The Pakistan Stock Exchange (PSX) continued to witness bulls’ surge on the back of encouraging statements from the International Monetary Fund (IMF) mission during its recently concluded visit. 

The benchmark KSE-100 index was trading at 96,700 points after gaining 850 points on Wednesday. 

There was enhanced buying in multiple sectors including cement, commercial banks, oil and gas exploration companies, OMCs, pharmaceuticals and power generation. 

Index-heavy stocks, including HUBCO, PSO, MARI, OGDC, PPL, MEBL and MCB also experienced financial windfall. 

This sustained bullish momentum in the market is believed to be caused by several factors which mainly includes rebuttal of news by Finance Minsiter Muhammad Aurangzeb regarding possibility of a mini-budget. 

Besides, an increase in Pakistan’s Foreign Exchange Reserves also helped elevate investors’ confidence. 

It must be remembered that the benchmark KSE-100 index closed at 95,865 points on Tuesday.

Corporate executives were taking a wait-and-see approach to President-elect Donald Trump’s vow to impose heavy tariffs on imports when he takes office in January, but many have raised concerns about the effect such levies will have on inflation.

Numerous major US corporations addressed tariffs at recent investor events and on conference calls, including some after the Nov. 5 election, when Trump edged out sitting Vice President Kamala Harris.

Walmart, the nation’s largest retailer, suggested on Tuesday after reporting results that prices could increase if tariffs rise.

“We’re concerned that significantly increased tariffs could lead to increased costs for our customers at a time when they are still feeling the remnants of inflation,” a Walmart spokesperson said.

Trump has vowed to make tariffs, which are a fraction of US tax collections, central to his economic agenda. Executives have been increasingly fielding questions on the subject, with many noting ongoing efforts to continue to diversify their supply chains, particularly away from China, Trump’s top target.

Since the beginning of September, executives from nearly 200 companies in the S&P 1500 Composite index discussed tariffs on earnings calls or at investor conferences, nearly doubling the same period in the run-up to the 2020 election, and far more than the 23 mentions in 2023, according to LSEG data.

“Roughly 40% of our cost of goods sold are sourced outside of the US, and that includes both direct imports and national brands through our vendor partners,” Lowe’s CFO Brandon Sink said on Tuesday. “And as we look at the potential impacts (of tariffs), it certainly would add to product costs.”

Trump has floated the idea of 60% tariffs on China, the world’s largest exporter, and universal tariffs of 10% or more, which he says is necessary to eliminate the US trade deficit.

Oxford Economics estimated a 60% China tariff could boost US inflation by 0.7 percentage points, and across-the-board tariffs would boost inflation by 0.3 points. Oxford believes any tariffs would be gradually introduced, but some analysts are worried about a shock effect.

“Trump 47 won’t be a mere replay of Trump 45,” said Brian Jacobsen, chief economist at Annex Wealth Management, noting that the president-elect’s proposals now were “far more expansive.”

POSSIBLE SECTOR EFFECTS

The sectors that account for the most imports to the United States include electronic products, transportation equipment, chemicals and minerals, according to the US International Trade Commission.

Taiwan, a key partner for the crucial US semiconductor industry, was a target of Trump’s rhetoric in the run-up to the election. He suggested that Taiwan should pay for US protection against the threat of China – which claims the island as its own territory – and accused it of poaching the semiconductor industry.

Any retaliation may affect US tech giants like Apple, Nvidia and Qualcomm, which count Taiwan as a vital component of their supply chain.

Tariffs could raise prices on clothing, toys, furniture, appliances, footwear, and travel goods, particularly items where China is a major supplier, according to the National Retail Federation, a US trade group of which Walmart’s US head is the chair.

“It is certainly one of the quickest things that could happen, because it could kind of happen with the stroke of a pen,” Stanley Black & Decker CFO Patrick Hallinan said at a Robert W. Baird investor conference last week. He said current tariffs are costing it about $100 million a year, which could double under Trump’s proposals.

To be sure, companies started to shift production away from China during Trump’s first term, and continued to do so following legislation passed during Joe Biden’s term designed to boost US manufacturing.

US goods imports from China peaked at $538.5 billion in 2018, according to US Census Bureau data, and were $433.3 billion over the 12 months ended in September.

Businesses may also be better prepared to deal with shifts following the COVID-19 pandemic, numerous labor strikes and disruptions to key waterways like the Panama and Suez canals, executives said.

“We’ve had so many disruptions and challenges that have forced us to make adaptions. We’re pretty well versed in managing through this,” Tapestry CFO Scott Roe said. 

The five-day negotiations between Pakistan and the IMF have concluded, with Pakistan successfully convincing the IMF of the provincial budget surplus.

On the final day, the IMF mission held discussions with the federal finance minister, provincial governments, and the FBR.

Pakistan achieved partial success on agricultural tax, and the government assured the IMF of securing external financing. The IMF emphasised meeting annual tax targets and implementing agricultural income tax measures.

The IMF mission is expected to return to Pakistan for the first economic review under the loan program in February or March.

In addition, Finance Minister Muhammad Aurangzeb met the IMF delegation for a farewell discussion, reaffirming Pakistan’s commitment to strict adherence to the loan programme. The government also committed to reforms in the tax and energy sectors, alongside addressing external financing gaps.

The IMF team raised detailed questions with provincial representatives, reviewed property prices in various cities, and expressed approval of a Rs3,000 increase in BISP stipends starting January 2025. They stressed the need for faster legislation on agricultural income tax and super tax, similar to Punjab’s efforts.

Sources revealed that Pakistan has the potential to generate Rs2,300 billion in tax revenue from agriculture and livestock, but collection remains minimal. The Finance Ministry presented revised figures, showing a surplus of Rs360 billion in provincial budgets, exceeding the IMF target of Rs342 billion for the first quarter.

The FBR chairman and members briefed the IMF mission on the strategy to meet the annual tax target of Rs12.97 trillion and formalise the economy, including a plan to monitor factory production through a software tool called “Digital Eye.”

The IMF mission is expected to visit Pakistan for the first economic review under the $7 billion loan programme in early 2025.