ISMAIL DILAWAR

KARACHI: Thanks to Pakistan’s economic insularity from the now-volatile global markets, the analysts foresee a long-term impact of the so-called Brexit on the growth-conscious South Asian country relatively not so significant.

In what market observers called it a somewhat ‘exaggerated’ reaction, Pakistan shares Friday tumbled 2.2 percent, 848 points, as confirmed reports of a “Leave” vote in the UK’s historic referendum caused panic selling at the bourse.

The benchmark KSE-100 index was seen plunging 3.8 percent or 1,412 points in the intraday trade.

Attributing the day’s bloodbath mainly to 570-point correction in banking and fertilizer stocks, researchers at Arif Habib Limited dub market reaction as “unjustifiable”.

“We view this panic in the market as unjustifiable and could be taken as a buying opportunity with our EM and CPEC theme intact,” they viewed.

Terming PSX reaction to Brexit as somewhat ‘exaggerated’, the AHL analysts said the sectors which would be adversely impacted constitute 25 percent weight in the market.

Syed Atif Zafar of JS Research also does not expect any significant impact of UK’s “Leave” vote on local fundamentals. “We believe fallout on local equities is a strong possibility if final results confirm Britain’s exit from European Union,” he said.

He recalled that KSE-100 index had slumped 11 percent at the start-of-the-year in reaction to meltdown in global equities (international markets crashing by 20 percent) during the period.

With many international experts expecting a similar decline in international equities (20 percent), he said a 10 percent decline in local equities cannot be ruled out in the short-term.

Zafar, however, pins hope in Pakistan’s recent reclassification to MSCI Emerging Markets that, he said, was likely to absorb the impact in the long run.

Economic observers at Topline Research came up with rather detailed report on Brexit’s impact on Pakistan saying the “surprise” outcome shook the global markets where Pound Sterling to US$ came off by 7 percent from yesterday’s 1.45 to 1.35, lowest since 1985.

“Global markets have also taken a toll with across the board losses,” they added.

International oil prices have come off as a result of global uncertainty and concerns over a recession in UK with a knock off effect in EU.

Oil prices dipped four percent Friday with WTI trading at $47. “This has led to weakness in local oil Exploration and Production (E&P) companies,” the analysts said.

Japanese Yen appreciated as a result of BREXIT and was trading at 101.9 to US$, up by three percent as of Thursday. “This would be negative for local auto sector as portion of their costs are denominated in yen,” they said.

Textile sector would also be affected as a weaker Pound Sterling and Euro (down 2.3 percent today) would render Pakistan’s exports more expensive. Out of total textile exports during Jul-May 2016 of $11.6 billion, UK textile exports are $1.2 billion or 10 percent.