Islamabad, May 1 The ongoing tension with India has shaken the confidence of investors in Pakistan badly, setting the country on course to record its worst performance in dollar bonds and stocks since 2023.
With fears of an all-out war looming large at the border, the Pakistani stock market has reacted negatively by recording a major decline in rupee and dollar bonds in April and underperforming massively in comparison to its counterparts.
Pakistan Information Minister Attaullah Tarar announcing in the middle of night early Wednesday that India may attack the country within the next 24 to 36 hours also impacted the trading with the market reacting negatively to the development and fears of war.
"The outlook in the near term is uncertain, so we can expect further weakness because additionally, the US tariffs are an overhang," stated Thomas Hugger, CEO of Asia Frontier Capital Limited.
"Any de-escalation of the tension will obviously calm down the nervousness of investors regarding further deterioration of the fragile relationship between the two countries and we can expect a small rally in bond and equity prices," Hugger added.
The investors have lost at least four per cent during the month of April while equities are down by three per cent. In comparison, India's assets have largely been invulnerable.
New Delhi has accused Islamabad of being involved in the Pahalgam terror attack which claimed the lives of 26 innocent civilians. It led to India declaring Pakistan's defence and security advisors at its High Commission in New Delhi as Persona Non Grata, issuing deadline to Pakistani nationals in India to leave the country, cutting down the diplomatic staff in Islamabad, shutting down of the Attari border and suspending the Indus Waters Treaty (IWT).
Pakistan has denied any involvement in the attack and responded to India's announcements with reciprocal measures besides also suspending its airspace for Indian airlines, a step that has been reciprocated by India now.
Since the Pahalgam incident, both sides have been flexing their military muscles along the Line of Control (LoC), engaging in exchange of heavy fire.
Global powers, including the United States, have called on both parties to show restraint and de-escalate tensions.
The ongoing tensions are putting immense pressure on Pakistan's financial market as international bonds dropped more than one per cent on Wednesday after expressing fears of an Indian attack within the next 24 to 36 hours.
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