Pakistan’s current account deficit narrows 38% YoY in July, while FDI, IT exports and auto financing show strong growth.

KARACHI: The Pakistan Stock Exchange (PSX) witnessed a weak performance during the week, with the benchmark KSE-100 Index closing at 177,167 points, down 2,938 points or 1.63% week-on-week (WoW), as continued uncertainty surrounding the US-Iran conflict and domestic political developments weighed on investor sentiment.

Despite the weekly decline, several macroeconomic indicators showed improvement, providing some support to the broader market outlook.

Pakistan’s current account deficit narrowed to $328 million in July 2026, compared with $529 million in July 2025, marking a 38% year-on-year decline. On a monthly basis, the deficit fell 59.7% from $814 million in June 2026.

Meanwhile, Pakistan recorded net foreign direct investment (FDI) of $179 million in July, compared with $49 million in June, representing a sharp 265% month-on-month increase.

Technology exports also maintained strong growth, rising 18% YoY to $417 million in July and accounting for 45% of total services exports.

LSMI output declines in June

Large-scale manufacturing output declined 3.5% YoY in June 2026, following a 6.1% monthly decline. However, on a full-year basis, LSMI output increased 5% during FY26.

Auto financing continued to show momentum, increasing 35.2% YoY to Rs386 billion in July from Rs286 billion a year earlier. On a monthly basis, auto financing rose 1.2%.

Power generation also increased 7% YoY to 15,122 GWh in July, marking the second-highest generation recorded for any July. The increase was supported by record-high hydel, local coal and imported coal-based generation.

Oil production declined 0.5% WoW to 67.8 thousand barrels per day, primarily due to lower flows from Nashpa, while gas production increased 1.9% WoW to 2,995 million cubic feet per day following the revival of Uch gas production.

T-Bill yields rise

The government raised Rs517.9 billion through a Treasury Bill auction, exceeding its target of Rs500 billion. Cut-off yields increased across all tenors, with Rs349.5 billion raised through the three-month tenor.

The Pakistani rupee appreciated marginally against the US dollar, strengthening 0.03% WoW to close at Rs277.56 per dollar.

Banks lead sector-wise decline

Banks remained the biggest drag on the KSE-100 Index, contributing a negative 1,773 points. Fertilizer stocks followed with a decline of 449 points, while cement, investment banks and power sectors contributed negatively by 410, 243 and 236 points, respectively.

In contrast, exploration and production (E&P) stocks contributed 372 points, followed by oil marketing companies (OMCs) at 222 points and refineries at 151 points.

At the scrip level, UBL was the largest negative contributor, dragging 705 points from the index. HBL, FFC, HUBC and ENGROH followed with negative contributions of 365, 363, 211 and 208 points, respectively.

On the positive side, PPL contributed 234 points, followed by PSO with 204 points, OGDC with 161 points, ATRL with 116 points and SRVI with 86 points.

Trading activity remains strong

Average daily volumes stood at 845.71 million shares, down 0.9% WoW, while average traded value increased 7.6% to $148 million.

Looking ahead, market direction is expected to remain sensitive to geopolitical developments, particularly developments surrounding the US-Iran conflict. The ongoing corporate earnings season is likely to provide some support to market performance.

The KSE-100 Index is currently trading at a price-to-earnings (P/E) multiple of 8.1x, with a dividend yield of 6.3%.

Market analysts identified OGDC, PPL, FFC, LUCK, MLCF, NBP, HUBC, PSO, DGKC, SAZEW and ATRL among their top picks.