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| June 13, 2005 | Monday | Jumadi-ul-Awwal 5, 1426 |
New fiscal policies yet to impact share business volume
After moving either-way under a cross-current of negative and positive news, the stocks in Karachi managed to finish higher last week. The post-budget rally is yet to manifest itself in a big way as is warranted by the fiscal incentives.
Trading seems to have been politicized as moves from some vested interest follow each rise and in most cases halts, pushing the market into the reverse gear in a go.
The new investment-friendly budget, though widely welcomed by the trade and industry and bourses, failed in generating the widely speculated post-budget buying euphoria due to a number of rumours, including the Prime Minister’s resignation.
Despite official denial of the PM’s rumour, loud whispering is making rounds in the corridors signalling that all may not be well in the elites’ club.
The future market direction is expected to be guided by the sell-off of the PTCL and its bidding date. Conflicting reports about the resumption of strike by its workers after a deadlock in talks tells of an elusive goal.
The government, on the other hand, has announced a package of Rs3.5 billion providing incentives to the employees under various heads, signals of a deal being signed with the PTCL union. The situation still is unclear, although its share value stands firm above the previous lows.
The stock market appears to have been terribly politicised, said an analyst adding, the contenders of power on the other side of the political divide coin one negative rumour if there is none to outwit the ruling elite.
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Yet, it is bound to respond positive in the coming weeks as has been demonstrated by the investors’ sixth sense to judge between the two, he added.
The worst-hit by these unfounded rumours are small investors who lost Rs12 billion in March and returned to the market on hopes of positive fiscal measures. Political battles, he added, should not be fought in the trading hall but at proper forums.
Earlier, the stocks gave spontaneous positive response to the new fiscal document as it has maintained a status quo on the Capital Value Tax (CVT) giving tax relief to textile, fertilizer, cement and banking sectors and capital gains exemption to insurance companies.
The KSE 100-share index recovered 132.12 points or 2.5 per cent at 7,345.29 to close near the week’s best bid adding Rs33 billion to the capital at Rs2,047 billion.
The market is expected to rise further as current lower levels on most of the blue chip counters could attract a lot of covering purchases if there is no mini budget or changes in relief, brokers predicted.
The investors are buoyed on reports that the budget is silent on the CVT issue — widely rumoured in the pre-budget sessions, analysts said. Any increase would have pushed the market into minus column sans the fiscal relief.
The new budget is billed as an export-oriented and investment-friendly as it has given fiscal assistance and tax cuts to boost export and production.
The chief beneficiary is the textile sector which along with the leather and carpets will have the benefits of zero-duty meaning withdrawal of the sales tax without duty drawbacks, analysts said.
The long standing demand of the KSE for the capital gain tax exemption to insurance sector has been met now which could mean flow of funds from the insurance into shares.
Though, the budget does not offer direct relief to the bourses but the impact of corporate sector will have a positive bearing on its future performance.
Unlike in previous sessions, textile shares led the market advance, relegating the leading oil shares, followed by the fertilizer and cement, who now are direct beneficiaries of the new document, brokers said.
Some market fundamentals are expected to undergo major change once new measures become operative from July 1, said a leading analyst. Much will depend on how the recipients implement these.
Plus signs are strewn all over the list leading the oil shares, the PTCL and some textile scrips being in the forefront of gainers under the lead of Attock Refinery, Attock Petroleum, Pakistan Refinery, Shell Pakistan, the PSO, the PPL, Pakistan Oilfields, and Mari Gas. Leading oil shares fell and rose in response to external news.
Other gainers are led by the Shafiq Textiles higher by Rs97.80 owing to the shortage of floating stock as is reflected by the nil business followed by the Arif Habib Securities, Javed Omer, the Artistic Denim, the Gatron Industries, the Engro Chemical, the Fauji Fertiliser, the OGDC and the Ferozson Lab.
Barring the Parke-Davis, Babri Cotton, Salfi Cotton, Glaxo-SKF, the BOC Pakisan, Sitara Chemicals and HinoPak Motors which suffered sharp losses, others fell, fractionally.
FORWARD COUNTER: With the exception of Pakistan Petroleum which suffered a sharp fall at inflated level, all speculative shares finished with good gains under the lead of the PTCL, the PSO, the OGDC, Fauji Feritliser Bin Qasim and others. The UBL also rose from the mid-week lows followed by reports of higher pulic participation in its recently floated shares. It ended around Rs62.—Muhammad Aslam.
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