After weeks of flirting with the 14,000 point psychological barrier, the benchmark KSE-100 index finally managed to break through following the signing of the much-awaited Capital Gains Tax Ordinance by the President.
The index inched up 106 points (0.8%) to close at 14,042 points on Friday. The index crossed the 14,000 points level on the opening day of the week, and managed to stay above it for the remaining four sessions; consolidating at levels last seen almost 4 years ago.
The market’s gains were also attributable to a flurry of good corporate results and the continued inflow of foreign funds. However, investors did approach the market cautiously due to prevailing political tensions in the country, resulting in moderated growth.
President Asif Ali Zardari officially signed off an ordinance pertaining to the revised Capital Gains Tax regime during the week, following its approval by the law ministry. The news provided the market with confirmation that the revised regime will indeed go into effect.
Announcement of the proposed regime at the start of the year had breathed new life into the market. The decision has resulted in a rally in which the KSE-100 index has since climbed more than 22%. The ordinance will now be tabled before the National Assembly on May 25, for final endorsement.
The week also saw result announcements from several heavyweights from the oil and gas, banking, cement and fertiliser sectors; which contributed to the market’s gains. The Oil and Gas Development Company and Pakistan Petroleum Limited reported earnings growth of 41% and 33% respectively for the nine month period ended March 31.
The banking sector also posted healthy earnings overall, with United Bank Limited leading the way with earnings growth of 49% during the first quarter of 2012. Lucky Cement, the largest cement manufacturer of the country, reported 89% earnings growth for the nine month period.
Foreigners continued to accumulate equity in the market, as net foreign inflows were recorded at $12.8 million during the week, up from $8.1 million in the previous week.
However, positives of the week were dampened by political unrest, as the Supreme Court convicted the Prime Minister, albeit symbolically, in the contempt-of-court case. The announcement led to protests by pro-government parties, while the opposition demanded the Prime Minister resign from his post. As a result, the market receded slightly in the final two sessions of the week.
Volumes dropped by 4.4% to 256 million shares traded per day. Average daily value increased by 11.4% and stood at Rs7.23 billion traded per day, as investors turned towards blue-chip stocks. The market capitalisation of the KSE increased 0.5% to Rs3.59 trillion by the end of the week.
Monday, April 23
The day saw the index close above the 14,000 point barrier for the first time since May 16, 2008.
Tuesday, April 24
The stock market closed in the black, albeit with clipped gains. Much positivity was generated by rumours that the long-awaited Capital Gains Tax amnesty has been cleared by the law ministry.
Wednesday, April 25
Investors breathed easier after reports that the long-awaited capital gains tax ordinance was finally signed by President Asif Ali Zardari; giving some certainty to investors over the issue. The bill is due to be tabled before the National Assembly on May 25.
Thursday, April 26
The stock market remained jittery following the conviction of Prime Minister Yousaf Raza Gilani in the contempt of court proceedings. Investors rushed to book profits at inflated levels.
Friday, April 27
Activity in the stock market was range-bound as investors remained cautious following Prime Minister’s conviction and its uncertain political fallout.
Published in The Express Tribune, April 29th, 2012.