PSX hits all-time high as investor confidence soars

The Pakistan Stock Exchange (PSX) experienced a significant surge on Friday, with the KSE-100 index gaining over 1,000 points in intraday trading, reaching a historic high of 77,000 points. This bullish momentum followed the previous day’s record-breaking single-day gains.

By 11:04 AM, the KSE-100 index had climbed 1,097.12 points, or 1.44 per cent, to 77,305.28, up from its previous close of 76,208.16, according to data from the PSX portal.

Raza Jafri, CEO of EFG Hermes Pakistan, attributed the market’s positive sentiment to the recent federal budget. “The feel-good factor post-budget continues, driven by improving liquidity with local institutions as the commencement of monetary easing sees rotation into equities,” Jafri explained.

Yousuf M Farooq, director of research at Chase Securities, cited reduced uncertainty and increased buying by mutual funds as key drivers behind the rally. “Reduced uncertainty and conversions from fixed income to equity funds have spurred mutual fund activity, boosting market confidence,” Farooq noted. He added, “We believe that as interest rates gradually decline, stock market valuations will continue to rerate upwards.”

Awais Ashraf, director of research at AKD Securities, pointed to the alignment of the budget with International Monetary Fund (IMF) recommendations and the maintenance of the capital gains tax (CGT) on securities sales as factors bolstering market performance. “The budget’s alignment with IMF requirements sets the stage for a new extended fund facility, reinforcing macroeconomic stability,” Ashraf stated. He highlighted that a flat CGT rate of 15pc on purchases from July 2024, for holdings under one year, is neutral for the market overall, while increased taxation on dividend income from debt securities of mutual funds is slightly positive for equities.

Ashraf also mentioned that the removal of exporters from the 1pc turnover tax regime is a significant negative for the textile and some steel sector players. However, he noted no major changes impacting the top three sectors of the PSX.

Amreen Soorani, head of research at JS Global Capital, welcomed the tax parity between the PSX and other asset classes, which has been positively received by investors.

The government aims to raise 13 trillion rupees ($47 billion) in tax revenue for the fiscal year beginning July 1, marking a nearly 40pc increase from the current year. This ambitious target is part of the country’s strategy to secure an IMF loan ranging from $6 billion to $8 billion to prevent a default in an economy currently experiencing the slowest growth rate in the region.

On Thursday, the benchmark index saw an unprecedented gain of over 3,400 points in intraday trading, spurred by the federal budget announcement. The budget’s avoidance of an expected increase in capital gains tax was particularly well-received by investors, contributing to the market’s upward trajectory.

Mohammed Sohail, CEO of Topline Securities, highlighted that the absence of increased taxes on dividends and capital gains in the new budget was a key factor in the market’s robust performance. “The decision not to increase taxes on dividends and capital gains has provided a significant boost to investor sentiment,” Sohail commented.

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