Weekly review: KSE-100 closes flat as volumes drop to 36-week low
Investors remain on the sidelines before monetary policy and budget announcements.
KARACHI:
Activity at the country’s stock markets continued to move at a snail’s pace as volumes dropped to a 36-week low of 45 million shares traded per day. The benchmark KSE-100 index closed the week flat, climbing 0.05 per cent (6 points) during the week ended May 20.
Although the monetary policy is unlikely to cause ripples in the market, details about the budget remain scant and investors fear an across the board increase in taxation which has kept them on the sidelines in recent weeks.
The government is expected to set a revenue target of Rs1.95 trillion in the upcoming budget, an increase of more than Rs300 billion over the previous year’s target. The government intends to cover for this increase by implementing the Reformed General Sales Tax (RGST) and by increasing corporate taxation rates to 40 per cent from 30 per cent, amongst other measures.
Foreign inflows also continued their downtrend and declined a further 64 per cent in a follow-up to the 70 per cent decline in the previous week and stood at a negligible $2.2 million net inflow for the week.
Sector-wise data was also negative as Sui Northern Gas Pipelines (SNGPL) cut the supply of gas to the new fertiliser plant of Engro Corporation. Furthermore, rumours circulated in the market that the government will remove the 7.5 per cent deemed duty on refineries and will levy a 10 per cent duty on the gas sector, which put investors on the back foot.
Macro data was also mixed as the 10-month current account posted a surplus of $748 million, while Foreign Direct Investment for the same period fell by 29 per cent to $1.23 billion and the foreign exchange reserves of the country fell below the $17 billion mark during the week.
Volumes declined 33 per cent and stood at 45 million shares traded per day, while average daily value also declined 37.5 per cent and stood at Rs1.45 billion per day.
What to expect?
The monetary policy announcement is unlikely to affect market proceeds in the coming week as status quo is likely to be maintained. Nonetheless, the dull trend in the market can be expected to spill over into the coming week and last until the budget is announced, after which the direction of the market is anybody’s guess.
A tough budget is expected; hence concessions in certain areas will be looked upon positively, while it could easily be the other way around if the government announces unexpected taxation measures which will hurt sentiments in the market.
Monday, May 16
Investors preferred to sell shares at the Karachi Stock Exchange on the first trading session of the week ahead of crucial talks between US Senator John Kerry and government officials. Moreover, the killing of a Saudi diplomat in Karachi also forced investors to stay cautious.
Tuesday, May 17
The stock market bounced back inline with expectations on the back of positive statements given by Senator John Kerry on Pakistan-US ties. This assurance came at a crucial time and helped alleviate any fear of international aid block after Osama bin Laden’s murder, said Elixir Securities equity dealer Sara Shahid.
Wednesday, May 18
Volumes hit an eight-month low at the Karachi Stock Exchange as the bourse spent most of the day along the neutral line. The market failed to generate any concrete direction as all eyes were on the monetary policy and federal budget announcement.
Thursday, May 19
The stock market witnessed another dull session with the index trading in a narrow range of 40 points ahead of the monetary policy and the annual budget. This is a cyclical trend as investors hold their investment decisions ahead of the annual budget, analyst said.
Friday, May 20
The stock market gained on the final trading session of the week as investors bought stocks on expectations of a status quo in the monetary policy. Market rumours that small investors will be exempt from capital gains tax also supported the upward trend.
Published in The Express Tribune, May 22nd, 2011.
Activity at the country’s stock markets continued to move at a snail’s pace as volumes dropped to a 36-week low of 45 million shares traded per day. The benchmark KSE-100 index closed the week flat, climbing 0.05 per cent (6 points) during the week ended May 20.
Although the monetary policy is unlikely to cause ripples in the market, details about the budget remain scant and investors fear an across the board increase in taxation which has kept them on the sidelines in recent weeks.
The government is expected to set a revenue target of Rs1.95 trillion in the upcoming budget, an increase of more than Rs300 billion over the previous year’s target. The government intends to cover for this increase by implementing the Reformed General Sales Tax (RGST) and by increasing corporate taxation rates to 40 per cent from 30 per cent, amongst other measures.
Foreign inflows also continued their downtrend and declined a further 64 per cent in a follow-up to the 70 per cent decline in the previous week and stood at a negligible $2.2 million net inflow for the week.
Sector-wise data was also negative as Sui Northern Gas Pipelines (SNGPL) cut the supply of gas to the new fertiliser plant of Engro Corporation. Furthermore, rumours circulated in the market that the government will remove the 7.5 per cent deemed duty on refineries and will levy a 10 per cent duty on the gas sector, which put investors on the back foot.
Macro data was also mixed as the 10-month current account posted a surplus of $748 million, while Foreign Direct Investment for the same period fell by 29 per cent to $1.23 billion and the foreign exchange reserves of the country fell below the $17 billion mark during the week.
Volumes declined 33 per cent and stood at 45 million shares traded per day, while average daily value also declined 37.5 per cent and stood at Rs1.45 billion per day.
What to expect?
The monetary policy announcement is unlikely to affect market proceeds in the coming week as status quo is likely to be maintained. Nonetheless, the dull trend in the market can be expected to spill over into the coming week and last until the budget is announced, after which the direction of the market is anybody’s guess.
A tough budget is expected; hence concessions in certain areas will be looked upon positively, while it could easily be the other way around if the government announces unexpected taxation measures which will hurt sentiments in the market.
Monday, May 16
Investors preferred to sell shares at the Karachi Stock Exchange on the first trading session of the week ahead of crucial talks between US Senator John Kerry and government officials. Moreover, the killing of a Saudi diplomat in Karachi also forced investors to stay cautious.
Tuesday, May 17
The stock market bounced back inline with expectations on the back of positive statements given by Senator John Kerry on Pakistan-US ties. This assurance came at a crucial time and helped alleviate any fear of international aid block after Osama bin Laden’s murder, said Elixir Securities equity dealer Sara Shahid.
Wednesday, May 18
Volumes hit an eight-month low at the Karachi Stock Exchange as the bourse spent most of the day along the neutral line. The market failed to generate any concrete direction as all eyes were on the monetary policy and federal budget announcement.
Thursday, May 19
The stock market witnessed another dull session with the index trading in a narrow range of 40 points ahead of the monetary policy and the annual budget. This is a cyclical trend as investors hold their investment decisions ahead of the annual budget, analyst said.
Friday, May 20
The stock market gained on the final trading session of the week as investors bought stocks on expectations of a status quo in the monetary policy. Market rumours that small investors will be exempt from capital gains tax also supported the upward trend.
Published in The Express Tribune, May 22nd, 2011.