Karachi, August 25, 2025 – The Institute of Cost and Management Accountants of Pakistan (ICMAP) has proposed the establishment of a Defence Sector Index at the Pakistan Stock Exchange (PSX) to safeguard the market during periods of conflict and national emergency.
The initiative forms part of a comprehensive strategy titled “ICMA’s Defence Framework: Securing the Stock Market,” which aims to reinforce the resilience of Pakistan’s capital markets.
Addressing Market Vulnerabilities
The Defence Framework was developed by ICMAP’s Research and Publications Department following lessons learned from the April–May 2025 border conflict. During that period, the PSX witnessed sharper losses compared to India’s National Stock Exchange (NSE). In contrast, India’s Defence Sector Index recorded a gain of nearly nine percent, stabilizing its broader market and reinforcing investor confidence. This comparison highlighted Pakistan’s structural gap and the urgent need for a similar mechanism.
Core Proposals Under the Defence Framework
At the heart of the initiative is the creation of a Defence Sector Index on PSX. Globally, similar indices in countries such as the United States, United Kingdom, Germany, Japan, and Singapore contribute nearly two percent of total market capitalization. These indices channel investment toward strategic industries—including aviation, cybersecurity, advanced manufacturing, and military technology—acting as stabilizers during periods of geopolitical stress. By adopting such a model, Pakistan could enhance investor confidence, mitigate volatility, and showcase economic resilience to international stakeholders.
The second component of the Defence Framework involves reforming PSX’s circuit breaker rules. ICMAP recommends a staged system similar to the New York Stock Exchange, where market halts are imposed at 4%, 8%, and 12% declines in major indices such as KSE-30 and KSE-100. This level-wise approach would help calm markets during steep declines, preventing panic-driven sell-offs and preserving investor trust.
A third key measure is the establishment of a Sovereign Market Stability Fund. Jointly managed by the Ministry of Finance and the Securities and Exchange Commission of Pakistan (SECP), the fund would provide liquidity injections, stock purchases, or government guarantees during times of crisis. Drawing inspiration from South Korea’s 2020 stabilization initiative, this fund would act as a vital shield for PSX.
The fourth pillar focuses on transparency and preparedness. ICMA proposes mandatory crisis-risk disclosures for all listed companies, including geopolitical risk assessments and business continuity strategies. Similar frameworks are already in place under the UK’s Financial Conduct Authority (FCA), fostering accountability and improving investor decision-making.
A Call for Urgent Implementation
ICMAP has urged the Government of Pakistan, Ministry of Defence, Ministry of Finance, SECP, and PSX management to consider these reforms on priority. In a volatile global environment, delay could prove costly. Establishing a Defence Sector Index and adopting ICMA’s framework would transform PSX into a shield of stability, reinforcing Pakistan’s economic security and investor confidence in uncertain times.