The stock market showed glimpses of its lost glory days following the government’s decision to relax capital gains tax over the weekend as average volumes surged to triple figures after more than a year.
The benchmark KSE-100 index climbed by 1.6 per cent or 186 points during the week ended January 27.
Positive sentiments prevailed throughout the week after the finance minister approved the Securities and Exchange Commission of Pakistan’s proposal to churn up activity levels at the bourse during a visit to the Karachi Stock Exchange over the weekend. The purpose of the scheme is to attract new investment to the stock market, which has seen activity decline gradually since 2009.
The index, which had posted a remarkable 6.9 per cent gain in the previous week, reacted positively to the measures as volumes hit 230 million shares traded on the opening session of the week against previous week’s average of 89 million shares.
The finance minister during the visit announced that withholding tax on stock market transactions was being abolished and capital gains tax rate would not be changed till 2014. However, the biggest announcement was that CGT collection would now be managed by the National Clearing Company of Pakistan Limited (NCCPL).
The announcement meant that investors will no longer have to personally file their tax returns and as a result will not be required to reveal their sources of income. These measures will come into effect from April. Investors immediately showed their appreciation by participating heavily in the market from the opening day.
The other major event of the week was the beginning of the earnings season. Pakistan Petroleum Limited and Fauji Fertiizer Bin Qasim were several of the blue chips which announced their earnings for the period.
Foreigners too got onto the bandwagon, and finally turned net buyers, purchasing equity worth $7.6 million during the week. Overall, volumes jumped by 67% and stood at an average of 145 million shares traded per day.
The fertiliser and cement sectors were the biggest gainers of the week. Engro Corporation and Fauji Fertilizer both climbed by 11.2 and 7.8%, respectively, on expectations of good results. A similar trend was witnessed in the cement sector, where DG Khan Cement and Lucky Cement both climbed 9 and 6, respectively. Exporters during the week increased cement prices by 25% to $50 per ton for Afghanistan, a destination for almost 50% of total exports.
With volumes up by 67%, average daily value also rose 48% and stood at Rs5.46 billion traded per day, finally approaching levels witnessed before the CGT era.
Monday, January 23
The stock market opened the week with a bang as activity surged to levels not seen in the past year on the back of government’s approval to ease tax regulations over the weekend.
Tuesday, January 24
The stock market witnessed a volatile session as investors were active buyers and sellers throughout the day. After rallying by 520 points in the last two days, market took some correction as investors preferred to book profits.
Wednesday, January 25
The stock market failed to cross the 12,000-point psychological barrier as equities struggled to continue the upward trend amid profit taking by investors.
Thursday, January 26
The stock market witnessed another day of profit taking as investors opted to book profits. Trade volumes fell to the usual dismal double figures 95.5 million shares compared with Wednesday’s tally of 125 million shares.
Friday, January 27
The stock market rose on the final trading session as investors opted to buy selective stocks in light of the corporate season. The bourse was predominantly supported by index giant OGDC closing up 2.7%.
Published in The Express Tribune, January 29th, 2012.
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