PSX sinks 3.2% as US-Iran peace momentum slows

ISLAMABAD: The Pakistan Stock Exchange ended the week lower, with the benchmark KSE-100 index declining 3.2% week-on-week to close at 165,596 points, as uncertainty surrounding the pace of US-Iran peace negotiations continued to affect investor sentiment.

According to Arif Habib Limited (AHL), the benchmark index lost 5,520 points over the outgoing week. The market began the week with a range-bound session, with the KSE-100 closing Monday at 170,506, down 610 points or 0.36% on the day. On Tuesday, the index fell another 1,590 points, or 0.93%, to 168,916 in a volatile session.

The market remained mixed on Wednesday, when the index settled at 167,451 after shedding 1,465 points, or 0.87%. On Thursday, the bourse stayed volatile and closed at 166,499, down 952 points or 0.57%. In the final session of the week, the KSE-100 dropped a further 902 points, or 0.54%, to finish at 165,596, extending its losing streak.

Domestic indicators offer some support

AHL said that despite pressure linked to slower progress in US-Iran peace negotiations, several domestic developments offered support to the market during the week.

Among them was Pakistan’s first three-year Panda Bond issuance in China, through which the country raised $250 million at a coupon rate of 2.5%. The issue was oversubscribed by more than five times.

Workers’ remittances rose 11% year-on-year to $3.5 billion in April 2026, compared with $3.2 billion in April 2025, although they were down 8% month-on-month. For the first 10 months of FY26, cumulative remittances increased 8% to $33.9 billion.

AHL also noted that Pakistan outperformed the MSCI FM Index by 4.1% in FY26-to-date, while the country’s weight in the MSCI FM Standard Index was expected at 5.8% after the latest review, effective May 29, 2026.

Under that review, Habib Metropolitan Bank was added to the Standard Index, while Crescent Textile, Highnoon Laboratories and The Searle Company were added to the Small Cap Index. The Searle Company was removed from the Standard Index, while Murree Brewery was deleted from the Small Cap Index.

Auto sales, growth and fiscal data

Auto sales increased 42% month-on-month to 22,000 units in April 2026 and were up 108% year-on-year. Cumulative sales during 10MFY26 rose 49% to 166,100 units.

AHL said Pakistan’s budget deficit for 9MFY26 stood at Rs856 billion, equivalent to 0.7% of GDP, while Federal Board of Revenue collections reached Rs9,306 billion, marking a 10% increase.

GDP growth in the third quarter of FY26 was recorded at 3.99%, driven by 4.7% growth in industry, with agriculture and services expanding 3% and 4.2%, respectively. Central government debt rose 0.8% month-on-month to Rs80.5 trillion as of March 2026, reflecting a 9.3% year-on-year increase from Rs73.7 trillion in March 2025, AHL added.

IMF disbursement and reserves

Syed Danyal Hussain of JS Global also said the KSE-100 fell 3.2% during the week amid continued uncertainty related to tensions in the Middle East.

He said the IMF disbursed $1.3 billion under its two programmes after Pakistan met most of the major targets. He added that the finance minister continued discussions with the visiting IMF team on the FY27 budget.

Referring to broader macroeconomic indicators, Hussain said Pakistan’s 3QFY26 GDP growth came in at 3.99%, mainly led by industrial sector growth of 4.65%.

He also said the country posted its lowest fiscal deficit in nearly three decades at Rs856 billion, or 0.7% of GDP, during 9MFY26, largely supported by higher petroleum levy collections and lower debt servicing costs.

On the external side, State Bank reserves edged up by $17 million to $15.9 billion, while the strong performance in auto sales remained one of the notable sectoral developments during the week.