The KSE-100 shed 5.3% (7.7% in US$) in September, easily making it the worst month of the year. Volumes remained thin while foreign selling accelerated, particularly in Banks. The key reasons behind the poor market performance were (i) continued uncertainty on Afghanistan and a possible reset in US-Pakistan relations, (ii) a renewed exodus of foreign funds after MSCI announced the FM downgrade decision, and (iii) continued import-led widening of the current account which kept up the pressure on the PKR and forced the SBP to commence monetary tightening.

Nevertheless, there are encouraging signs that Pakistan remains committed to macroeconomic reforms as well as the resumption of the stalled IMF programme.

The risk of adverse US action is remote, while progress on IMF talks can restore investor confidence and enable Pakistan equities to bounce back as year-end approaches.

Courtesy – Intermarket Securities Limited (Abstract from a report)