. Our top picks are OGDC, PPL, UBL, ENGRO, FFC, EFERT, BOP and BAFL.

 

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