From Zeeshan Mirza
KARACHI: Shares at the Pakistan Stock Exchange plunged on Wednesday, with analysts attributing the bearish sentiment to a “disappointing” budget as well as no progress on a Staff Level Agreement with the International Monetary Fund (IMF) as the programme deadline of June 30 inches closer.
The benchmark KSE-100 index closed at 40,220.79, down 418 points or 1.06 per cent. Salman Naqvi, head of research at Aba Ali Habib Securities, said the budget for fiscal year 2024, which was presented in the National Assembly earlier this month, proposed a host of taxes which had discouraged investors.
He referred to an “across-the-board super tax” on industry, a 10pc tax on bonus shares and a 50pc tax on “abnormal profits” as weighing down sentiment. The market was performing quite well prior to the budget, he said, adding that there was a “lack of incentives for the economy” in the budget.
Naqvi also pointed out that less than 10 days were left before Pakistan’s Extended Fund Facility (EFF) with the IMF expires (on June 30) but no agreement had been signed yet. “The IMF deal is crucial for Pakistan and there are fears of a default without it,” Naqvi said.
Because there is no word on the agreement yet, Naqvi said investors were adopting a wait-and-see approach and watching from the sidelines even though the market was offering attractive dividend yields and price-earning ratios.
Ahsan Mehanti of Arif Habib Corporation said stocks fell across the board as investors weigh Pakistan’s dollar-denominated bond yields, which have risen to 119.5pc for securities maturing in April 2024, indicating that default risk was soaring.
“Economic uncertainty, dismal data on foreign direct investment, which fell by 21pc for Jul-May 2023, and IMF bailout programme delays acted as catalysts in today’s bearish close.”
