The Pakistan Stock Exchange (PSX) saw its largest one-day gains on the trading floor the day before, and on Friday it climbed almost 1,000 points in intraday trade to reach an all-time high of 77,000.
According to the PSX data portal, the KSE-100 index increased by 1,097.12 points, or 1.44 percent, from the previous closing of 76,208.16 to stand at 77,305.28 at 11:04 am.
“The feel-good factor post-budget continues, driven by improving liquidity with local institutions as the commencement of monetary easing sees rotation into equities,” stated Raza Jafri, chief executive of EFG Hermes Pakistan.
The positive momentum was ascribed to “reduced uncertainty and increased buying by mutual funds, driven by conversions from fixed income to equity funds,” according to Yousuf M. Farooq, director of research at Chase Securities.
“We think stock market valuations will continue to rerate upwards as interest rates gradually decline,” he continued.
The surge was attributed by Awais Ashraf, director of research at AKD stocks, to the budget’s compliance with the IMF’s recommendations and the “status quo on capital gain tax on sale of securities.”
“The FY25 budget, when presented in accordance with IMF requirements, would help cement the macroeconomic stability achieved in the last two years and pave the way for a new extended fund facility,” he said.
He emphasized that the budget is neutral for the market as a whole because a flat rate of 15 percent capital gains tax (CGT) will be applied to purchases made after July 2024, given that most retail and high-net-worth (HNW) investors hold their investments for less than a year. Additionally, he noted that the market would benefit slightly from an increase in the tax rate on dividend income derived from debt securities of mutual funds.
Furthermore, he declared that “the factors affecting the top three sectors of the Pakistan Stock Exchange (PSX) have not changed significantly.” Nonetheless, the textile industry and certain steel industry participants will suffer significantly from exporters being excluded from the final tax regime of a 1 percent turnover tax.
Amreen Soorani, head of research at JS Global Capital, states that investors are pleased with the tax parity that has been established between PSX and other asset classes.
For the year beginning July 1, the administration hopes to increase tax income to 13 trillion rupees ($47 billion), an increase of roughly 40% over the current year.
In order to avoid default in an economy that is expanding at the slowest rate in the area, the nation is requesting an estimated $6 billion to $8 billion in loans from the IMF.
The government released the federal budget for the upcoming fiscal year on Thursday, and the benchmark index increased by more than 3,400 points during intraday trading.
Despite an aggressive tax revenue objective, the budget delighted investors by averting an anticipated hike in capital gains tax.
The increasing trend was ascribed by Topline Securities CEO Mohammed Sohail to “no increase in tax on dividend and capital gain tax for investors in the new budget.”
