Investors flee as benchmark index craters, spotlighting how frontier skirmishes and loan snags throttle Pakistan’s fragile recovery.
The Pakistan Stock Exchange suffered severe PSX under pressure amid border clashes and IMF delays last week, with the KSE-100 index shedding 5,892 points or 3.48% to close at 163,098 points on Friday.
PSX Falls Amid Border Tensions
Geopolitical risks PSX Pakistan faced intensified after reports of intense border fighting. Kabul accused Islamabad of airstrikes, prompting retaliatory fire. A blast in the Afghan capital added to fears of spillover.
The State Bank of Pakistan clarified an $11 billion trade data gap early in the week. This eased some IMF concerns but failed to halt the slide. Investors dumped shares amid uncertainty. Trading volume dipped 8.8% to 1.35 billion shares. Turnover plunged 24% to PKR 54.8 billion. Profit-taking swept the floor.
Insurance firms sold net $25 million worth of stocks. This sector led the rout. Broader political friction between the government and allies weighed on sentiment. Analysts at Arif Habib Limited noted the drop. “The overall market faced significant selling pressure, primarily driven by profit-taking,” they said. The KSE-100 index dropped 5,892 points, they added.
Topline Securities tracked the benchmark’s slip. It fell 3.48% week-on-week to 163,098 points amid IMF reactions.
Geopolitical Risks PSX Pakistan Amplify IMF Woes
IMF staff-level talks stalled over the trade discrepancy. The fund sought public disclosure of the $11 billion gap. Pakistan’s imports showed mismatches between Pakistan Single Window and SBP figures.
Over five years to June 2025, PSW logged $321 billion in imports. SBP cleared $291 billion. This $30 billion variance sparked queries.
SBP reserves rose $20 million to $14.42 billion. Total FX reserves climbed $13.7 million to $19.81 billion. The Pakistani rupee gained 0.03% to PKR 281.17 per dollar. Yet PSX under pressure amid border clashes and IMF delays persisted. Border closures followed clashes. Key crossings shut after overnight exchanges.
The Taliban confirmed attacks on Pakistani troops. They struck multiple sites along the northern frontier. Afghanistan’s Defence Ministry later announced an end to retaliation. Pakistan urged de-escalation. Officials called for ending foreign occupations to curb terrorism.
Oil production edged up 0.3% to 64,493 barrels per day. Gas output surged 3.1% to 2,900 million cubic feet per day. Higher yields from Makori East and Nashpa fields aided this. Central government debt grew 1% to PKR 77.5 trillion in August. This marked a 10.1% year-on-year rise. Positive indicators clashed with market gloom. Remittances hit $3.18 billion in September, up 11% year-on-year. Quarterly inflows reached $9.6 billion, a 8% increase.
Car sales jumped 67% to 17,174 units in September. The Pakistan Automobile Manufacturers Association reported this surge. The National Accounts Committee revised FY25 GDP growth to 3.04% from 2.68%. Q3 expanded 2.79%. Q4 hit 5.66%. Industrial output soared 19.95%. Agriculture grew 0.18%. Services advanced 3.72%. These fundamentals offered little solace. PSX falls amid border tensions dominated headlines.
In South Asia, this PSX under pressure amid border clashes and IMF delays signals broader risks. Pakistan’s market anchors regional finance. A prolonged slump could deter inflows, hike borrowing costs, and strain neighbours through trade disruptions. Frontier volatility threatens supply chains from Kabul to Delhi, underscoring the need for swift diplomacy to safeguard economic corridors.
Background: Persistent PSX Vulnerabilities
The KSE-100 has swung wildly in recent years. Political upheavals and external shocks often trigger routs. In May 2025, escalation with India caused the largest single-day drop in history. IMF programmes have been rocky. Delays in prior reviews eroded confidence. The current $7 billion facility faces scrutiny over fiscal slippages.
Geopolitical risks PSX Pakistan endures stem from the Durand Line. Clashes with Afghanistan recur, disrupting commerce worth billions annually. Investor participation waned despite upbeat data. Foreigners sold amid uncertainty. Locals followed suit.
AKD Securities foresaw shifts. “Investor sentiment may improve if the second phase of IMF discussions yields positive results,” they projected. They highlighted stabilising risks and resilient fundamentals.
AHL analysts echoed caution. The index trades at a forward PER of 8.21x for 2026, below the 15-year average of 8.59x. Dividend yield stands at 6.3%, drawing value hunters. Corporate earnings season looms. Banks and energy firms report soon. These could pivot sentiment if robust. Political rifts simmer. Coalition strains over budget allocations fuel volatility. Elections in Punjab add layers.
PSX Under Pressure Amid Border Clashes and IMF Delays: Sector Snapshots
Banking stocks tumbled 4%. Energy dipped 2.5%. Cement held firmer at 1% loss. Insurance’s outflow hit hardest. Net sales reached $25 million as firms rebalanced portfolios. Textiles and autos bucked trends slightly. Car sales data buoyed related scrips. Broader indices mirrored the KSE-100. KSE-30 fell 3.2%. KMI-30 shed 3.6%.
Weekly breadth showed 350 scrips down versus 150 up. Losers outnumbered gainers three-to-one. Foreign investment outflow totalled $50 million. This reversed September’s inflows. Domestic mutual funds bought PKR 2 billion. Pension funds added PKR 1.5 billion. These cushioned the fall marginally. Commodity prices offered mixed signals. Global oil eased on de-escalation hopes elsewhere. Local gas hikes supported producers.
What’s Next for Geopolitical Risks PSX Pakistan
Markets eye IMF’s second review. Positive outcomes could spark rebound. Delays risk further erosion. Border calm holds key. Diplomatic channels with Kabul reopen talks. Saudi mediation aids progress. Earnings reports start next week. Consensus forecasts 15% profit growth for Q1 FY26.
Analysts target 170,000 points by year-end if risks fade. Valuations tempt bargain hunters. External inflows hinge on stability. Gulf funds eye opportunities. US rate cuts could funnel capital. As Monday trading resumes, focus sharpens on cues. PSX under pressure amid border clashes and IMF delays tests resilience yet again.
Published in SouthAsianDesk, October 12th, 2025
Follow SouthAsianDesk on X, Instagram, and Facebook for insights on business and current affairs from across South Asia.
