PSX closes lower by 0.7% on ME crisis

KSE-100 loses ground as geopolitical uncertainty overshadows IMF progress

KARACHI:

Pakistan's stock market remained under pressure during the outgoing week, with the benchmark KSE-100 index closing at 151,708 points, down around 0.7% week-on-week, as persistent geopolitical tensions and volatile global oil prices dampened investor sentiment.

The cautious mood prevailed despite supportive developments on the economic front, including progress in talks with the International Monetary Fund (IMF) towards finalising the staff-level agreement (SLA), alongside improved liquidity conditions reflected in a higher-yield government debt auction.

PSX commenced the trading week on Tuesday, when the KSE-100 closed at 153,966, gaining 1,226 points (+0.80%). Investors took optimistic bets post Eidul Fitr holidays. On Wednesday, the market saw another upbeat session as the index staged a robust recovery, closing at 158,313, up 4,347 points (+2.82%), on the back of easing geopolitical tensions.

However, the PSX recorded a decline on Thursday as the KSE-100 lost 5,406 points (-3.41%) to close at 152,910. The bourse closed the week with profit-taking and fell 1,200 points (-0.79%) at 151,708.

Arif Habib Limited (AHL), in its weekly commentary, noted that the KSE-100 index experienced some volatility during the week amid ongoing geopolitical tensions, resulting in continued selling pressure. It closed at 151,708, marking a modest decline of 0.68% WoW (-1,033 points). As the geopolitical conflict entered its fourth week, Pakistan emerged as a constructive force by positioning itself as a mediator, aiming to facilitate dialogue and support a peaceful resolution, AHL mentioned.

Furthermore, the IMF shared a draft of the Memorandum of Economic and Financial Policies (MEFP) with Pakistan, marking a key step towards finalising the SLA, pending agreement on policy measures and macroeconomic targets under its funding programmes. In addition, shipping disruptions in the Arab Gulf prompted global carriers to reroute cargo, leading to a modest increase in transshipment activity in Pakistan as its ports stepped in to handle the diverted volumes, it said.

During the week, the government raised debt worth Rs503.1 billion against the target of Rs400 billion. Cut-off yields rose by 90-225 basis points across all tenors and a major amount was raised through the 15-year Pakistan Investment Bonds (PIB), with allocation of Rs327.9 billion.

Fresh oil and gas discoveries and appraisals of existing discoveries had a positive impact on the E&P sector. Notable discoveries included gas finds at Shams-1, Sahito-1, Bilitang-1 and Pasakhi-13 wells. Meanwhile, Barrick Mining was moderating the pace of development at Reko Diq, citing evolving security conditions and regional dynamics, AHL added.

Syed Danyal Hussain of JS Global noted that the KSE-100 index remained under pressure during the week as the lack of visibility on the regional situation kept investor sentiment subdued. International oil prices remained highly volatile as diplomatic negotiations offered some hope of de-escalation, but they failed to provide meaningful relief to energy markets. Brent crude surged to $111 per barrel on Friday after hitting a low of $100 during the week. Consequently, the KSE-100 closed the week down by 0.7%.

On the economic front, the IMF released the Memorandum of Economic and Financial Policies, which laid out broad policy expectations for the FY27 budget. Key highlights included a proposed tax collection target of Rs15 trillion. Furthermore, the IMF recommended frequent petroleum price adjustments to better reflect international oil price movements.

Meanwhile, the latest PIB auction saw yields rise across different maturities, reflecting inflation concerns amid elevated oil prices and heightened geopolitical tensions. In a setback, Barrick Mining postponed the development timeline of its Reko Diq project by 12 months, citing the prevailing regional instability and domestic security concerns. Lastly, the SBP reserves stood at $16.4 billion, up $22 million, Hussain said.