KSE-100 recovers from over 2,000-point loss, closes marginally negative

A dramatic day at the Pakistan Stock Exchange (PSX) eventually saw the benchmark KSE-100 Index close marginally negative, but not before it had lost over 2,000 points in the early minutes of trading on Friday.

The KSE-100 started the trading session with its biggest fall in months, plunging below the 72,000 level as investors offloaded shares over rumours of high taxes being imposed on the capital markets in the upcoming budget.

The index had already been under pressure this week, losing ground in every session, but Friday’s selling spree was an outright ‘dump approach’ that was triggered by rumours of higher taxes and anti-growth proposals in the upcoming budget that is set to be announced on June 12.

However, participants soon began to cherry-pick over a greater likelihood of a rate cut in the monetary policy announcement on June 10. Gradually, the market recovered with the index clawing back over 73,000, and only closed marginally in the red.

At close, the benchmark index settled at 73,754.02, down by just 108.91 points or 0.15%. It had earlier hit an intra-day low of 71,781.96.

Experts said concerns regarding proposals in the upcoming budget 2024-2025 drove the selling spree early on in the session.

“A proposed increase in the Capital Gains Tax (CGT) and dividend tax in the upcoming budget drove this trend,” said Sana Tawfik, head of research at brokerage house Arif Habib Limited.

“There are also talks of imposition of GST or increasing PDL on petroleum products,” she added.

The analyst, however, was of the opinion that the expected decline in the key policy rate in the upcoming Monetary Policy Committee (MPC) would turn fortunes around.

“We expect policy rate to decline by 200bps.

“A global reversal of policy rate has been initiated, with the ECB and Bank of Canada announcing rate cut. This will support the State Bank of Pakistan’s decision.”

Regardless of the expectation, selling pressure was witnessed among key sectors on Friday.

Another brokerage house Topline Securities in its post-market report said a volatile session was observed at the exchange where index declined to make an intraday low of -2,081 points largely on a rumour that in the budget for FY25 capital gains and dividend tax rate might be increased to match standard personal or corporate income tax rates.

“However, as the day progressed, better sense prevailed as investors came in to accumulate shares given monetary policy meeting on Monday where market expects a cut in the policy rate by 100-200 basis points and the fact that an increase in tax on capital market is a rumour at this point in time,” it said.

MEBL, PPL, HBL, MCB, OGDC and UBL lost value to weigh down on the index by -302 points, according to Topline.

On week-on-week basis, the KSE-100 declined by 2.8%.

“This decline can be attributed to investors` concern with respect to expected austerity and additional taxation measures by the government in the upcoming budget for FY25,” the brokerage house said.

Meanwhile, the Pakistani rupee registered marginal improvement against the US dollar, appreciating 0.07% in the inter-bank market on Friday. At close, the local unit settled at 278.20, a gain of Re0.19, against the greenback, as per the State Bank of Pakistan.

Volume on the all-share index increased to 559.55 million from 352.74 million a session ago.

The value of shares jumped to Rs20.21 billion from Rs12.31 billion in the previous session.

Pervez Ahmed Co was the volume leader with 78.93 million shares, followed by Fauji Cement with 34.4 million shares, and WorldCall Telecom with 28.27 million shares.

Shares of 441 companies were traded on Friday, of which 180 registered an increase, 200 recorded a fall, while 61 remained unchanged.