The spiraling tension between India and Pakistan took a toll on the latter's stock market on Wednesday with the Karachi Stock Exchange plummeting 569 points to close at 39,771.
Local market analysts believe that drills by Pakistan Air Force - suggestive of preparations against any aggression by India in the aftermath of the Uri attack last week - drove small investors to run for cover. According to Dawn, individual small investors dealing with 'penny stocks' were responsible for panic selling. Former Karachi Stock Exchange chairman Arif Habib blamed the 'hype' surrounding a possible confrontation with India as the primary cause behind Wednesday's fall.
Tensions between the two neighbours have spiked since Sunday when four terrorists stormed an Indian Army camp in Uri and killed 18 soldiers before being gunned down. Pakistani media late on Wednesday reported that airspace over the country's northern areas was shut down. State-run Pakistan International Airline also cancelled flights to Gilgit-Baltistan, Chitral, Gilgit and Skardu. Instead, flights by Pakistan Air Force (PAF) fueled the speculative fire of a possible confrontation with India. A military official though was quoted by Dawn as saying that the PAF flights were routine training exercises.
Nonetheless, the strong stand taken by India, growing international snub of Pakistan and a reportedly high-level of alertness on the border, point towards challenging days ahead for markets in the country.