PSX blasts off to all-time high of 76,208 points on CGT status quo

Karachi
Firing on all its rockets, the stock market on Thursday blasted off to hit unscaled highs as investors cheered the Capital Gains Tax (CGT) status quo in the federal budget 2024-25, traders said.
Pakistan Stock Exchange’s (PSX) benchmark, the KSE-100 Shares Index reached an all-time high of 76,208.16 points, showing an unprecedented giant leap of 3,410.73 points or 4.69% — the highest-ever single-day gain.
“The market was expecting an increase in capital gains tax and so investors had reduced exposure significantly,” Adnan Sheikh, assistant vice president of Pak Kuwait Investment Co told Reuters.
After the budget and Monday’s cut of 150 bps in the central bank’s policy rate, the market could see a record day as “equities are the best option for the medium term”, Sheikh added.
Apart from the capital gains tax, analysts say the budget and other revenue measures are in line with expectations.
The rally set all the top sectors on fire, triggering widespread buying interest in automobile assemblers, cement, commercial banks, engineering, oil and gas marketing companies (OMCs), and refineries.
This euphoria gripped the market a day after Finance Minister Senator Muhammad Aurangzeb unveiled Pakistan’s federal budget for 2024-25, which aims to boost tax revenue of Rs13 trillion for the year starting July 1, up nearly 40% from the current year.
The budget aims for a modest 3.6% growth, a move seen as a delicate balancing act to satisfy the International Monetary Fund (IMF) while addressing the nation’s fiscal challenges with heightened taxation.
It’s been designed to strengthen the case for a new bailout deal from the IMF, as Pakistan seeks an estimated loan ranging from $6 billion to $8 billion, to avert default in an economy growing at the region’s slowest pace.
“We believe this budget will serve as prior action for a new IMF programme,” Topline Securities said in a note.
If parliament passed the budget in compliance with IMF measures, Topline said it expected a forward price-to-earnings ratio of 6.93 in three years, a historic high, from 3.4 now.
Pakistan’s international sovereign bonds also rallied with longer-dated maturities enjoying the largest gains.
The 2036 bond added 1.4 cents–its biggest gain in more than two months–to be bid at just over 77 cents in the dollar, Tradeweb data showed.
Defending the decision to boost tax revenue, Finance Minister Muhammad Aurangzeb said the present tax-to-GDP ratio of a little under 10% was not sustainable. Key objectives for the upcoming fiscal year include efforts to increase the ratio gradually to 13% in the next three years, Aurangzeb told a press conference after presenting the budget in parliament.