Pakistan stock market briefly halts trading as KSE-30 index plunges 7.2%

Karachi Stock Exchange

Pakistan briefly paused trading at its stock market on May 8. This comes after its benchmark index KSE-30 plunged 7.2 percent, extending massive losses for the second consecutive session after Indian military conducted strikes against several terrorist outfits across the country under the codename 'Operation Sindoor'.

Indian stock markets however remained resilient, with benchmark index Sensex closing 412 points lower at 80,335 and Nifty ending the session 0.58 percent lower at 24,274.

KSE 100 index also crashed nearly 7 percent (over 7,300 points) to hover around 102,674. Market participants in the country will await International Monetary Fund's (IMF) decision tomorrow on a possible extension of its funding facility for the country.

Since the Pahalgam terror attack on April 22, KSE 100 has fallen nearly 13 percent while KSE 30 has crashed around 14 percent so far. KSE 30 index later resumed trading.

Before the latest round of hostilities between the two nations as an aftermath of the brutal terror attack in Pahalgam, the market confidence in Pakistan had been improving, supported by a sovereign credit rating upgrade and a decline in global oil prices. Last year, Pakistan’s stock market delivered its highest return in 22 years, drawing renewed interest from global investors. Asset management giants such as BlackRock and Eaton Vance have increased their exposure to Pakistan’s $50 billion equity market, which has offered an impressive 84 percent return last year.

Pakistan's recent stock market success was backed by a successful effort to secure an International Monetary Fund (IMF) bailout and improved macroeconomic indicators. Amid the geopolitical uncertainties, IMF's possible extension of funding facility will remain a major factor for the market.

However, while Indian assets enjoyed a strong April, Pakistan’s stocks and dollar bonds suffered their worst monthly performance in two years, according to Bloomberg The country is currently trying to pull itself out of an economic crisis that brought it close to bankruptcy in 2023.

Pakistan's equities have also entered a period of typical seasonal weakness between now and September, Bilal Khan, head of international equity sales at Arif Habib Ltd told Bloomberg. The KSE-100 Index has dropped in five of the past 10 years during this year.

Terrorists killed 26 civilians in Pahalgam, Kashmir on April 22. Indian military then launched strikes against terrorist outfits in Pakistan on May 7 under the code name ‘Operation Sindoor’.

However, Pakistani troops resorted to heavy cross-border shelling along the Line of Control (LoC) in Jammu and Kashmir's Kupwara district on May 8, a day after the 'Operation Sindoor'. According to reports, the Pakistani troops targeted civilian areas in the Karnah area and fired shells and mortars after midnight.

Additionally, Pakistan’s Defence Minister Khawaja Asif has warned that the possibility of India-Pakistan nuclear war is ‘definitely present’. India has now been put on high alert as authorities in New Delhi anticipate a potential retaliation from Pakistan.

Also read: Pakistan's stock market valuation just a fraction that of India; Sensex returns better than KSE-100 in most recent years