Pakistan Stock Exchange hits record high on IMF deal optimism

KARACHI: The Pakistan Stock Exchange (PSX) extended its post-budget rally to reach an unprecedented peak on Thursday, driven by optimism following Fitch Ratings’ positive assessment of Islamabad’s prospects for securing a bailout deal from the International Monetary Fund (IMF).

Reopening after a three-day closure for Eidul Adha (June 17-19, 2024), the PSX’s benchmark KSE-100 index surged by 2,094.76 points, or 2.73 per cent, to trade at 78,801.53 points. This marked the fourth-largest single-day increase in the index’s history, up from the previous close of 76,706.77 points.

Mohammed Sohail, CEO of Topline Securities, attributed the rally to hopes that the new budget would facilitate a deal with the IMF for a more substantial and extended bailout. “In the last year, the market has gained over 95 per cent in rupee terms and 100 per cent in dollar terms,” Sohail noted.

Saad Ali, Director of Research at Intermarket Securities, highlighted renewed optimism for an IMF deal following a budget aligned with the financial institution’s recommendations and a hike in the base power tariff before the Eid holidays. “Fitch Ratings believes the budget is conducive for an IMF program. Additionally, the market views positively the Prime Minister’s plan to reduce power tariffs for industries,” Ali said.

The federal government has set an ambitious tax revenue target of Rs13 trillion for FY25, a nearly 40 per cent increase from the current year, and aims to reduce its fiscal deficit to 5.9 per cent of GDP from 7.4 per cent.

Pakistan is in talks with the IMF for a $6-8 billion loan to avoid a debt default amid the region’s slowest economic growth. Fitch Ratings stated that Pakistan’s FY25 budget bolsters the likelihood of an IMF agreement, which would support other external funding.

Tahir Abbas, Head of Research at Arif Habib Limited (AHL), mentioned that the budget did not introduce significant changes for the stock market and aligned with IMF recommendations, raising expectations of a new, larger program. Abbas also pointed to a downward inflation trajectory and potential rate cuts as positive market drivers.

Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company, said the market was buoyed by anticipated inflows from retail investors. “The market is rising as there is anticipation of significant inflows from retail investors, given that alternative investment avenues like real estate have been heavily taxed in the budget,” he explained.