The Pakistan Stock Exchange (PSX) faced another tough session on Wednesday as the KSE-100 Index plummeted by 1,598.82 points, or 1.39%. The index closed at 113,443.43, reflecting weak investor confidence due to economic uncertainty and regulatory concerns.
During the session, the index reached an intraday high of 115,256.16 before falling to a low of 113,359.37. Analysts attributed the decline to the Tax Laws Amendment Bill 2024, rupee instability, and weak global crude oil prices.
Tax Reforms and Rupee Instability Weigh on Investors
The Tax Laws Amendment Bill 2024 has limited non-filers’ ability to purchase stocks beyond certain limits. This restriction dampened market sentiment and added to concerns about the government’s regulatory stance. Ahsan Mehanti, CEO of Arif Habib Commodities, noted that these regulatory changes, combined with political and economic uncertainty, triggered bearish activity.
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The rupee’s instability and ongoing uncertainty over government-PTI negotiations further eroded investor confidence. Weak global oil prices added pressure, impacting energy sector stocks.
Meanwhile, the government informed the National Assembly about plans to expand the tax base and tackle the undocumented economy. Minister of State for Finance Ali Pervaiz Malik said the reforms aim to increase tax compliance and streamline the Federal Board of Revenue (FBR). Prime Minister Shehbaz Sharif has approved a transformation plan for the FBR, signaling a major policy shift.
Foreign Investors Withdraw Amid Declining Yields
Foreign investors continued to pull funds from Pakistan’s Treasury bills (T-bills). Net outflows totaled $38.5 million in the first 10 days of January. While inflows reached $51.978 million, withdrawals amounted to $90.51 million.
The State Bank of Pakistan (SBP) recently reduced the policy rate by 200 basis points to 13%, its fifth consecutive cut in 2024. Total rate cuts for the year now stand at 900 basis points, leading to lower T-bill yields. This has reduced the appeal of Pakistan’s bonds for foreign investors, further pressuring the economy.
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Tuesday’s session also saw significant pressure, with the KSE-100 Index losing 803 points to close at 115,042.25. While the index managed to hold the critical 115,000-point level, Wednesday’s decline has added to investor concerns.
Market sentiment remains sensitive to macroeconomic developments, especially as the International Monetary Fund (IMF) mission prepares to visit Islamabad next month. Analysts predict that investor focus will stay on the government’s compliance with the Extended Fund Facility programme.
The combination of tax reforms, rupee instability, and declining foreign investments is keeping investors on edge. The PSX’s performance reflects growing concerns over the economy’s stability and the impact of regulatory measures.
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