The mood across the trading floor in Karachi turned tense within moments of Friday’s opening bell. Investors barely had time to settle in before the benchmark KSE 100 Index plunged sharply in early trade.
The sharp decline came as news of escalating military action along the Pakistan-Afghanistan border rattled financial markets.
The sell-off was swift and broad.
Let’s take a look at the key factors why the Pakistan stocks exchange tumbled in today’s trading session –
War fears trigger panic across financial markets
Putting it simplly, Markets dislike uncertainty. For the Pakistan stock exchange, the latest escalation along the disputed Durand Line created plenty of it.
Reports of cross-border airstrikes, artillery shelling and ground operations intensified overnight.
Moreover, Pakistan confirmed it had launched an operation named “Ghazab Lil Haq” after accusing Afghan forces of unprovoked firing.
Afghanistan, in turn, claimed it had conducted large-scale operations against Pakistani military positions.
Statements from Pakistan’s Defence Minister Khawaja Asif describing the situation as “open war” added to the anxiety.
Explosions and aircraft activity reported in Kabul early Friday morning further heightened concerns.
Selling across sectors
The decline was not limited to one corner of the market. Almost every major sector saw red screens.
Automobile assemblers, cement makers and fertiliser companies came under pressure.
Banking stocks also slipped. Energy-related companies, including oil and gas explorers, oil marketing firms and refineries, were among the notable losers.
Heavyweight names such as Attock Refinery, Mari Energies, Oil and Gas Development Company, Pakistan Oilfields, Pakistan Petroleum, Sui Southern Gas Company, Sui Northern Gas Pipelines, MCB Bank, Meezan Bank and National Bank of Pakistan traded lower, dragging the broader index down with them.
Why markets react so sharply to conflict
Stock markets function on expectations about the future. When there is a sudden risk of war or prolonged military engagement, investors worry about higher government spending, currency volatility, disruption to business operations and weaker foreign investment inflows.
After the initial slide, some value buying was seen at lower levels, helping the index recover a small portion of its losses.