The PSX reflects mixed sentiment as investors weigh tax concerns

The stock market opened cautiously on Friday as investors balanced optimism about easing inflation and improving macroeconomic indicators against concerns about widening trade deficits and tax collection shortfalls.

The market showed a mixed trend, reflecting fluctuations in investor sentiment in early trading.

The benchmark Pakistan Stock Exchange (PSX) KSE-100 hit an intraday high of 117,891.62 and an intraday low of 115,580.01 before closing at 117,586.98, up 467.33 points or 0.4% from previous meeting.

Prime Minister Shehbaz Sharif, chairing the 11th meeting of the Special Investment Facilitation Council (SIFC) Summit Committee on Thursday, highlighted the improvement in Pakistan’s macroeconomic indicators. He attributed the progress to the government’s consistent efforts and stressed that economic stability is deeply linked to political stability.

“For the first time since 2018, inflation fell to 4.1%, remittances from abroad increased by 34%, exports increased and foreign exchange reserves increased from $4 billion to $12.5 billion,” he said. The prime minister also noted that the policy rate of 13% offers room for further reduction given the downward trend in inflation.

Prime Minister Shehbaz further emphasized the importance of export-led development and highlighted that billion dollar memoranda of understanding (MoUs) have been signed with Saudi Arabia, Qatar and the United Arab Emirates (UAE) to attract foreign investment. He reiterated the need for national unity to ensure sustainable economic growth and stability.

However, financial challenges remain. The Federal Board of Revenue (FBR) has reported a significant tax shortfall of Rs 386 billion. Rs in the first half of FY2024-25.

The total revenue collection amounts to 5.623 billion. Rs, short of the International Monetary Fund’s (IMF) indicative target of Rs 6.009 billion. Rs.

Adding to the challenges, Pakistan’s trade deficit widened to $2.44 billion in December 2024, up 35 percent year-on-year and the highest level since April.

Exports rose marginally by 0.67% year-on-year to 2.84 billion. dollars, while imports increased by 14% to 5.285 billion. dollars, marking a 47% month-on-month increase in the trade deficit compared to November.

Despite these concerns, inflation trends provided some relief. Consumer Price Index (CPI) inflation for December eased to 4.1% year-on-year, the lowest in six and a half years, compared to 4.9% in November and 29.7% in December 2023. This gave hopes for further monetary easing in the near term.

On Thursday, January 2, 2025, the KSE-100 closed at 117,119.65 points, up a modest 111.57 points or 0.1% from the previous session.