Budget approval to pave way for IMF program, expected to be major market catalyst: report

The approval of the budget will pave the way for the upcoming IMF program, which will likely become a significant market catalyst going forward, according to a note by AKD Research. 

The brokerage firm said in its note that the post-budget market has gained a sense of certainty, particularly in sectors benefiting from budgetary measures. With the start of monetary easing, optimism is expected to rise, especially in cyclical sectors. 

The Pakistan Stock Exchange (PSX) experienced a turbulent start to the week, with the KSE-100 index dropping to 72,589 points amid rumors of potential increases in the Capital Gains Tax (CGT). 

However, the market swiftly rebounded after the announcement of the Federal Budget 2024-25, which introduced less severe taxation measures than anticipated.

On Thursday, the KSE-100 index surged by 3,410 points, marking the largest single-day gain, and closed the week at an all-time high of 76,706 points on Friday, with a weekly gain of 2,952 points or 4%. This recovery reflects investor confidence despite initial pre-budget jitters.

The week also saw the State Bank of Pakistan (SBP) announce a 150 basis points rate cut, the first in a series of expected monetary easing measures, further boosting market sentiment. 

Additionally, the cut-off yields in the latest T-bill auction dropped by 85, 103, and 115 basis points for 3-month, 6-month, and 12-month papers, respectively, as the inflation outlook eased.

Despite the positive momentum, average trading volumes decreased by 3.8% week-on-week, with 409.6 million shares traded compared to 423.3 million shares the previous week. 

On the currency front, the Pakistani Rupee depreciated by 0.11% week-on-week, closing at 278.51 against the US Dollar.

Key economic events during the week included the Economic Coordination Committee (ECC) approving Rs9 billion for clearing OMCs’ PDCs, allowing the export of 0.15 million metric tons of surplus sugar, and Finance Minister Aurangzeb’s commitment to raising the tax-to-GDP ratio to 13%. 

Additionally, Pakistan plans to launch a $1 billion bond and secure $4 billion in foreign bank loans, while the World Bank projects a 2.3% GDP growth rate.

Sector-wise, top performers included Commercial Banks (up 6.6% WoW), Pharmaceuticals (up 5.7% WoW), Oil & Gas Exploration Companies (up 4.5% WoW), Oil & Gas Marketing Companies (up 4.3% WoW), and Paper & Board (up 4.1% WoW). Conversely, Textile Composite (down 4.8% WoW), Woollen (down 2.8% WoW), Leasing Companies (down 2.7% WoW), Food & Personal Care Products (down 2.1% WoW), and Textile Spinning (down 1.7% WoW) were among the worst performers.

Flow-wise, major net selling was recorded by individuals with a net sell of $8.9 million, while mutual funds absorbed most of the selling with a net buy of $11.1 million.

The top performing companies of the week were BAFL (up 12.9% WoW), MCB (up 12.4% WoW), NCPL (up 11.0% WoW), UBL (up 10.6% WoW), and KOHC (up 9.9% WoW). The top laggards were ILP (down 13.9% WoW), PTC (down 7.5% WoW), YOUW (down 7.4% WoW), COLG (down 6.4% WoW), and PGLC (down 5.7% WoW).