The capital market achieved another milestone to open the week as the KSE-100 Index surpassed the 110,000-point mark for the first time, pushed by investor confidence in improving economic conditions and easing inflation.
Initially, the market faced a sharp decline, shedding over 1,000 points during early trading because of concerns over potential government tax measures on banks’ profits. However, it staged a rebound later in the session.
The Pakistan Stock Exchange’s (PSX) KSE-100 Index surged by 916.43 points, or 0.84%, to close at 109,970.38 points. The session also saw a low of 107,902.66 before changing trajectory.
“News that the government has set up a committee to consider increasing taxation on banks’ profits has dampened sentiment,” said Muhammad Saad Ali, Director of Research at Intermarket Securities Ltd. “Most banks are down over 4% already. Banks led the most recent leg of the rally, and some of those returns will be pulled back in the interim.”
The government is looking to tax bank profits derived from investments in government securities. A seven-member committee, led by Deputy Prime Minister Ishaq Dar, has been formed to review the legal framework of the banking sector’s advance-to-deposit ratio (ADR) and to foster consensus with banks.
The committee is expected to finalise recommendations by December 31 to ensure revenue targets are met and propose measures to encourage private-sector lending.
Global factors also weighed on the market. Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities cited “a global equities selloff, foreign outflows, and concerns over tax shortfalls and IMF target slippages” as catalysts for bearish activity.
Macroeconomic developments continue to support long-term optimism. Inflation dropped to 4.9% in November, the lowest since April 2018. Saudi Arabia extended its $3 billion deposit for another year, strengthening Pakistan’s foreign reserves.
Trade agreements worth $560 million with Saudi Arabia and a 25-month high in petroleum sales further signal growing economic activity. Additionally, the government raised Rs353 billion through an auction of Ijarah Sukuk, boosting liquidity.
Prime Minister Shehbaz Sharif celebrated recent economic milestones, including weekly inflation dropping to 3.57%, the lowest in six years. He attributed these achievements to the government’s efforts to stabilise the economy and highlighted rising remittances, increased investments, and stronger diplomatic ties.
PM Shehbaz said that the country was rapidly moving toward progress after achieving economic stability, reiterating his commitment to reducing hardships and fostering industrial growth, employment, and foreign investment.
Finance Minister Muhammad Aurangzeb shared a similarly optimistic outlook, projecting remittances to exceed $35 billion by FY 2024-25. Addressing the Overseas Chamber of Commerce and Industry (OICCI), he discussed ongoing reforms, including closing 900 fake petrol pumps, promoting local products, and addressing private sector challenges.
He also clarified that there are no talks with the IMF about imposing sales tax on petroleum products.
Analysts remain confident in the PSX’s long-term prospects, supported by easing inflation and solid macroeconomic indicators.
As the State Bank of Pakistan’s monetary policy meeting approaches on December 16, expectations of a rate cut and continued reforms are likely to shape the market’s future trajectory.
