Heightened tensions along the Pakistan-Afghanistan border over the weekend sent shockwaves through financial markets, sparking panic at the Pakistan Stock Exchange (PSX) on Monday.
Investor sentiments took a sharp hit, with the benchmark KSE-100 index nosediving over 4,500 points in a single trading session amid mounting fears of regional instability. Stocks suffered downturn by losing 4654 points and settled at 158,443.
The market rout followed reports of deadly overnight clashes along the Pakistan-Afghanistan border, where at least 23 Pakistani soldiers were martyred and over 200 militants killed in an attack reportedly launched from Afghan territory, according to the Inter-Services Public Relations (ISPR).
The escalation comes at a time when the PSX was already showing signs of strain, with investors unnerved by uncertainty surrounding Pakistan’s IMF programme and the broader economic outlook. The KSE-100 index had dropped 3.5% last week to close at 163,098.19 points, weighed down by thinning volumes and profit-taking after opening in a chaotic start.
JS Global Head of Equity Research Waqas Ghani told The Express Tribune that the market has lost around 9,500 points in the last six sessions, driven by weak investor sentiment amid escalating cross-border tensions between Pakistan and Afghanistan. “Index tumbled down to intra-day low of 5031 points, 3.1% over geopolitical uncertainty that triggered broad-based selling across key sectors, including banking, energy, and cement, as investors remain cautious.”
KTrade Securities equity trader Ahmed Sheraz observed that PSX continues to reel from a string of negative developments, with the benchmark KSE-100 index losing approximately 4,654 points (-2.85%) to close at 158,443 points.
Market sentiment, already fragile due to diminishing expectations of a policy rate cut in the upcoming Monetary Policy Committee (MPC) meeting and heightened scrutiny from the International Monetary Fund (IMF) during its ongoing programme review, has been further undermined by deteriorating security conditions.
Moreover, the recent wave of terrorist attacks, which claimed the lives of several security personnel, has significantly shaken investor confidence. Pakistan has retaliated with action against proscribed Tehreek-i-Taliban Pakistan’s (TTP) units across the border in Afghanistan.
Tensions have also been running high since police clashes with Tehreek-e-Labaik Pakistan (TLP) broke out last week, first in Punjab, then across country. These developments have introduced additional layers of uncertainty at the bourse.
Given the volatile security environment and the critical IMF review underway, Sheraz expects market sentiment to remain highly sensitive in the near term. Any developments on either front are likely to significantly influence investor behaviour and market direction, he said.