Rising tensions along the Pakistan-Afghanistan border over the weekend sent shock waves through financial markets and sparked panic on the Pakistan Stock Exchange (PSX) on Monday.
Investor confidence took a hit, with the benchmark KSE-100 index plummeting more than 4,500 points in a single trading session amid growing fears of regional instability. The shares suffered a fall, losing 4,654 points and settling at 158,443.
The market crash came after reports of deadly clashes overnight along the Pakistan-Afghanistan border, where at least 23 Pakistani soldiers were martyred and more than 200 militants were killed in an attack allegedly launched from Afghan territory, according to Inter-Services Public Relations (ISPR).
Read: Pakistan warns of direct attacks on Afghan soil after cross-border attacks
The rally comes at a time when the PSX was already showing signs of strain, with investors nervous about uncertainty surrounding Pakistan’s IMF program and the broader economic outlook. The KSE-100 index had fallen 3.5% last week to close at 163,098.19 points, hit by declining volumes and profit-taking after a chaotic opening start.
Waqas Ghani, global head of equity research at JS, said The express PAkGazette 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. “The index fell to an intraday low of 5,031 points, down 3.1 per cent as geopolitical uncertainty triggered widespread selling in key sectors including banking, power and cement, as investors remain cautious.”
Ahmed Sheraz, equity trader at KTrade Securities, noted that PSX continues to reel from a series of negative developments, with the benchmark KSE-100 index losing about 4,654 points (-2.85%) to close at 158,443 points.
Read more: TLP protest paralyzes Islamabad roads
Market sentiment, already fragile due to lower expectations of a policy rate cut at the upcoming Monetary Policy Committee (MPC) meeting and increased scrutiny by the International Monetary Fund (IMF) during its ongoing program review, has been further undermined by deteriorating security conditions.
Furthermore, 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 banned units of the Tehreek-i-Taliban Pakistan (TTP) across the border in Afghanistan.
Tensions have also risen since police clashes with Tehreek-e-Labaik Pakistan (TLP) broke out last week, first in Punjab and then across the country. These developments have introduced additional layers of uncertainty into the stock market.
Given the volatile security environment and the ongoing critical review of the IMF, Sheraz expects market sentiment to remain very sensitive in the near term. Any development on either front is likely to significantly influence investor behavior and market direction, he said.
