Bearish sentiment dominated the Pakistan Stock Exchange (PSX) on Wednesday as the benchmark KSE-100 index fell below the critical 75,000 level, reflecting widespread investor concerns. At 2:20 PM, the KSE-100 index stood at 74,916.07, down by 601.41 points or 0.80%, marking a significant decline amid across-the-board selling pressure.
Key sectors, including automobile assemblers, cement, chemical, commercial banks, oil and gas exploration companies, oil marketing companies (OMCs), and refineries, experienced significant sell-offs. Prominent stocks such as OGDC, PPL, SNGPL, HBL, and NBP were among those deep in the red, contributing to the market’s overall decline.
Market experts attribute this selling pressure to the anticipated fiscal measures in the upcoming FY 2024-25 budget. The government aims to achieve greater fiscal discipline and enhance tax revenues, prompting investor caution. Reports suggest that major changes are expected in tax laws through the Finance Bill 2024, which will likely increase the cost of financial transactions for non-filers of income tax returns. Additionally, the bill is set to introduce enforcement measures totaling Rs 300-400 billion.
The Finance Bill 2024 is also expected to bolster the powers of the Directorate General of Digital Invoicing within the Federal Board of Revenue (FBR). This move aims to better document supply chains across major businesses, which could have significant implications for market participants.
The market’s bearish trend started earlier in the week, with the KSE-100 index losing 466 points on Monday, closing at 75,517.49. The stock market remained closed on Tuesday due to a public holiday announced by the federal government, but this did little to stem the negative momentum.
In a broader regional context, stock markets also displayed mixed performance. China’s stocks saw some gains on Wednesday as the International Monetary Fund (IMF) upgraded its economic growth forecast for the country. According to the IMF, China’s economy is set to grow by 5% this year, following a robust first quarter. This is an increase from the previous forecast of 4.6% growth. Despite this positive news from China, the overall regional sentiment was bearish, with MSCI’s Asia ex-Japan stock index down by 1.20% and Japan’s Nikkei index falling by 0.43%.
The anticipation surrounding Pakistan’s fiscal policies is significant, as the government prepares to unveil the budget for the fiscal year 2024-25. Key areas of focus include enhancing tax revenues and implementing stricter enforcement measures to improve fiscal discipline. These steps are part of a broader effort to stabilize the country’s economy amid ongoing challenges.
The Finance Bill 2024’s expected changes to tax laws are aimed at increasing financial compliance and broadening the tax base. By increasing the cost of financial transactions for non-filers and enhancing enforcement measures, the government hopes to boost revenue collection. These measures are anticipated to impact various sectors, with businesses likely to face higher compliance costs.
The enhanced powers for the Directorate General of Digital Invoicing are part of efforts to improve transparency and accountability within the business sector. By documenting supply chains more effectively, the government aims to reduce tax evasion and increase revenue from major businesses. This move is expected to have far-reaching implications for companies operating in Pakistan, as they adjust to stricter documentation and reporting requirements.
In the energy sector, the market remains cautious due to the substantial outstanding payments to IPPs. Addressing these financial obligations is crucial for restoring investor confidence and securing future investments in the sector. The government’s commitment to resolving these issues is critical for maintaining the stability and growth of Pakistan’s energy infrastructure.
Overall, the bearish sentiment at the PSX reflects investor uncertainty amid impending fiscal changes and broader economic challenges. As the government prepares to implement significant fiscal measures, market participants remain wary of potential impacts on various sectors. The upcoming budget announcement will be a key event, with investors closely monitoring for details that could influence market dynamics.
