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| June 18, 2007 | Monday | Jumadi-us-Sani 02, 1428 |
Post-budget KSE rally sustained
DESPITE stray profit selling at the fag end of the previous week by some leading foreign investors in bank shares, the post-budget rally was well sustained on the share market on active follow-up support.
Although some of the foreign investors took profits on the bank and oil sectors, local weekend selling in cement and some other current actives contributed to slow down.
The KSE 100-share index is steadily inching to its next target of 14,000 points level, and if the post-budget assumptions in the backdrop of a number of tax relief and incentives are correct then the target is not elusive.
After having hit the intra-week high of 13,613.26 points, the target is half way and if all goes well with the foreign investors’ share business perceptions one could look the index well above this level.
The week finally ended 163.6 points up at 13,438.47 compared to 13,274.87 points a week earlier as leading base shares were quoted higher under the lead of MCB, National Bank, OGDC, and some others. The total market capital also swelled to Rs3,898bn, up Rs41bn from the previous close.
But, on the other hand, the KSE 30-share index remained under pressure owing to weakness of massively capitalised shares, notably OGDC and fell by 19.15 points at 16,752.65.
The significant feature of last week’s trading was that investors both local and foreign ignored the external negative factors, including political tension, and generally meant business, analysts said.
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Cement, oil, automobile and bank shares ran into profit-selling at highly inflated levels owing to early price flare-up, but investors did not leave the market.
Leading among them opted for low-priced issues having potential for capital gains, especially in the cement sector, notably Pakistan Cement, Maple Leaf Cement and TRG Pakistan, never allowing the market to fall below the current levels.
The initial investor reaction in the post-budget trading was encouraging as some of the listed sectors, which are the main beneficiaries of tax exemptions, incentives and duty adjustments, performed credibly well under the lead of cement and fertiliser shares.
The market’s early upward drive reflected the general perception that maintaining of status quo in a new budget for the corporate sector and capital markets is also an incentive viewed in the wider market parlance, analyst Hasnain Asghar Ali said.
The sectors, which are to get instant benefit from fresh incentives, mainly cement on the increase of Rs110 billion in the PSDP, fertiliser on subsidy followed by textiles, auto and oil marketing companies on similar concessions, performed well on active short-covering.
“I think the market will hum with activity after the impact of fiscal measures on the capital market is fully digested”, said a leading analyst. “The initial investor reluctance is expected to fade out during the next couple of sessions”, he added.
Tax exemption on capital gains tax for another year, withdrawal of tax on CFS income on mutual funds, tax relief on group companies, withdrawal of CVT on imported vehicles and custom duty adjustments for this sector will go a long way in boosting stock trading, analysts said.
“The budget, in addition to some incentives for the selected sectors, mostly maintained a status quo which was not favoured by a section of investors, and hence the negative reaction”, analysts said.
Forward counter: Speculative issues on other hand turned mixed on late selling and ended fractionally lower for OGDC, Bank of Punjab, and Fauji Fertiliser Bin Qasim and some others, while Lucky Cement, D. G. Khan Cement, National Bank, MCB and United Bank tended higher on active foreign buying. — Muhammad Aslam
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