PSX stages its fourth largest one-day surge on IMF bailout bets

The Pakistan Stock Exchange (PSX) extended its post-budget rally, reaching yet another record high on Thursday,  mainly fueled by Fitch Ratings' optimism for Pakistan's likelihood of securing a bailout deal from the International Monetary Fund (IMF).

The market reopened on Thursday after remaining closed for three days this week (June 17-19, 2024) owing to Eid ul Adha.

PSX's benchmark KSE-100 shares index gained 2094.76 points or 2.73% to trade at 78,801.53 points, up from the previous close of 76,706.77 points — the fourth-largest single-day increase in KSE-100 history.

Mohammed Sohail, CEO of Topline Securities, in a note, credited positive sentiments to hopes that the new budget would help Pakistan strike a deal with the IMF for a longer and larger bailout. He said in the last one year, the market had gained over 95% in rupee terms, and 100% in dollar terms.

Saad Ali, Intermarket Securities Director of Research, told Geo.tv that renewed optimism for another IMF deal following a budget that was in agreement with the financial institution's recommendations and hike in base power tariff before the Eid holidays fueled the rally.

"Fitch Ratings thinks that the Budget is good enough for an IMF programme. Also, [the] market [is] taking positively PM's plan to reduce power tariff for industries," Ali added.

The federal government has set a challenging tax revenue target of Rs13 trillion for FY25, a near-40% jump from the current year, and a sharp drop in its fiscal deficit to 5.9% of GDP from 7.4% for the current year.

Pakistan had to reduce its fiscal deficit as part of negotiations with the IMF, with which it is discussing a loan of $6-8 billion, as it seeks to avert a debt default for an economy growing at the slowest pace in the region.

In a statement a day earlier, Fitch Ratings said Pakistan's ambitious FY25 budget strengthens prospects for an IMF deal. "We believe a new IMF deal will be agreed, underpinning other external funding."

Arif Habib Limited (AHL) Head of Research Tahir Abbas also said that there had been no major changes in the budget for the stock market, while the budgetary framework was in line with the IMF recommendations and expectations of signing a new and bigger programme [were high].

Also, he added, a downward inflation trajectory and the likelihood of a further rate cut were keeping the market sentiment positive.

Samiullah Tariq, the head of research at Pak-Kuwait Investment Company, said the market was bullish as there were expectations of major inflows from retail investors.

"In my view, market is increasing as there is anticipation of major inflow from retail investors in the market as alternate investment avenues like real estate have been heavily taxed on the budget," he said.