Stocks hit record highs on Thursday as investors cheered the status quo Capital Gains Tax (CGT) in the federal budget for 2024-25, traders said.
The benchmark Pakistan Stock Exchange (PSX) KSE-100 index hit an all-time high of 76,208.16 points, an unprecedented jump of 3,410.73 points or 4.69%.
Adnan Sheikh, assistant vice president of Pak Kuwait Investment Co, told Reuters: “The market is expecting an increase in income tax and investors have significantly reduced their exposure.”
Sheikh said the market could see a record day after the budget and the central bank’s 150 bps policy cut on Monday.
Apart from capital gains, analysts said the budget and other revenue measures were in line with expectations.
The rally attracted wide interest from automobile manufacturers, cement, commercial banks, engineering, oil and gas marketing companies (OMCs) and refineries.
A day after Finance Minister Senator Muhammad Aurangzeb announced Pakistan’s federal budget for 2024-25, the destination market grew by around 40% this year.
The budget targets an average growth of 3.6%, which is seen as a good balance between satisfying the International Monetary Fund (IMF) and addressing the country’s fiscal problems by raising taxes.
The new bailout deal from HPG is set to strengthen the case as Pakistan seeks between $6 billion and $8 billion in loans to avoid default in the region’s slowest economy.
“We believe this budget will be the starting measure for HPG’s new program,” Topline Securities said in a note.
Topline said it expects it to rise from 3.4% now to 6.93% in three years if parliament passes its budget in line with International Monetary Fund measures.
Pakistan’s international sovereign bonds also rallied with long maturities yielding the most.
Bond 2036 added 1.4 cents – its biggest gain in two months – to just over 77 cents on the dollar, according to Tradeweb data.
Defending the decision to increase tax revenue, Finance Minister Muhammad Aurangzeb said that the current tax rate of less than 10% of GDP is not sustainable.
Aurangzeb said in a press conference after presenting the budget in the assembly that the next fiscal year includes efforts to gradually raise the core ratio to 13% during the next three years.
