The Pakistani capital market reached a significant milestone as the KSE-100 Index crossed the 110,000-point mark for the first time, driven by growing investor confidence in improving economic conditions and easing inflation.
The market initially saw a sharp drop of over 1,000 points in early trading due to concerns over potential government tax measures on bank profits. However, it rebounded later in the session, with the Pakistan Stock Exchange’s (PSX) benchmark index gaining 1,210.56 points, or 1.11%, to reach an intraday high of 110,264.51. The session saw a low of 107,902.66 before shifting direction.
Muhammad Saad Ali, Director of Research at Intermarket Securities Ltd., noted that investor sentiment was affected by news that the government had formed a committee to consider increasing taxes on banks’ profits, particularly those from investments in government securities. Despite this, banks, which had led the recent rally, faced a pullback in returns.
The government’s committee, led by Deputy Prime Minister Ishaq Dar, is tasked with reviewing the legal framework of the banking sector’s advance-to-deposit ratio (ADR) and developing consensus with banks. Recommendations are expected by December 31 to ensure revenue targets are met and encourage private-sector lending.
Global factors, including a global equities selloff, foreign outflows, and concerns over tax shortfalls and IMF targets, also influenced market sentiment. However, positive macroeconomic indicators continue to support long-term optimism, such as inflation dropping to 4.9% in November, the lowest since 2018, and Saudi Arabia extending its $3 billion deposit for another year.
Prime Minister Shehbaz Sharif celebrated recent economic achievements, including a drop in weekly inflation to 3.57%, the lowest in six years. He emphasized the government’s role in stabilizing the economy and fostering industrial growth, employment, and foreign investment.
Finance Minister Muhammad Aurangzeb expressed optimism, projecting remittances to exceed $35 billion by FY 2024-25, and discussed ongoing reforms aimed at improving the business environment. He also clarified that no talks with the IMF are taking place regarding a sales tax on petroleum products.
Analysts remain optimistic about the PSX’s long-term prospects, with expectations of a rate cut and continued reforms shaping the market’s future outlook as the State Bank of Pakistan’s monetary policy meeting approaches on December 16.
