Bulls rampant at PSX as shares see biggest single-day gain a day after budget

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This screengrab, taken at 12:27pm, shows PSX activity on June 13. — PSX data portal
This screengrab, taken at 12:27pm, shows PSX activity on June 13. — PSX data portal

Bulls returned to the Pakistan Stock Exchange (PSX) on Thursday — a day after the government proposed its budget for FY2024-25 — as shares saw a massive gain of more than 3,400 points in intraday trade.

The KSE-100 index gained 2735.07 points, or 3.75 per cent to stand at 75,579.23 at 12:17pm, the PSX data portal showed. Finally, the index closed at 76,208.16, up by 3,410.73 or 4.69pc, from the previous close of 72,797.43 points.

Mohammed Sohail, chief executive of Topline Securities, attributed the upward trajectory to “no increase in tax on dividend and capital gain [tax] (CGT) for investors in the new budget”.

Furthermore, Sohail noted that that the point increase was “a record high in a single day” for the index.

Raza Jafri, chief executive of EFG Hermes Pakistan, said, “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.”

“The measures to go after non-tax filers, and to an extent, retailers and real estate, are also being taken positively although risks remain on enforceability,” he added.

On the International Monetary Fund’s (IMF) expected reaction to the budget, which was aimed at securing a new bailout, Jafri said it should be “acceptable” to the global lender in its current form.

“The government now needs to hold its nerve and push through with implementation and enforcement,” he stressed.

“Market remained under pressure for the past couple of days for reasons including uncertainties over significant tax measures in the budget amid guidelines from the IMF,” Shahab Farooq, director of research at Next Capital Limited, said.

“On the contrary, the actual budget put those concerns to rest with overall positive impacts of budgetary measures.”

Farooq also expressed confidence that the IMF was “likely to give its consent on the budget, particularly [the] move to enhance documentation of economy by tightening the belt around non-filers and real estate sector”.

He noted that the “outlook for equities market, which was already cheap, has further improved”.

“The market had been battered over the past two weeks on rumours of an increase in CGT and dividends over the last week,” Yousuf M Farooq, director of research at Chase Securities, said, “No such tax increase has been seen in the budget and this is a relief rally.”

“The budget is a continuation of relatively tight monetary policy with a primary surplus target as required by the IMF. Textile stocks are down on moving goods exports from final tax of 1pc to normal tax,” he highlighted, adding that “construction-related stocks are up on increased PSDP allocation and supporting measures for the steel industry”.

“The market was expecting an increase in capital gains tax and so investors had reduced exposure significantly,” said Adnan Sheikh, assistant vice president of Pak Kuwait Investment Company.

Following the budget and the 150 bps policy rate cut on Monday, the market may even witness a record day as “equities are the best option for the medium term”, he added.


Additional input from Reuters

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