The stock market faced continued selling pressure on Wednesday, extending its decline, weighed down by intensifying regulatory concerns, persistent economic uncertainty, and subdued global trends.
Investor confidence was shaken by the Tax Laws Amendment Bill 2024, which restricts non-filers from stock purchases, exacerbating market anxiety.
Adding to the bearish sentiment were the rupee’s volatility, stalled government-PTI negotiations, and slumping global crude oil prices, collectively creating a challenging environment for market participants.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index closed with a steep decline of 1,598.82 points, or -1.39%, settling at 113,443.43.
The session saw the index slide to a low of 113,359.37 after reaching an intraday high of 115,256.16, reflecting persistent selling pressure and weak investor sentiment.
“Stocks remained bearish amid worries over the Tax Laws Amendment Bill 2024 prohibiting non-filers from making stock purchases beyond limits,” said Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities.
“Rupee instability, uncertainty over government-PTI negotiations, and weak global crude oil prices played a catalyst role in bearish activity,” he added.
Adding to investor concerns, the National Assembly was informed on Monday about the government’s plan to tackle the undocumented economy, expand the tax base, and reduce reliance on regressive taxation.
Minister of State for Finance Ali Pervaiz Malik highlighted that reforms in the tax system were a major priority, with Prime Minister Shehbaz Sharif having approved a transformation plan for the Federal Board of Revenue (FBR).
The transformation plan, aimed at increasing tax compliance, comes amid challenges in achieving revenue targets. This policy shift seeks to streamline tax collection mechanisms and address structural inefficiencies in the tax system.
Foreign investments in Treasury bills (T-bills) saw a net outflow of $38.5 million in the first 10 days of January. While inflows reached $51.978 million, withdrawals amounted to $90.51 million, reflecting waning interest among foreign investors due to declining returns.
The State Bank of Pakistan’s (SBP) decision to reduce the policy rate by 200 basis points (bps) to 13% last month, marking the fifth consecutive rate cut in 2024, has reduced T-bill yields. Total rate cuts for 2024 stand at 900bps, contributing to diminished appeal for foreign investors in Pakistan’s bonds.
On Tuesday, the PSX experienced pressure during the earnings season, with the KSE-100 Index shedding 803 points to close at 115,042.25. Despite the decline, the index maintained the critical 115,000-point threshold.
The stock market remains sensitive to macroeconomic developments and investor sentiment around political and fiscal stability.
As the IMF mission prepares to visit Islamabad next month, investor focus will remain on the government’s compliance with the Extended Fund Facility programme.
