PSX dips as weak corporate earnings, policy woes dampen sentiment

• Market dips 543 points, or -0.48%, closing at 111,487.36.
• Intraday high at 112,569.89, but selling pressure prevails.
• KSE-100 Index touches a low of 111,157.18 points.

Stocks slipped on Wednesday as disappointing corporate earnings and persistent economic uncertainties prompted high-strung investors to offload positions, with the index swinging wildly in volatile trade.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index hit an intraday high of 112,569.89 but failed to sustain the rally, closing at 111,487.36, down 543.00 points, or 0.48%.

At its lowest point, the index touched 111,157.18, reflecting a decline of 873.18 points, or 0.78%, from the previous session’s close of 112,030.36.

Arif Habib Limited’s Head of Research, Sana Tawfik, noted that lacklustre earnings weighed on sentiment.

"Corporate financial results falling short of expectations, coupled with the impact of rollover week, dragged the index down," Tawfik said, explaining that futures contract adjustments were weighing on market activity.

Finance Minister Muhammad Aurangzeb reaffirmed the government's commitment to fulfilling the conditions of the $7 billion International Monetary Fund (IMF) programme. Speaking at the Dialogue on the Economy event in Islamabad, he said: "We are in a three-year Fund programme and know where we are, what we have committed and we are going to stay firm on those commitments."

Meanwhile, the State Bank of Pakistan (SBP) Governor Jameel Ahmad highlighted that cooling inflation provided "ample room" for further monetary easing. In an interview with Bloomberg TV, Ahmad noted that both headline and core inflation were trending downward, allowing the central bank flexibility to cut interest rates further after reducing the policy rate to 12% on Monday.

Pakistan’s inflation, which peaked at 38% in May 2023, has now recorded a single-digit increase in recent months. Analysts anticipate further easing, reinforcing expectations of additional rate cuts in the coming months.

The Federal Board of Revenue (FBR) disclosed alarming data about Pakistan’s narrow tax base. Out of 5.9 million tax returns filed, an astonishing 43.3% declared zero taxable income. Furthermore, only 3,651 individuals reported earning over Rs100 million annually.

FBR Chairman Rashid Mehmood Langrial recently testified before a National Assembly panel that only 12 people declared wealth exceeding Rs10 billion. The figures suggest either widespread tax evasion or a lack of ultra-high-net-worth individuals in the country.

A report by Topline Securities projected that Pakistan’s central bank foreign exchange reserves could rise to $13.5-14.5 billion by the end of the fiscal year, exceeding the $13 billion target set under the IMF programme. This projection is based on Pakistan’s low external financing requirements and improved current account performance.

An IMF team is set to visit Pakistan in March for the next programme review, assessing the country’s economic progress and policy adjustments.