In the eagerly anticipated Senate elections, the ruling alliance fell short of forming a majority in the upper house. Moreover, in one of the most hotly contested senate seats, PDM’s candidate, Yousaf Raza Gillani, managed to beat the incumbent finance minister, PTI’s Dr. Abdul Hafeez Sheikh. The seat’s election was a close race with the former PM securing 169 votes while Dr. Abdul Hafeez Sheikh secured 164 votes. It is important to highlight that PTI’s female candidate for the seat, Ms. Fouzia Arshad secured 174 votes against her opponent’s 161, suggesting internal discord within the party.
This loss can be considered a major blow to the ruling coalition since Dr. Sheikh is presently an unelected minister. As per Clause 9 of Article 91 of the Constitution, Dr. Sheikh has a period of 6 months since his appointment as a minister (Dec20) to become either a member of the Senate or the National Assembly. PTI now has the option of getting Dr. Sheikh elected prior to his tenure’s expiry or revert his position back to the Special Assistant to PM. Note that Dr. Sheikh is on the forefront of Pakistan’s negotiations with the IMF so preserving his position will be PTI’s top priority.
Imran Khan seeks vote of confidence
Post the Senate elections, the PM Imran Khan has filed a motion to seek a vote of confidence. We project that the ‘vote of confidence’ will likely be successful as the balloting is not to be secret. The eventual result is expected to instill ‘confidence’ back into the elected government.
Fundamentals will likely pave way through short-term jitters
The market reacted to the renewed political uncertainty post the senate elections, particularly after Dr. Sheikh’s loss. Consequently the market closed down 882pts (-1.95%) during today’s session. While short-term jitters may be visible, we believe investors will once again focus on recovering economic macros, especially post a successful vote of confidence. We continue highlighting our preference for cyclical stocks, including Cements, and Automobiles.