Shares at the Pakistan Stock Exchange (PSX) continued their downtrend for the third consecutive day on Thursday as political and economic uncertainty continued to prevail.

The benchmark KSE-100 index closed at 39,342.89 points, down 489.56 points or 1.23 per cent. It reached an intraday low of 555.75 points or 1.39pc around 3:28pm.

Aba Ali Habib Securities’ Salman Naqvi said the primary reason for the downtrend continued to remain the same: political uncertainty and the situation of the Punjab Assembly, about which different rumours had been circulating throughout the day. “There are rumours of imposing governor’s rule, or [ousting the incumbent chief minister] through a no-confidence vote.

“The economic conditions are in front of us. There is no surety of inflows from the IMF (International Monetary Fund). There are different rumours of a very big increase in electricity tariff and imposition of new taxes. The market came under selling pressure again because of these reasons despite some stability earlier,” he added.

Arif Habib Corporation Director Ahsan Mehanti said stocks fell across the board as the political crisis persisted ahead of the impending dissolution of the Punjab and Khyber Pakhtunkhwa assemblies.

“Rupee instability and likely massive surge in energy prices for revival of IMF programme played a catalyst role in bearish activity,” Mehanti added.

The benchmark index had crashed below the 40,000 barrier a day earlier after plunging by 1,138.37 points.

Analysts have attributed the stock market’s bearish trend to the political crisis in Punjab, along with the deteriorating economic situation.

PTI Chairman Imran Khan announced on Saturday that his party’s governments in Punjab and Khyber Pakhtunkhwa would dissolve their assemblies on Dec 23 to pave the way for fresh elections.

However, in a double-edged move by the ruling Pakistan Democratic Movement (PDM), Punjab Governor Balighur Rehman asked the chief minister to obtain a vote of confidence from the Punjab Assembly on Wednesday (today), while PML-N and PPP lawmakers submitted a separate no-trust resolution against him in a bid to bar him from dissolving the assembly.

On Tuesday, Punjab Assembly Speaker Sibtain Khan termed the governor’s orders “illegal, against the provisions of the Constitution and thus … disposed of”.

With both sides sticking to their positions, an acrimonious constitutional battle is undoubtedly going to ensue, adding further fuel to the already volatile political situation.

Read: Punjab on the brink of another constitutional crisis

Meanwhile, the country’s economic situation is deteriorating by the day. The State Bank of Pakistan’s foreign exchange reserves are in a critical condition, declining by $11 billion during a year. In Dec 2021, the central bank’s reserves were $17.686bn which now stand at $6.7bn as of Dec 9, barely enough to cover a month’s imports.

The gravity of the situation has been exacerbated as the ninth review of a $7bn IMF programme is facing delays even as remote talks are being held between Fund officials and the government for the release of $1.18bn.

The talks, originally due in the last week of October, were rescheduled to Nov 3 and then kept on facing delays following gaps in estimates by the two sides.

Pakistan has to repay at least $13bn in the remaining part of the financial year. But it is unclear when it will receive more inflows from bilateral and multilateral institutions, giving rise to default fears.

The country was already in the grips of an economic crisis, facing decades-high inflation and dangerously low levels of forex reserves, when it was devastated by floods that killed at least 1,700 people and caused severe damage, estimated at around $30bn by authorities, to agricultural land and infrastructure.