KARACHI: Pakistan’s stocks plummeted to a five-month low on Wednesday, according to data from the country’s stock exchange, as regional tensions soar following India’s strikes within Pakistani territory last night.
The market reaction followed India targeting six locations inside Pakistan, in which the Pakistan army said at least 26 civilians were killed. Islamabad said it had responded by targeting Indian fighter jets and striking military posts along the Line of Control that divides the two sides of the disputed Kashmir region.
Pakistan’s Finance Minister Muhammad Aurangzeb convened an emergency meeting “to review market resilience and financial security,” the ministry said, as stocks plunged about six percent at the open after India carried out strikes on Pakistan and Azad Kashmir.
The benchmark KSE-100 Index dropped 6,560 points early Wednesday morning before rebounding and closing at 110,009 points, down 3.13 percent from the previous session, the Pakistan Stock Exchange (PSX) said on its website.
“This level (of the index) was last seen almost five months ago,” Muhammad Rizwan, director of brokerage at Chase Securities Pakistan (Pvt.) Ltd., said in a statement.
Muhammad Waqas Ghani, the head of research at JS Global Capital, said the six percent plunge early morning was the “heaviest daily loss since April 7 when the index fell 7.3 percent.”
The Pakistani rupee was not affected immensely, depreciating by 0.04 percent to Rs 281.47 against the US dollar in the interbank market, the central bank said.
As investors regained confidence, Pakistan’s dollar bonds also rose one percent to 1.5 percent, Topline Securities CEO Mohammad Sohail said.
“Bond investors feel tension will cool down so they are buying Pakistan bonds,” Sohail told Arab News.
Shankar Talreja, head of research at Topline Securities Ltd., said the yields on Pakistan’s Euro and Sukuk bonds “surprisingly” improved by 18-61 basis points in international market.
Wednesday’s surge for the bonds was observed after a 160 basis points average drop in the last eight to nine days, Talreja said.
‘STABLE AND SECURE’
Pakistan’s finance ministry meanwhile said an emergency meeting had been called “to assess the current financial landscape in light of escalating regional tensions.”
“The Finance Minister reiterated that Pakistan’s financial system remains stable and secure, and that all relevant authorities are working in close coordination to uphold national economic integrity in the face of emerging challenges,” a statement said.
Smoke rises in the main town of Poonch district on May 7, 2025. (AFP)
The Securities and Exchange Commission of Pakistan (SECP) also “assured market stability,” a statement by the regulator said.
“SHARP REBOUND”
The latest standoff comes as Pakistan’s government treads a tricky path to economic recovery, bolstered by a $7 billion IMF loan.
The South Asian nation’s stock index had surged more than 80 percent last year, mainly due to IMF-backed economic stability, with interest rates halving to 11 percent since June and inflation easing to a record 0.3 percent in April.
However, equities began declining after April 22, the day 26 tourists were killed in Pahalgam in Indian-administered Kashmir. The attack triggered the latest standoff between the longstanding enemies, with New Delhi blaming Islamabad of involvement, a charge Pakistan denied.
The renewed geopolitical tension caused the market to fall about 10 percent by Wednesday morning, though it began recovering and pared losses to 1.2 percent by 10:45 AM, reflecting the strong macroeconomic fundamentals of the country’s stabilizing economy.
“The sharp rebound of 4,500 points reflects underlying market confidence, driven by strong economic fundamentals,” said Ghani.
The Securities and Exchange Commission of Pakistan (SECP) also “assured market stability,” a statement by the regulator said.
The latest standoff comes as Pakistan’s government treads a tricky path to economic recovery, bolstered by a $7 billion IMF loan.
Pakistan’s stock index had surged more than 80 percent last year, mainly due to IMF-backed economic stability, with interest rates halving to 11 percent since June and inflation easing to a record 0.3 percent in April.
However, equities began declining after April 22, the day 26 tourists were killed in Pahalgam in Indian-administered Kashmir. The attack triggered the latest standoff between the longstanding enemies, with New Delhi blaming Islamabad of involvement, a charge Pakistan denied.
The renewed geopolitical tension caused the market to fall more than seven percent by Wednesday, though it began recovering and has pared losses, reflecting the strong macroeconomic fundamentals of the country’s stabilizing economy.
“The sharp rebound of 4,500 points reflects underlying market confidence, driven by strong economic fundamentals,” said JS Global analyst Ghani.
Investors, he added, were also encouraged by a statement from US Secretary of State Marco Rubio expressing hope that the situation would de-escalate “quickly.”
Amreen Soorani, head of research at Al Meezan Investment Management, said Pakistan’s past escalations with archrival India had “historically presented headwinds for equities.”
She said while Pakistan’s economy carried higher sensitivity to prolonged conflict, nuclear deterrence between the neighboring countries remained a critical factor limiting major escalation.
Similar events in the past, Soorani said, suggested a pattern of eventual de-escalation, helping restore investor confidence.
Metal debris lies on the ground in Wuyan in India-administered Kashmir's Pulwama district May 7, 2025.(Reuters)
“Given prevailing attractive valuations and the anticipated positive impact of IMF developments on investor sentiment, positive sentiments may remain intact in the longer term,” she added.
Talreja said due to the ongoing military escalation, Pakistani stocks were performing in a “lackluster” manner despite economic gains like the fast-approaching IMF board review of Pakistan’s loan program, easing interest rates and declining inflation.
The IMF’s executive board is scheduled to meet on May 9 to approve the release of about a $1 billion tranche for cash-strapped Pakistan as it seeks to boost its dwindling foreign exchange reserves.
Talreja said in past such conflicts had not derailed Pakistan’s IMF programs that are based on “macroeconomic targets.”
“Going forward we believe, market performance will be dependent on Pakistan’s response to this aggression,” he said.
Prime Minister Shehbaz Sharif on Wednesday chaired a meeting of Pakistan’s National Security Committee that allowed the armed forces to take “corresponding actions” in response to India’s overnight strikes.
Businessmen from Pakistan’s largest Karachi Chamber of Commerce and Industry (KCCI) condemned Indian aggression and said their entire strength was devoted to the country’s defense.
“If required, we are ready to contribute our resources, networks, and influence to support national preparedness through relief efforts or strategic planning,” Zubair Motiwala, chairman of KCCI’s dominant Businessmen Group, told a press briefing in Karachi.
Motiwala asked businessmen to stay prepared “for any eventuality by quickly adopting the civil defense norms and carrying out exercises for the same.”
In Islamabad, Kashif Chaudhry, president of the Central Organization of Traders, said small traders would ensure smooth supply of consumer items in all major cities of Pakistan during the ongoing tensions.
“Keeping in mind the needs of the Pakistani army, all kinds of supplies will be ensured 24 hours a day,” said Chaudhry, whose association represents thousands of small trade bodies from across Pakistan.
