Bulls returned to the Pakistan Stock Exchange (PSX) on Thursday, the day after the government proposed its budget for FY2024-25, with shares surging by over 1,700 points during intraday trading.
The KSE-100 index increased by 1,707.83 points, or 2.35%, reaching 74,505.26 points from the previous close of 72,797.43 by 10:49 am.
Mohammed Sohail, CEO of Topline Securities, attributed the market’s rise to “no increase in tax on dividend and capital gains tax (CGT) for investors in the new budget.”
Raza Jafri, CEO of EFG Hermes Pakistan, noted, “The market is clearly reacting positively to the soft changes to CGT for tax filers, in sharp contrast to the fears in the run-up to the budget.” He added that measures targeting non-tax filers, retailers, and the real estate sector are being viewed positively, although there are risks concerning enforceability.
Regarding the International Monetary Fund’s (IMF) expected reaction to the budget aimed at securing a new bailout, Jafri said it should be “acceptable” to the global lender in its current form. He emphasized the need for the government to implement and enforce the budgetary measures decisively.
Shahab Farooq, director of research at Next Capital Limited, remarked, “The market remained under pressure for the past couple of days due to uncertainties over significant tax measures in the budget amid guidelines from the IMF.” However, he noted that the actual budget alleviated these concerns, leading to overall positive impacts.
Farooq also expressed confidence that the IMF would likely approve the budget, particularly the efforts to enhance economic documentation by tightening regulations around non-filers and the real estate sector. He stated that the outlook for the equities market, which was already undervalued, has improved further.
Yousuf M Farooq, director of research at Chase Securities, observed that the market had been negatively affected by rumors of an increase in CGT and dividends in the past weeks. He noted that the absence of such tax increases in the budget has triggered a relief rally. He highlighted that the budget maintains a relatively tight monetary policy with a primary surplus target as required by the IMF. While textile stocks were down due to a shift in tax treatment, construction-related stocks rose due to increased PSDP allocation and supportive measures for the steel industry.
Adnan Sheikh, assistant vice president of Pak Kuwait Investment Company, stated that investors had significantly reduced their exposure in anticipation of a CGT increase. Following the budget announcement and the 150 bps policy rate cut on Monday, he suggested that the market might even experience a record day, asserting that “equities are the best option for the medium term.”
