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| June 8, 2005 | Wednesday | Rabi-us-Sani 30, 1426 |
Stocks recover 286.78 points on budgetary incentives
KARACHI, June 7: Stocks on Tuesday gave a spontaneous positive reaction to the federal budget as it maintained a status quo on the Capital Value Tax (CVT) issue and gave a number of tax relieves to the banking sector and exempted insurance companies from capital gains tax.
The KSE 100-share index recovered 286.78 points or 4.04 per cent at 7,391.18, and added Rs77 billion to the market capital at Rs.2,061.166 billion.
The market is expected to rise further as the current lower levels on most of the blue chip counters could attract a lot of covering purchases if there is no mini budget and changes in some of the corporate-friendly relieves, brokers predict.
But some analysts said one must not go by the initial market reaction and wait for more details on the fiscal front and their likely impact on the share business. There could be still many a slips between the lip and the cup.
“The worried investors were literally buoyed after reports that the budget is silent on the widely rumoured issue of raise in CVT in the pre-budget sessions,” analysts said. “Any increase including widely rumoured 0.02 per cent from the current 0.01 per cent should have pushed the market into the minus column sans some fiscal relieves.”
The new budget is billed as export-oriented and investment-friendly as it has given a number of fiscal relieves and duty cuts to boost exports and production.
“The chief beneficiary of the fiscal relieves is the textile sector, which along with leather and carpets will have the benefit of zero-duty, which means withdrawal of sales tax and no duty drawbacks,” analysts said.
The long-standing demand of the KSE for the capital gains tax exemption for the insurance sector was met in the new budget, which could well mean large fresh inflow of funds from insurance companies into the share business.
Although the budget did not offer any direct relief to the bourses, sympathetic positive impact from the corporate sector owing to tax relieves will have a positive impact on its future performance.
Unlike the previous sessions, textile and oil shares led the market advance, relegating the hereto trend setters into the secondary position, followed by fertilizer and cement shares, which were the direct beneficiaries of the new budget, brokers said.
“Some of the basic market fundamentals are expected to undergo a major change after the new budgetary measures are operative from July 1,” says a leading analyst “but much will depend how the recipients implement them.”
Plus signs were strewn all over the list leading oil shares, PTCL and some textile scrips being in the forefront of gainers under the lead of Attock Refinery, Attock Petroleum, Pakistan Refinery, Shell Pakistan, PSO, PPL and Pakistan Oilfields, and Mari Gas, higher by Rs6.55 to Rs10, largest rise of Rs16.05 being in the PSO.
Other leading gainers were led by Shafiq Textiles, higher by Rs97.80 owing to shortage of floating stock as was reflected by nil business followed by Arif Habib Securities, Javed Omer, Artistic Denim, Gatron Industries, Engro Chemical, Fauji Fertilizer, OGDC and Ferozson Lab, higher by Rs5 to Rs11.85.
Barring Babri Cotton, Salfi Cotton, Glaxo-SKF, BOC Pakistan, Sitara Chemicals and HinoPak Motors, which suffered fall ranging from Rs2.25 to Rs5, losses on the other hand were fractional.
Trading volume rose to 304m shares from the previous 230m shares as gainers forced a strong lead over the losers at 280 to 54, with 25 shares holding on to the last levels.
The most active list was topped by PTCL, higher by Rs3 at Rs67.10 on 108m shares despite reports of threat by the workers union to go again on strike if the agreement was not announced, followed by OGDC, up Rs5 at Rs105.95 on 58m shares, National Bank, higher by Rs4.80 at Rs101.05 on 25m shares, D.G.Khan Cement, firm by Rs2.70 at Rs58.40 on 22m shares, Sui Northern Gas, up Rs2.15 at Rs66.65 on 10m shares, PSO, higher by Rs16.05 at Rs372.05 also on 10m shares and Pakistan Petroleum, higher by Rs10.30 at Rs200.30 on 9m shares.
Other actives were led by Pak PTA, firm by 95 paisa on 6m shares, Pakistan Oilfields, higher Rs12.75 also on 6m shares and Nishat Mills, up Rs3.80 on 5m shares.
FORWARD COUNTER: Speculative issues on the forward counter also came in for strong covering purchases and recovered from the previous lows amid active trading. PTCL again led the list of actives, up Rs2.95 at Rs67.60 on 11m shares followed by Pakistan Petroleum, higher by Rs9.50 at Rs202.10 on 8m shares and PSO, up Rs14.80 at Rs374.10 on 7m shares.
Other actives were led by OGDC, up Rs4.95 at Rs104.90 on 6m shares and Sui Northern Gas, higher by Rs2.65 at Rs66.90 on 3m shares. Other also recovered under the lead of fertilizers shares.
DEFAULTER COS: Some of the textile shares came in for active support on this counter followed by reports of incentives for the textile sector in the budget and rose by one rupee for Ashfaq Textiles, Service Fabrics, and Ahmed Spinning, up by 50 paisa to one rupee, Dewan Auto and Crescent Board followed them, higher by the same amount.
Dawood Fibre fell by one rupee, while some others showed fractional fall amid light trading.
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