Geopolitical tensions overshadow strong macroeconomic indicators as investors turn cautious
ISLAMABAD: Pakistan’s KSE-100 weekly performance turned negative during the week ended July 11, 2026, with the benchmark index falling 1.69%, or 3,130 points, to close at 182,242, as renewed geopolitical tensions in the Middle East triggered widespread selling at the Pakistan Stock Exchange (PSX).
The week began on a positive note, with the KSE-100 Index surging 2,082 points on Monday amid broad-based buying. However, investor sentiment weakened sharply after tensions escalated between the United States and Iran, following U.S. President Donald Trump’s announcement that the ceasefire had effectively ended, prompting profit-taking and increased risk aversion.
Despite the weekly decline, analysts said Pakistan’s improving macroeconomic fundamentals—including record workers’ remittances, rising foreign exchange reserves and a stable currency—continued to provide support to the broader market.
Sector-Wise Performance
The exploration and production (E&P) sector emerged as the biggest drag on the benchmark, wiping out 648 points from the index during the week.
Fertiliser stocks followed with a negative contribution of 435 points, while cement companies reduced the benchmark by 425 points.
Investment banks and commercial banks also weighed on the market, subtracting 351 points and 344 points, respectively.
On the positive side, refinery stocks added 115 points, followed by synthetic and rayon companies (38 points), miscellaneous companies (21 points), sugar stocks (11 points) and tobacco shares (8 points).
Among individual companies, Fauji Fertilizer Company (FFC), Engro Holdings (ENGROH), Pakistan Petroleum Limited (PPL), Oil & Gas Development Company Limited (OGDCL) and Hub Power Company (HUBC) were the largest negative contributors.
Meanwhile, Habib Bank Limited (HBL), GHNI, CNERGY, Attock Refinery Limited (ATRL) and IBFL provided the strongest positive support.
Trading Activity Remains Strong
Despite heightened volatility, investor participation remained robust throughout the week.
Average daily trading volume increased 23.8% week-on-week to 1.071 billion shares, while average daily traded value edged up 0.1% to $171.5 million, reflecting continued market activity.
Macroeconomic Indicators Offer Support
Several economic developments helped cushion investor sentiment during the week.
Pakistan recorded its highest-ever annual workers’ remittances in FY2026, with inflows reaching $41.6 billion, up 9% from the previous fiscal year. June remittances, however, declined 18% month-on-month to $3.5 billion following exceptionally strong inflows in May.
The State Bank of Pakistan (SBP) reported that its foreign exchange reserves increased by $1.94 billion to $18.5 billion, lifting the country’s total liquid reserves to nearly $24 billion and providing import cover of approximately 2.9 months.
The Pakistani rupee remained largely stable, appreciating marginally by 0.02% against the U.S. dollar to close the week at Rs278.05.
Meanwhile, central government debt rose 7.8% year-on-year to Rs82 trillion as of May 2026.
In the latest treasury bill auction, the government raised Rs2.07 trillion against a target of Rs2.4 trillion, while cut-off yields declined by 31 to 40 basis points across various maturities.
Oil and gas production also improved, with gas output increasing 4.2% week-on-week to 3,097 million cubic feet per day (mmcfd) and crude oil production rising 6% to 70,157 barrels per day.
Outlook
Analysts said the near-term direction of the KSE-100 Index will remain closely tied to geopolitical developments, particularly diplomatic engagement between the United States and Iran.
At current levels, the benchmark is trading at a price-to-earnings ratio of around 8.4 times while offering a dividend yield of approximately 6%, valuations that analysts consider attractive relative to historical averages.
For the medium term, analysts continue to favour OGDCL, PPL, FFC, Lucky Cement, Maple Leaf Cement (MLCF), National Bank of Pakistan (NBP), HUBC, Pakistan State Oil (PSO) and ATRL, supported by improving macroeconomic conditions and attractive valuations.