PSX down 3.2% as US-Iran peace push slows

Geopolitical uncertainty weighs on KSE-100 index despite domestic developments

KARACHI:

The KSE-100 index at the Pakistan Stock Exchange (PSX) retreated 3.2% week-on-week, closing at 165,596 points, as lingering uncertainty over the pace of US-Iran peace negotiations weighed on investor sentiment.

Despite the cautious mood, several positive domestic developments provided underlying support. On a day-on-day basis, the PSX commenced the week with a range-bound session, where the KSE-100 closed at 170,506, down 610 points (-0.36%).

On Tuesday, the market witnessed another volatile session, losing 1,590 points (-0.93%) at 168,916. The PSX had a mixed session on Wednesday, with the index closing at 167,451, down 1,465 points (-0.87%).

On Thursday, the bourse remained volatile, ending trading at 166,499, lower by 952 points (-0.57%). The KSE-100 settled at 165,596 in the last session, shedding 902 points (-0.54%) and extending its weakening streak. Arif Habib Limited (AHL), in its commentary, noted that the KSE-100 index declined during the outgoing week amid slower progress in US-Iran peace negotiations, and closed at 165,596, down 3.2% (5,520 points). However, some positive developments emerged during the week, including Pakistan's successful $250 million inaugural three-year Panda Bond issuance in China at a 2.5% coupon rate. The issue was oversubscribed by more than five times.

Workers' remittances rose 11% year-on-year to $3.5 billion in Apr'26 compared to $3.2 billion in Apr'25, but fell 8% month-on-month. Cumulatively, remittances during 10MFY26 edged higher by 8% to $33.9 billion. Additionally, Pakistan's market outperformed the MSCI FM Index by 4.1% in FY26-to-date, while Pakistan's weight in the MSCI FM Standard Index was expected at 5.8% following the latest review effective from May 29, 2026. In the review, the additions were Habib Metropolitan Bank (Standard Index), Crescent Textile, Highnoon Laboratories and The Searle Company (Small Cap Index) while the deletions included The Searle Company (Standard Index) and Murree Brewery (Small Cap Index), AHL said.

Auto sales increased 42% MoM to 22k units during Apr'26, while they surged 108% YoY. Cumulatively, sales during 10MFY26 increased 49% to 166.1k units. Pakistan's budget deficit for 9MFY26 stood at Rs856 billion (0.7% of GDP), while FBR's revenues clocked in at Rs9,306 billion, up 10%. GDP growth for 3QFY26 hit 3.99%, driven by a 4.7% expansion in the industry and supported by agriculture and services, which grew 3% and 4.2%, respectively.

The central government debt edged up 0.8% MoM to Rs80.5 trillion as of Mar'26, reflecting a 9.3% YoY increase compared to Rs73.7 trillion in Mar'25, AHL added. Syed Danyal Hussain of JS Global stated that the KSE-100 dropped 3.2% during the outgoing week amid continued uncertainty regarding Middle East tensions. On the macro front, the IMF disbursed $1.3 billion under its two programmes after Pakistan met most of the major targets. Meanwhile, the finance minister continued discussions with the visiting IMF team regarding the FY27 budget.

Furthermore, Pakistan's 3QFY26 GDP growth clocked in at 3.99%, primarily driven by the industrial sector growth of 4.65%. In another major development, Pakistan raised $250 million through a three-year Panda Bond at a financing rate of 2.5%, which was oversubscribed by more than 5x, he mentioned. The country recorded its lowest fiscal deficit in nearly three decades at Rs856 billion (0.7% of GDP) during 9MFY26, largely supported by higher petroleum levy collections and lower debt servicing costs. On the sectoral front, auto sales posted a staggering 108% YoY growth in Apr'26, taking 10MFY26 growth to nearly 50%. Lastly, the State Bank reserves inched up $17 million to $15.9 billion.