Exercise Fuels Indo Pak Escalation Fears Drives Stocks Down

Despite official insistence that the activities had been planned in advance, Wednesday’s closure of airspace over the country’s northern areas and flights by Pakistan Air Force (PAF) fighter planes participating in exercises fuelled rumours that the country’s armed forces were preparing for a possible Indian attack, driving the stock market down.

‘Exercise’ fuels Indo-Pak
‘Exercise’ fuels Indo-Pak escalation fears, drives stocks down

The exercises, coming at a time when tensions between the two nuclear-armed neighbours are running high following a terrorist attack on a military camp in India-held Kashmir, drove speculation on social and mainstream media. Despite the confusion, Inter-Services Public Relations and the PAF’s media directorate chose to keep mum and the official silence only fuelled rumour mills. Talking to Dawn, a senior military official rejected the reports about any change in the alert level over the past few days. However, he noted that “extreme vigilance” was being exercised in view of the current threats from India. It is expected that official details about the exercises will be released in the coming days. But following official announcements regarding the closure of airspace over the northern areas and the M1 and M2 motorways, even private TV channels began airing reports hinting at the possibility that these measures were being taken in response to the potential threat of surgical strikes by India, as possible retaliation for the Uri camp attack that left 18 soldiers dead. Talking about the fighter planes landing on the motorway, the military official said this was part of a routine training exercise, ‘Highmark’.

Usually held every five years, this exercise is one of the largest undertakings by the PAF and requires months of advance planning. Due to the closure of airspace, PIA flights from Islamabad to Gilgit and Skardu had also been cancelled. A top PIA official told Dawn that a ‘Notice to Airmen’ (NOTAMS) had been issued three days ago, informing about the airspace closure at different times on Sept 21, 22 and 24 due to the exercise. The closure of the M1 and M2 motorways at multiple points between Kala Shah Kaku and Sheikhupura/Gujranwala on the M2 and near Peshawar-Nowshera  was announced by National Highways and Motorway Police (NHMP) through a press release issued a day earlier, but the reason for the close was attributed to “construction work”. The over-flights by jets participating in the PAF drills also fuelled speculation that caused a sharp decline in the stock market, with the KSE-100 benchmark index dropping a massive 569 points to close at 39,771 points. 

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As small investors ran for cover, the market fell by 1.41pc, wiping out gains netted in the month of September. Banks, companies and mutual funds remained stable, but panic selling was triggered by individual small investors, who were dabbling in “penny stocks” that usually generated the biggest volumes in the market. Former Karachi Stock Exchange chairman Arif Habib blamed the tumbling stocks on the hype created by the electronic media about tensions between Pakistan and India, which gave the impression that a confrontation was imminent. But Mr Habib also pointed out that the market had been on a long bullish run, and that with the KSE-100 index crossing the 40,000-point level, a correction was due. Certain media outlets also broadcast reports claiming that Indian troops had been moved to forward locations. 

Ever since India adopted the cold-start doctrine, troops that used to be stationed 800-1,000km from the LoC and Working Boundary have now moved to a proximity of around 200-250km. According to a defence analyst, this implied that India’s war-time troop locations from 2005-06 were now their regular deployment zones. No further movement has been observed,” a military official disclosed, adding that Indian troops had already been in a state of mobilisation. Army Chief Gen Raheel Sharif, chairing a corps commanders meeting earlier this week, had expressed satisfaction over the military’s “operational preparedness” and vowed to thwart all sinister designs against the country’s sovereignty and integrity.