RECORDER REVIEW

KARACHI: The Pakistan Stock Exchange (PSX) suffered a notable weekly setback as stalled US-Iran negotiations, a global sell-off in sovereign fixed-income markets that pushed US Treasury yields to their highest levels since 2002, and a widening domestic trade deficit weakened investor risk appetite, sending the benchmark KSE-100 Index down 2,609.74 points, or 1.5 percent, to close at 168,155.48 points.

The market remained under pressure throughout the week as geopolitical uncertainty and global fixed-income volatility overshadowed relatively favourable domestic inflation data and continued engagement with international lenders. The combination of stalled bilateral negotiations between the United States and Iran and the surge in US Treasury yields increased uncertainty across global financial markets, while domestic investors also weighed the deterioration in Pakistan’s trade balance and rising sovereign borrowing costs.

Global crude prices remained another important factor for market participants. Brent crude oil prices stayed above USD100 per barrel throughout the week, maintaining pressure on the global energy market.

The domestic macroeconomic picture remained mixed. Headline Consumer Price Index (CPI) inflation moderated to 10.3 percent year-on-year in September 2026 from 11.1 percent in August, indicating a decline of 0.8 percentage points in the monthly inflation reading.

Meanwhile, Pakistan’s merchandise trade deficit widened 6.2 percent year-on-year to USD3.56 billion, during September 2026. The monthly deterioration pushed the cumulative trade deficit for the first quarter of Fiscal Year 2027 to USD10.79 billion, representing a 15.1 percent increase over the corresponding period of the previous year.

The widening trade gap was driven primarily by imports growing faster than exports. Aggregate imports increased 13.2 percent year-on-year during the period, while total exports grew 10.8 percent year-on-year.

On the multilateral financing front, formal discussions commenced between the federal government and the visiting International Monetary Fund (IMF) delegation. The talks cover the combined fourth review under the USD7 billion, Extended Fund Facility and the third review under the Resilience and Sustainability Facility.

Successful completion of the joint IMF reviews is intended to unlock the fifth tranche under the EFF as well as the third tranche under the RSF.

At the same time, conditions in the domestic sovereign debt market pointed toward tighter liquidity and higher yield requirements. In the latest primary auction of Treasury Bills, the federal government raised Rs880 billion, against a target of Rs700 billion. Although the government raised more than its stated target, cut-off yields increased across all maturity tenors by between 49 and 75 basis points.

The increase in T-bill yields was accompanied by an upward revision in returns on National Savings Schemes. Profit rates under the National Savings Schemes were increased by as much as 73 basis points, reflecting the broader adjustment in domestic fixed-income returns during the week.

Trading activity across the equity market was concentrated in a relatively narrow group of sectors. Technology and Communication, Refinery and Textile Spinning each accounted for 12 percent of total market trading volume, making them the three largest contributors to market participation. Investment Banks and Miscellaneous companies each accounted for 8 percent, while all other sectors collectively represented the remaining 49 percent of total market volume.

Sectoral performance was broadly negative, with the Refinery sector emerging as the only major sector to post a weekly gain. Refinery stocks increased 1.4 percent week-on-week, making the sector the sole positive performer during the period.

Technology and Communication and Engineering suffered the largest sectoral declines, with each falling 3.2 percent week-on-week. Food and Personal Care stocks declined 2.7 percent, while Oil and Gas Marketing Companies fell 2.6 percent.

Textile Composite stocks declined 2.3 percent, followed by Cement, which fell 2.2 percent. Power Generation and Distribution companies declined 2.1 percent, while Pharmaceuticals lost 1.5 percent.

Oil and Gas Exploration Companies fell 1.4 percent, Automobiles declined 1.0 percent, and Commercial Banks and Chemical companies each slipped 0.9 percent. Fertilizer stocks recorded the smallest decline among the sectors that remained in negative territory, edging down 0.4 percent.

Despite the broad market weakness, several individual stocks recorded gains, reflecting selective buying interest. SSOM emerged as the strongest gainer, climbing 13.6 percent week-on-week to close at Rs502.43 per share.

Attock Refinery Limited rose 3.8 percent to Rs1,189.43, while TRG Pakistan Limited gained 3.7 percent to Rs54.39. Lotte Chemical Pakistan Limited advanced 2.9 percent to Rs26.25, and Service Industries Limited increased 2.6 percent to Rs182.46.

Unilever Pakistan Foods Limited gained 2.0 percent to close at Rs25,488.40 per share, while YOUW Equity rose 1.8 percent to Rs5.03.

The declining side of the KSE-100 was led by Pakistan Services Limited, which fell 12.0 percent week-on-week to Rs1,011.43 per share. First Habib Modaraba declined 10.9 percent to Rs27.48, while Nishat Power Limited dropped 9.4 percent to Rs57.98.

Pakistan International Bulk Terminal Limited fell 6.1 percent to Rs14.20, while HUM Network Limited declined 6.0 percent to Rs9.68. International Industries Limited lost 5.6 percent to close at Rs160.00, and Javedan Corporation Limited declined 5.5 percent to Rs137.82 per share.

The broad decline in equity prices also translated into lower overall market capitalisation. Total PSX market capitalisation fell 1.4 percent during the week to Rs18.726 trillion, equivalent to USD67.58 billion, from Rs18.996 trillion, or USD68.54 billion, in the preceding week. The decline represented a reduction of Rs270 billion in rupee terms and USD0.96 billion in dollar terms.

Market participation also weakened considerably across both the ready and derivative segments. Average daily turnover in the readyboard market declined 21.7 percent week-on-week to 524.53 million shares from 670.21 million shares previously.

The decline was also visible in ready-market value turnover. Average daily readyboard trade value fell 16.6 percent to Rs18.66 billion, equivalent to USD67.33 million, compared with Rs22.37 billion, or USD80.70 million, in the preceding week.

The Business Recorder benchmark indices also reflected the broader weakness in the equity market. The BRIndex100 opened the week at 18,805.41 points and closed at 18,497.10 points, registering a decline over the course of the week. Total weekly turnover on the BRIndex100 stood at 2 billion shares, or precisely 1,999,147,913 shares. The BRIndex30 also declined during the week. It opened at 68,118.64 points and fell to close at 66,301.56 points. Total weekly turnover on the BRIndex30 amounted to 1.133 billion shares, or 1,132,733,643 shares.

Analysts say, going forward, market sentiment is expected to remain closely tied to international geopolitical developments and the progress of Pakistan’s IMF reviews. The completion of the combined fourth EFF and third RSF reviews remains an important near-term event because of their implications for the release of the next multilateral financing tranches.