Karachi, June 14, 2024 – The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) reached a record high of 76,707 points on Friday, driven by post-budget optimism. The index closed with a gain of 499 points, up from the previous day’s closing of 76,208 points.
Analysts at Topline Securities Limited attributed the continued rise to investor relief over the lack of increased taxes on dividends and capital gains from the stock market for filers. Market rumors had suggested potential tax hikes, but the government’s decision to maintain current rates, while increasing taxes on other asset classes, has bolstered investor confidence.
“The KSE-100 Index saw an intraday high surge of 1,102 points,” said a Topline Securities analyst. “This rally was largely driven by the favorable tax treatment of stock market investments in the new budget, contrasting with increased taxes on mutual fund dividends and property gains.”
Despite the strong opening at the KSE-100 index, some intraday profit-taking occurred as investors opted to secure gains ahead of the long weekend due to Eid ul Adha holidays. This led to a slight pullback from the day’s peak, but the market maintained a robust overall performance.
Major contributions to the index’s rise came from the banking sector, with MEBL, MCB, BAFL, UBL, BAHL, and HBL collectively adding 642 points. The day’s trading volume stood at 395 million shares, with a total value of Rs 21.33 billion. K-Electric Limited (KEL) emerged as the volume leader, trading 23 million shares.
Over the week, the KSE-100 Index recorded a 4% gain, reflecting a broader market optimism that was fueled by the Federal Budget FY25. “The budget exceeded market expectations, particularly with the decision to maintain the tax rate on stock market dividends and capital gains for filers,” noted the analyst. “In contrast, there were significant tax increases on dividends from mutual funds earning over 50% of their income from debt profits and a rise in capital gains tax on property from 3% to 15%.”
Additionally, a 150 basis point cut in the policy rate by the State Bank of Pakistan (SBP) on Monday provided further stimulus. The decline in interest rates has enhanced market liquidity and investment appetite, contributing to the bullish trend.
Other significant developments included a surge in Pakistan’s auto sales, with the Pakistan Automotive Manufacturers Association (PAMA) reporting sales of 10,949 units in May 2024, the highest in 15 months, representing a 4% month-on-month and 100% year-on-year increase. The T-Bill auction held during the week also saw yields decline by 85-115 basis points across various tenors, further supporting market sentiment.
Average trading volume and value for the week at the KSE-100 index were robust, standing at 410 million shares and Rs 16.9 billion, respectively. This healthy trading activity underscores the market’s resilience and the positive investor sentiment following the budget announcement.
As the market looks ahead, the combination of favorable tax policies, declining interest rates, and strong economic indicators is expected to sustain the bullish momentum, providing a promising outlook for investors in the coming months.