Escalating tensions in the Middle East and a resulting spike in global oil prices are expected to dictate near-term direction at the Pakistan Stock Exchange, with analysts warning that uncertainty is dampening investor appetite despite attractive valuations.
The benchmark KSE-100 Index ended the week at 152,740 points, down 0.73% week-on-week, or 1,126 points, amid heightened volatility driven by geopolitical concerns.
Analysts say market sentiment remains closely tied to developments in the Middle East conflict, with any signs of de-escalation likely to trigger a rebound.
“Market direction will hinge on geopolitical developments,” an analyst at AKD Securities said in a briefing, adding that investor focus will also remain on government energy conservation measures, diversification of fuel imports and progress on Pakistan’s review program with the International Monetary Fund.
The brokerage noted that recent corrections have improved valuations, with the market’s forward price-to-earnings ratio falling to 6.6 times. It forecasts the KSE-100 Index could reach 263,800 points by December if conditions stabilize.
An analyst at Arif Habib Limited said the market will continue to track geopolitical developments in the coming week, alongside post-Ramadan sentiment and upcoming inflation data.
“The KSE-100 will remain sensitive to external triggers, particularly oil price movements and regional stability,” the analyst said, noting the index is currently trading at a price-to-earnings ratio of 7.5 times, offering a dividend yield of about 6.8%.
Sector-wise, the decline was led by banking stocks, which shaved 515 points off the index, followed by investment banks (341 points), fertilizer (255 points), leather and tanneries (86 points) and power (85 points).
On the other hand, gains in exploration and production stocks helped offset losses, contributing 279 points, followed by technology (76 points), automobile parts (21 points), paper and board (16 points) and cable and electrical (13 points).
Individually, major drags on the index included National Bank of Pakistan, Engro Holdings, Habib Bank Limited, Fauji Fertilizer Company and Hub Power Company.
Meanwhile, support came from MCB Bank, United Bank Limited, Systems Limited, Pakistan Petroleum Limited and Oil and Gas Development Company.
Trading activity also slowed, with average daily volumes falling 29% week-on-week to 320 million shares, while average traded value declined 25% to $71 million.
Analysts said while near-term uncertainty linked to the Middle East conflict is likely to keep markets under pressure, any easing in tensions could revive investor confidence and support a recovery in equities.
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