PSX settles above record high of 94,100 as mini-budget fears ease

• IMF remarks raise likelihood of Pakistan completing $7bn deal.
• Analyst says blue chips led rally on strong earnings outlook.
• Says rupee stability, falling SBP rates spurred bull-run.

Stocks on Thursday hit a new lifetime high above the 94,100-point mark amid strong expectations of a soft landing for the economy, following reports that the International Monetary Fund (IMF) is unlikely to push Pakistan to introduce a mini-budget.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Index surged by 836.47 points or 0.9%, reaching a record high of 94,191.89 points, after touching an intraday high of 94,289.97 points. 

Khurram Schehzad, CEO of Alpha Beta Core, suggests that investor optimism is being driven by the IMF team’s ongoing smooth review, pushing the market into uncharted territory. 

Schehzad notes that this raises the likelihood of Pakistan successfully completing the $7 billion Extended Fund Facility (EFF) programme.

The IMF mission, which arrived in Islamabad on November 11, after meetings with Pakistani authorities, has reportedly given a thumbs-up to an increase in the tax-to-GDP ratio by nearly 1.5 percentage points — a significant achievement by the Federal Bureau of Revenue (FBR).

This improvement means there’s no immediate need for additional tax measures through a supplementary finance bill.

It must be noted that the IMF had previously set a target for Pakistan to boost its tax revenues by 1.5% of GDP in the fiscal year 2024-25, targeting a total increase of 3% throughout the 37-month programme.

Last week, The News reported that an IMF delegation would hold talks with Pakistan next week following major "deviations" on performance targets and might urge Islamabad to bring out a mini-budget for "course correction". The unscheduled visit and talks are too early for the first IMF review  — due in the first quarter of 2025.

Commenting on the rally, Ahsan Mehanti Managing Director & CEO at Arif Habib Commodities, said stocks hit a new all-time high led by blue chip scrips on strong earnings' outlook down the line.

"Rupee stability, receding fears over mini-budget and falling bank lending rates spurred a strong bull-run at the country's capital market," Mehanti added.

It was a blue-chip-buying fest today as sectors, such as commercial banks, oil and gas exploration, oil marketing companies, and power generation, stole the show. 

Major support came from heavyweights, including MCB Bank, Meezan Bank Limited, National Bank of Pakistan, Hub Power Company, Mari Petroleum Company, Oil & Gas Development Company, Pakistan Petroleum Ltd, and Sui Northern Gas Pipelines Limited.

Topline Securities credited the uptrend to growing economic optimism after positive IMF remarks mitigated the frets over potential new taxation measures.

"Investor interest surged in the banking sector following news that Pakistani banks secured temporary relief from the Islamabad High Court against a government tax linked to shortfalls in private sector lending," the brokerage said in a note.

It added that this relief would remain in effect until a final decision was reached, with hearings scheduled to commence on December 3, 2024.