Investor optimism on CGT boosts market

Stocks ended up on Wednesday amid investor optimism regarding talks between KSE and a parliamentary committee.

KARACHI: Stocks ended up on Wednesday amid investor optimism regarding talks between Karachi Stock Exchange authorities and a parliamentary committee about Capital Gains Tax (CGT), dealers said.

However, there were reports after the market closed that the National Assembly Standing Committee for Finance had rejected the exchange authorities’ appeal to exempt gains from shares purchased before July 1 from the tax.

Dealers said this will have a negative impact on the market on Thursday.

The KSE benchmark 100-share index rose 2.01 per cent, or 186.33 points, to end at 9,436.88 on turnover of 99.14 million shares.

In its budget for the 2010-11 fiscal year, the government announced that Capital Gains Tax of 10 per cent would be imposed on stocks held for six months or less and 7.5 per cent on stocks held for more than six months to a year.

“The market rose in anticipation of a positive outcome of the meeting but things are still very unclear,” said Sajid Bhanji, a dealer at brokers Arif Habib Ltd.

Dealers said the government had previously agreed with the exchange that the capital gains tax would be levied only on profits made since the start of the 2010-11 fiscal year on July 1.

But now there are concerns that the government may seek to tax gains from stock purchases made before that date as well, they said.

Another disagreement was on the filing of returns for the new tax. Stockbrokers say they need to be filed annually, but the budget states that brokerage houses must submit quarterly returns.

Wednesday’s turnover was 99.35 million shares. Total exchange value stood at Rs4.06 billion.

During the day’s trade, 284 stocks closed higher, 100 declined and 22 remained unchanged in value.

Lotte Pakistan (KSE: LOTPTA) was the volume leader with 17.65 million shares gaining Rs0.35 to close at Rs8.96. Jahangir Siddiqui Company (KSE: JSCL) came second with 7.1 million shares gaining Rs0.93 to end at Rs12.26. Azgard Nine (KSE: ANL) came third with 4.44 million shares gaining Rs0.49 to close at Rs10.61.

Pakistan State Oil (KSE: PSO) was in the limelight during the day after an announcement by the government that it will release Rs41.4 billion to resolve the circular debt issue, according to Sameer Danawala, an analyst at JS Global Portal. The share closed at Rs268.58, up 4.1 per cent.

Faysal Bank’s (KSE: FABL) confirmation of the Royal Bank of Scotland Pakistan (KSE: RBS) acquisition drove RBS’s stock to hit its upper circuit at Rs11.73.

RBS was also the KSE-100 top gainer of the day, its share price rising 9.32 per cent.

Published in the Express Tribune, June 17^th, 2010.