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Brokers monitor an index board showing latest share prices at the Pakistan Stock Exchange in Karachi on January 26, 2023. — AFP
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The capital market experienced a sustained bearish trend on Thursday, weighed down by concerns over political instability, policy uncertainty, and structural challenges.
The market saw modest gains early in the session, but the lack of sustained buying pressure and bearish drivers kept investors cautious.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) ended the session at 112,638.26, down 1,510.19 points or -1.32% from the previous close of 114,148.45.
The market touched an intraday high of 114,329.95 points but quickly retreated to a low of 112,594.66 points.
“Pressure was seen on the PSX amid fears of a ban on non-filing investors under the new tax amendments,” said Arif Habib Commodities Managing Director and CEO Ahsan Mahanti.
“Political uncertainty, concerns over SBP’s easing of cautious policy, and uncertainty over the outcome of IMF tax collection and reduction in structural reform targets played a catalytic role in bearish activity,” he added.
The recently introduced Tax Laws (Amendment) Act, 2024, which bars non-filers from opening accounts in the stock market, has come under heavy criticism from stakeholders. The Pakistan Stock Brokers Association (PSBA) has expressed serious concerns, demanding an immediate dialogue with the government officials.
The controversial amendment states: “No person authorized to sell securities, including debt securities or units of mutual funds, shall sell securities or mutual funds to any disqualified person or association of persons, shall not open an account or will not clear.”
This rule directly affects non-filers, many of whom represent a significant portion of active traders in the stock market. The PSBA warned that the move could significantly reduce stock market participation and dampen investor sentiment.
Adding to the fiscal challenges, last month, Federal Board of Revenue (FBR) Chairman Rashid Mehmood Langriyal revealed that the country’s tax gap is Rs 7.1 trillion, with income tax alone accounting for Rs 2.4 trillion. The revelation underscores Pakistan’s difficulties in meeting tax collection targets linked to the IMF programme.
Market volatility increased due to profit-taking by large institutional investors such as insurance companies and banks, which was not offset by adequate new buying by mutual funds.
“In recent sessions, we have seen profit-taking by large institutional investors, such as insurance companies and banks, without adequate new buying by mutual funds,” said Muhammad Saad Ali, director of research at Intermarket Securities. Ltd. said.
“The market currently lacks new positive stimulus, after a strong run-up, and concerns around politics are rising. I suspect the same theme is playing out today.”
Prime Minister Shehbaz Sharif on Wednesday sought to restore hope by reiterating his belief in the recovery of the economy during his visit to Karachi. Addressing the Pakistan Stock Exchange, the Prime Minister acknowledged that the current tax rates are a hindrance to business and investment activities.
He, however, stressed the importance of fulfilling the commitments made under the IMF program while acknowledging its role in ensuring economic stability.
Adding to this narrative, Deputy Prime Minister Ishaq Dar highlighted the long-term benefits of stock market integration, stressing that it has developed as a strong foundation for the economy.
Finance Minister Muhammad Aurangzeb also emphasized the important role of the stock market in boosting investor confidence and driving economic growth.
Adding to the economic pressure, regasified liquefied natural gas (RLNG) diversion to the domestic sector increased to 450mmcfd in January 2025, from 250mmcfd in December 2024. This increase is expected under the jurisdiction of Sui Northern Gas Pipelines Limited, revolving credit in the gas sector.
The difference between the domestic tariff of Rs 1,250 per mmbtu and the RLNG tariff of Rs 3,600 per mmbtu is putting considerable financial pressure on gas utilities, raising concerns about the sustainability of the sector. have been
The IMF’s proposed levy on gas supply to industrial captive power plants (CPPs) remains a key structural criterion under the Expanded Fund Facility (EFF), adding to investor concerns over compliance and financial pressures.
On the fiscal front, the government raised Rs 434 billion through market treasury bills auction on Wednesday, surpassing the target of Rs 250 billion but short of the maturity amount of Rs 654 billion.
Cut-off yields for three-month, six-month and 12-month papers — by 22bps, 21bps and 50bps respectively — indicate market expectations for further monetary easing by the State Bank of Pakistan (SBP).
Expectations for a rate cut have been bolstered by falling inflation, which fell to 4.1 percent year-on-year in December from 4.9 percent in November.
This trend, driven by a stable currency, declining global commodity prices, and improved supply chain conditions, has given policymakers and investors alike some hope.
The KSE-100 index closed at 116,052.68 on Wednesday, marking a loss of 202.44 points or -0.17%, as profit margins and ongoing concerns about the energy sector’s revolving credit left the market in the red for the third straight day. I kept
