Karachi: Pakistan's economic landscape experienced notable shifts in the first quarter of FY27, driven by heightened geopolitical tensions in the Middle East and fluctuating debt market dynamics. The Karachi Stock Exchange's KSE-100 index witnessed a substantial downturn, correcting by a significant 5.7% quarter-on-quarter to close at 169,969 points as of September 30, 2026. This decline in the benchmark index was accompanied by a 12.0% decrease in average trading volumes, marking the lowest levels since the fourth quarter of FY25.
The period under review, ending on September 30, 2026, saw a single sector, the refinery sector, making a positive contribution to the index. The sector's rally was bolstered by the much-anticipated approval of a brownfield refinery policy. In contrast, other major sectors exerted downward pressure on the index, with mutual funds and banks emerging as primary sellers, while individuals and companies displayed buying interest.
On October 27, 2026, UBL Fund Managers Limited released its quarterly report for September 2026. The directors' report encompassed several funds, including the UBL Liquidity Plus Fund (ULPF), UBL Cash Fund (UCF), and others. The company's portfolio spanned a range of funds, reflecting its diversified investment approach.
Consumer Price Index (CPI) inflation averaged 10.2% year-on-year during the first quarter of FY27, maintaining its double-digit trajectory from the previous quarter. This increase was largely attributed to rising prices in utilities and transport, coupled with a surge in food prices, notably wheat, which saw a 17% quarter-on-quarter increase.
According to information available from the Pakistan Stock Exchange (PSX), the Federal Board of Revenue's tax collections marginally exceeded quarterly targets, reaching PKR 3.08 trillion. On the external front, the current account deficit narrowed by 36.3% year-on-year to USD 543 million, supported by a 14.7% rise in remittances.
The debt market experienced volatility, with investor demand concentrated in short-term Treasury Bills, leading to PKR 5.715 trillion being raised by the government. The market also saw robust participation in Pakistan Investment Bonds and Ijara Sukuk, although geopolitical uncertainties and inflationary pressures induced higher yield demands.
Moody's and S&P Global credit rating upgrades provided a positive outlook for Pakistan, facilitating the government's successful USD 3 billion Eurobond issuance. This was complemented by an increase in foreign exchange reserves to USD 21.4 billion, bolstered by Saudi Arabia's USD 5 billion deposit roll-over.
Overall, the quarter highlighted a complex interplay of geopolitical tensions, economic challenges, and strategic fiscal measures that shaped Pakistan's financial markets. The developments underscore the ongoing need for vigilance and adaptability in navigating the evolving economic landscape.