Reduction of the regulatory duty on imported inputs of textile is positive for textile companies. PHOTO: FILE
“Amended budget (Finance Bill 2018) bodes well for the economy and select sectors,” Topline Securities said in a post-budget commentary to its clients.
The revised budget is aimed at reducing the fiscal deficit by around 100 basis points to 5.1%. This was followed by the decision of raising gas prices on average by more than 35%, it said.
The two decisions would largely help the economy come out of the current financial crisis and support many sectors of the economy to perform well that will be reflected at the PSX. The brokerage house in the commentary said the budget stands positive for cement, steel, textile and auto sectors; neutral for banks and negative for the tobacco sector.
Cement and steel sectors
A 10% increase in the development budget (versus Rs661 billion spent last year) coupled with commitment to construct around 18,000 houses should bode well for the construction sector. Moreover, the withdrawal of restrictions on non-tax filers to purchase properties above Rs5 million will be positive for infrastructural activities. Similarly, continuity of China-Pakistan Economic Corridor (CPEC) projects and dam budget will serve as a catalyst for cement and steel sectors.
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Textile sector
Reduction of the regulatory duty on imported inputs of textile is positive for textile companies. To note, in its commitment to increase exports, the government did not increase gas prices for the textile sector in Monday’s ECC meeting, while other sectors were not fortunate enough.
Auto sector
Major development for auto sector comes from the withdrawal of the condition to be a tax filer to purchase new cars. This will lead to a rebound in sales of local auto assemblers, which remained muted for last couple of months as non-tax filers were barred from purchasing new vehicles. Furthermore, increase of regulatory duty on luxury cars (1800cc+) will also bode well for local assemblers.
Banks
Although withholding tax (WHT) on banking transactions is increased to 0.6% from earlier 0.4%, the brokerage house believes it will not have any material impact on business transactions and hence the impact will be neutral for banks.
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Tobacco
Due to increase in excise rates, sales of tobacco companies, which so far have enjoyed healthy sales growth, will be affected negatively.
PSX profit plunges
The Pakistan Stock Exchange Limited’s (PSX) profit plunged 77% to Rs64.22 million for the year ended June 30, 2018 due to a drop in the revenue and income from other heads, according to an announcement on Tuesday. The company had booked profit of Rs277.29 million in the previous year.
Earnings per share reduced to Rs0.08 in the year compared to Rs0.35 in the last year. While, the company’s revenue fell 16% to Rs891 million compared to Rs1.06 billion.
The share of profit from associates reduced to Rs339.6 million from Rs391.87 million and other income declined to Rs5.17 million compared to Rs21.42 million last year.
PSX’s share price increased 2.05%, or Rs0.35, to close at Rs17.40 with 101,500 shares changing hands at the PSX.
Published in The Express Tribune, September 19th, 2018.
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