Pakistan's stock, international bonds soar after ceasefire with India

"While optimistic, sustaining momentum requires ceasefire compliance, accelerated reforms, and managing global headwinds like oil prices," senior economist Sanie Khan told AFP.

Pakistan's stocks closed up 9.4% and its international bonds also recorded strong gains on Monday after a ceasefire deal with neighbouring India agreed over the weekend fuelled a relief rally.

Pakistan's main stocks benchmark — the KSE-100 share index — rose 9.6%, to its highest level since April 23, and closed at 9.4%, marking its highest ever gain in terms of points and percentage.

The benchmark KSE-100 Index opened at 117,104.11 points, up 9,929.48 points, or 9.26 per cent, prompting an hour-long trading suspension because limits had been reached.

"Today's sharp surge in the stock market stems from a powerful convergence of bullish triggers that have swiftly turned investor sentiment from fear to opportunity," Sana Tawfiq, head of research at Arif Habib Limited, Pakistan's largest securities brokerage, told AFP.

The country's international bonds rallied sharply, adding as much as 5.7 cents in the dollar, Tradeweb data showed.

The jump also comes on the back of the International Monetary Fund (IMF) on Friday approving a Pakistan loan-programme review, unlocking around $1 billion in much-needed funds and greenlighting a new $1.4 billion bailout despite India's objections.

"We are very pleased today that the market has performed extremely well," Ahmed Chinoy, director of the Pakistan Stock Exchange Limited, told AFP, while celebrating by cutting a cake with brokers.

"This positive shift is reinforced by the IMF's dual approvals, providing both critical funding and international validation of Pakistan's reform path," Tawfiq added.

Saturday's ceasefire in the region, announced by US President Donald Trump, followed four days of fighting and diplomacy and pressure from Washington.

"After four days of tense clashes that pushed India and Pakistan close to war, a ceasefire appears to be holding after being announced on Saturday," said Jim Reid at Deutsche Bank in a note to clients.

The gains in stocks came after the exchange halted trading on Monday for an hour, according to an exchange notification.

In a research note, Arif Habib Limited said that while a ceasefire and diplomatic progress have boosted optimism, unforeseen escalations remained a risk.

The US president pledging support for resolving the Kashmir issue and encouraging enhanced trade relations between India and Pakistan, the IMF's nod on Pakistan, as well as the central bank's 100 basis points rate key rate cut last Monday which is "expected to boost equity valuations," should all encourage stability, the note said.

In a series of posts on social media, Trump also pledged to increase trade with both nations.

A policy rate cut by the country's central bank was also seen as a positive factor boosting equity flows.

Agencies