Pakistani stocks down 2.9% on US ties

The market made an intra-day low at 11,150.60 points.

Stocks fell sharply lower at KSE as investors reacted to U.S. pressure and allegations against Pakistan army and ISI,said Ahsan Mehanti,director at Arif Habib Investments Ltd.

A Pakistani newspaper reported on Monday that Pakistan’s military will not take action against a militant group Washington blames for an attack against its embassy in Kabul,despite mounting American pressure to do so.

Pakistan’s army chief General Ashfaq Kayani met with his top commanders on Sunday in a special meeting to discuss the security situation,the military said,as the war of words with the United States escalated.

In the currency market,the rupee firmed to 87.44/51 to the dollar,compared with Friday’s close of 87.57/64 to the dollar,amid a lack of import payments but dealers expect the local unit to come under pressure as payments are typically higher during the end of the month.

The rupee hit a record low of 87.92 to the dollar this month and dealers expect the pressure to continue after reports Pakistan will not seek a new loan from the International Monetary Fund.

However in the open market,the rupee was trading at 89.90/90.10 to the dollar.

The IMF also projected Pakistan’s GDP growth for 2011/12 fiscal year at 3.8 percent,compared with the government’s target of 4.2 percent.

In the money market,overnight rates were flat at the top level of 13.40 percent,unchanged from the Saturday’s close amid tight liquidity in the interbank market.