The Pakistan Stock Exchange (PSX) achieved a historic milestone on Monday as the KSE-100 Index surpassed the 110,000-point mark for the first time, reflecting investor confidence fueled by positive economic indicators and declining inflation.
The session began on a negative note, with the market losing over 1,000 points amid concerns over potential government taxation measures on banks’ profits. However, it rebounded strongly, with the KSE-100 Index rising by 1,195.03 points, or 1.1%, to reach an intraday high of 110,248.98. The index saw a low of 107,902.66 before gaining momentum.
Muhammad Saad Ali, Director of Research at Intermarket Securities Ltd., explained that news of a government committee being set up to review taxation on bank profits had dampened market sentiment, leading to declines in bank stocks. “Banks, which had led the rally, are seeing some of their gains being pulled back,” he noted.
The government is considering taxing bank profits derived from investments in government securities. A committee, led by Deputy Prime Minister Ishaq Dar, is reviewing the banking sector’s framework, with recommendations expected by December 31 to meet revenue targets and encourage private-sector lending.
Despite these concerns, global factors and local developments continued to influence market dynamics. Ahsan Mehanti, CEO of Arif Habib Commodities, pointed to global equity sell-offs, foreign outflows, and concerns over tax shortfalls and IMF targets as contributing to the bearish sentiment.
On the positive side, macroeconomic indicators remain strong. Inflation dropped to 4.9% in November, the lowest since April 2018, and Saudi Arabia extended its $3 billion deposit in Pakistan for another year, strengthening the country’s foreign reserves. Additionally, trade agreements worth $560 million with Saudi Arabia and the highest petroleum sales in 25 months further bolstered economic growth.
Prime Minister Shehbaz Sharif celebrated recent economic achievements, including a drop in weekly inflation to 3.57%, the lowest in six years. He credited these developments to the government’s stabilization efforts and emphasized the importance of rising remittances, increased investments, and stronger diplomatic ties for Pakistan’s future progress.
Finance Minister Muhammad Aurangzeb expressed optimism, projecting remittances to surpass $35 billion by FY 2024-25. Addressing the Overseas Chamber of Commerce and Industry (OICCI), he highlighted ongoing reforms, including the closure of 900 fake petrol stations and efforts to promote local products and address challenges in the private sector. He also clarified that there are no discussions with the IMF regarding sales tax on petroleum products.
Despite some short-term setbacks, analysts remain confident in the PSX’s long-term prospects, supported by easing inflation and strong macroeconomic fundamentals. With the State Bank of Pakistan’s monetary policy meeting approaching on December 16, expectations of a rate cut and further reforms are likely to shape the market’s future outlook.
