PSX hits all-time high of 78,801 points on IMF bailout optimism
PSX hits all-time high of 78,801 points on IMF bailout optimism
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The Pakistan Stock Exchange (PSX) continued its post-budget rally on Thursday, reaching an unprecedented peak driven by optimism from Fitch Ratings' positive assessment of Islamabad's prospects for securing a bailout deal with the International Monetary Fund (IMF).
Following a three-day closure for Eid ul Adha (June 17-19, 2024), the PSX's benchmark KSE-100 index surged by 2,094.76 points, or 2.73%, closing at 78,801.53 points, up from the previous close of 76,706.77 points. This marks the fourth-largest single-day increase in KSE-100 history.
Mohammed Sohail, CEO of Topline Securities, attributed the positive market sentiment to hopes that the new budget would facilitate Pakistan's deal with the IMF for an extended and more substantial bailout. He noted that over the past year, the market had gained more than 95% in rupee terms and 100% in dollar terms.
Saad Ali, Director of Research at Intermarket Securities, told Geo.tv that the rally was fueled by renewed optimism for another IMF deal, following a budget aligned with the IMF's recommendations and a hike in the base power tariff before the Eid holidays. Ali added, "Fitch Ratings thinks that the budget is good enough for an IMF programme. Also, the market is taking positively the PM's plan to reduce power tariffs for industries."
The federal government has set a challenging tax revenue target of Rs13 trillion for FY25, a near-40% increase from the current year, and aims to reduce its fiscal deficit to 5.9% of GDP from 7.4% for the current year. These measures are part of Pakistan's negotiations with the IMF, as the country seeks a $6-8 billion loan to avoid a debt default amidst slow regional economic growth.
Fitch Ratings' statement from the previous day suggested that Pakistan's ambitious FY25 budget enhances the likelihood of an IMF deal, with the agency expressing confidence in the agreement and its potential to support other external funding.
Tahir Abbas, Head of Research at Arif Habib Limited (AHL), noted that the budget did not introduce major changes for the stock market and adhered to IMF recommendations, boosting expectations of a new and larger programme. He also mentioned that a downward inflation trajectory and the potential for further rate cuts were maintaining positive market sentiment.
Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company, explained that the market's bullish trend was due to anticipated major inflows from retail investors, as alternative investment avenues like real estate had been heavily taxed in the budget. He remarked, "In my view, the market is increasing as there is anticipation of major inflow from retail investors in the market as alternate investment avenues like real estate have been heavily taxed in the budget."
