Pakistan’s dollar bonds and equities are heading towards their poorest monthly performance since 2023, with growing India-Pakistan tensions affecting investor confidence.
The performance of dollar bonds shows a decline of nearly 4% this month, whilst equities have decreased almost 3%. In contrast, Indian assets remain relatively unaffected, with both stocks and domestic bonds showing positive returns this month.
In April, Pakistani equities have shown weaker performance compared to regional markets, whilst the rupee and dollar bonds declined amidst potential conflict with India, according to a Bloomberg report.
Pakistan’s Information Minister Attaullah Tarar claimed on Wednesday that India would initiate military operations within 24 to 36 hours, stating that Pakistan would respond “assuredly and decisively.”
Pakistan Stock Markets
The relationship between these nuclear-armed nations worsened following the terror attack on April 22 in the Jammu and Kashmir region, resulting in 26 casualties.
“The outlook in the near term is uncertain and therefore we can expect further slight weakness since additionally, the US tariffs are an overhang,” said Thomas Hugger, chief executive officer and fund manager at Asia Frontier Capital Ltd. in Hong Kong.
“A reduction in tensions would naturally ease investors’ concerns about potential worsening of the delicate relations between the two nations, potentially leading to modest gains in bond and equity markets,” Hugger noted.
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Before this development, Pakistan’s investment outlook was becoming more positive, supported by improved credit ratings and declining oil prices. The stock market had recorded its strongest annual performance in 22 years, creating favourable conditions for additional growth as the nation’s economic activities increased, the Bloomberg report said.
“Recent declines in bond prices present favourable investment opportunities,” wrote Avanti Save, head of Asia credit research & strategy at Barclays Bank Plc, in a note. She continues to maintain an overweight position on the country.
