PSX direction hinges on constructive resolution of Middle East conflict: report

A constructive resolution of the Middle East conflict will remain the pivotal near-term catalyst for the direction of Pakistan’s equity market, AKD Research said in its weekly market review. 

The research firm said that market momentum reversed during the week ended on Friday, with the benchmark KSE-100 Index shedding 3,267 points or 1.9% WoW to close at 170,672, as investors digested a more complex geopolitical backdrop following last week’s ceasefire-driven rally. Average daily traded volume (ADTV) rose to 1,665 million shares, up 31.7% WoW, while investor risk appetite weakened as US–Iran diplomatic talks faced fresh hurdles.

However, sentiment improved during the second half of Friday’s session after an Iranian delegation confirmed that Foreign Minister Abbas Araqchi would visit Pakistan over the weekend. 

Additionally, the US president’s decision to extend the ceasefire indefinitely on Tuesday, just hours before its expiry and at Pakistan’s request, helped sustain hopes of a resolution and prevented a sharper market decline.

Oil prices ended the week higher, rising 3.2% WoW to $104.8 per barrel, as Iran’s seizure of two container vessels attempting to transit the Strait of Hormuz renewed concerns over supply disruptions. 

On the macroeconomic front, the IMF Executive Board is expected to consider approval of the fourth tranche under the 37-month programme in May 2026.

Meanwhile, the State Bank of Pakistan’s foreign exchange reserves increased to $15.1 billion, up $18 million WoW, while the exchange rate closed the week at Rs278.85 per US dollar, up 0.02% WoW.

Other major news during the week included: Greenshoe option allows Pakistan to increase Eurobond issuance to $750 million; IMF to review auto policy before cabinet approval; IMF calls for removal of non-tariff barriers; Pakistan seeks spot LNG cargoes after December 2023; and first Central Asian shipment reaches Pakistan via China.

Sector-wise, top contributors were textile weaving, refinery, and synthetic and rayon, which rose by 26.0%, 7.9% and 6.1% week-on-week. The worst-performing sectors were jute, pharmaceuticals and cement, which declined by 9.3%, 6.1% and 5.7% week-on-week.

In terms of flows, major net selling was recorded by insurance and other organisations at $11.9 million and $5.0 million. In contrast, individuals and companies emerged as net buyers with inflows of $14.6 million and $2.6 million.

Company-wise, top performers were YOUW, up 68.4% week-on-week; ATRL, up 11.2%; GADT, up 8.9%; IBFL, up 7.9%; and MUREB, up 6.3%. Meanwhile, top laggards were PIOC, down 10.3% week-on-week; DGKC, down 9.4%; ISL, down 8.8%; CPHL, down 8.7%; and MLCF, down 8.7%.

AKD Research said that a constructive resolution would remain the key near-term driver of market direction, with any positive developments over the weekend likely to act as a trigger. The firm added that despite the recent recovery, valuations remain attractive, with the market trading at a price-to-earnings ratio of 7.2x. 

It projected the KSE-100 Index to reach 263,800 by December 2026.