KARACHI: The Pakistan Stock Exchange (PSX) failed to sustain its recovery momentum as heightened geopolitical tensions and persistent economic uncertainty kept investors on edge, dragging the benchmark KSE-100 index below the pre-war level in the outgoing week.
Investor sentiment remained depressed amid a lack of tangible progress in US-Iran negotiations, while concerns over the fragile situation in the Strait of Hormuz fuelled fears of further disruption to global oil supplies.
After easing slightly earlier in the week, oil prices resumed their upward trajectory following renewed harsh exchanges between Washington and Tehran over attacks and vessel seizures in the strait, but the ceasefire holds on the ground.
According to Topline Securities Ltd, the KSE-100 index declined 3.23 per cent week-on-week, or 5,520 points, to close at 165,596 points, as elevated oil prices and stalled US-Iran talks weighed heavily on market sentiment.
Index drops 3.23pc as investors stay cautious on rising oil prices
Trading activity also weakened considerably during the week, with average daily traded volume and value declining 39pc week-on-week to 827 million shares and Rs25 billion, respectively.
Major developments during the week included the State Bank of Pakistan (SBP) receiving $1.3bn from the International Monetary Fund under the Extended Fund Facility and Resilience and Sustainability Facility programmes. The auto sector posted robust growth, with data from the Pakistan Automotive Manufacturers Association showing April sales surged 107pc year-on-year and 42pc month-on-month to 22,015 units.
Workers’ remittances stood at $3.5bn in April, up 11pc year-on-year but down 8pc from the previous month. Meanwhile, yields in the latest treasury bill auction rose by 24 to 40 basis points across the three-, six- and 12-month tenors, signalling expectations of a possible interest rate hike at the next monetary policy meeting.
On the flows side, mutual funds, foreign corporates and local companies emerged as major sellers, offloading equities worth $6.9m, $3.8m and $3.1m, respectively. Individual investors remained the largest buyers, purchasing shares worth $9.9m.
Arif Habib Ltd (AHL) said the market remained under pressure amid slower progress in US-Iran peace negotiations despite several positive domestic developments.
Among these was Pakistan’s successful launch of its inaugural three-year Panda Bond in China’s onshore capital market. The $250m bond carried a coupon rate of 2.5pc and was oversubscribed more than five times.
The brokerage house noted that PSX also outperformed the MSCI Frontier Markets Index by 4.1pc in FY26 to date, while the country’s weight in the MSCI Frontier Markets Standard Index is expected to rise to around 5.8pc following the latest MSCI review effective May 29.
In the May 13 treasury bill auction, the government raised Rs949.8bn against a target of Rs1tr, while yields increased across most maturities. Central government debt rose 0.8pc month-on-month to Rs80.5tr in March 2026, reflecting a 9.3pc increase from a year earlier.
SBP-held foreign exchange reserves increased by $16.7m week-on-week to $15.9bn, while the rupee appreciated marginally by 0.03pc to close at 278.61 against the dollar.
Sector-wise, leather and tanneries, textile spinning and paper and board sectors posted gains, while banks, cement, investment banks, fertiliser and power sectors dragged the index lower.
Among individual stocks, TRG, Service Industries, K-Electric, Sazgar Engineering and Gadoon Textile recorded positive contributions, whereas United Bank, Engro Holdings, Lucky Cement, Habib Bank and Fauji Fertiliser were the major laggards.
AKD Securities Ltd said the market remained dominated by bearish sentiment amid fears of escalation in the US-Iran conflict, with Brent crude hovering around $106 per barrel due to concerns over potential disruptions in the Strait of Hormuz.
The brokerage house noted that sentiment improved slightly towards the end of the week after indications of progress in negotiations emerged and Pakistan’s mediation efforts received support from both the US and China.
Other major developments included Pakistan’s first-ever import of nearly six million barrels of US crude oil through Cnergyico, the government’s commitment to eliminate Rs140bn gas cross-subsidy by January 2027 under an IMF structural benchmark, and continued LNG imports from Qatar through special transit arrangements.
Analysts expect market performance in the coming week to remain closely tied to geopolitical developments, particularly the trajectory of US-Iran negotiations and international oil prices, while investor activity is likely to stay cautious ahead of the federal budget.
Published in Dawn, May 17th, 2026