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Pakistan bonds up after India strikes following tourist

killings

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Pakistan stock index recovers after initial drop

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Upcoming IMF board meeting raises optimism over Pakistan

aid

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Live coverage of Kashmir developments: https://bit.ly/4iNF4HS

(Updates pricing, adds background, quotes)

By Karin Strohecker and Ariba Shahid

LONDON/KARACHI, May 7 (Reuters) - Pakistan's

international bonds rose on Wednesday and stocks cut hefty

losses after India launched strikes on the country in response

to April's tourist killings, sparking the worst fighting in over

two decades between the nuclear-armed enemies.

The country's international bonds gained as much as 0.6

cent, clawing back losses of more than 1 cent in early trading,

according to Tradeweb data. The 2027 bond, which saw the biggest

gains, was bid at just under 90 cents in the dollar.

The country's benchmark share index was down 1.4%,

clawing back much of its losses after opening 5.78% lower.

India said it struck nine Pakistani "terrorist

infrastructure" sites, some of them linked to an attack by

Islamist militants on Hindu tourists that killed 26 people in

Indian Kashmir last month, while Islamabad said it had shot down

five Indian fighter jets.

The latest escalation comes at a fragile moment for

Pakistan, which has emerged from an economic crisis and is

trying to shore up finances and make progress on its $7 billion

International Monetary Fund loan programme agreed in 2024.

"The reliance of Pakistan on external capital inflow - in

recovery from an external account crisis, in the midst of an IMF

programme, and with under 3 months of import cover compared to

over 9 months in India - makes its asset prices much more

sensitive to any conflict than those in India," said Hasnain

Malik at Tellimer in Dubai.

The IMF executive board is scheduled to sign off on May 9 on

a staff level agreement that would trigger a $1 billion payout

as well as Pakistan's new $1.3 billion arrangement under a

climate resilience loan program.

"Investors seem optimistic on the upcoming IMF board meeting

which will decide on the loan tranche for Pakistan," said Sohail

Mohammed, CEO of Topline Securities in Pakistan.