Market falls slightly as capital gains tax fuels investor uncertainty

KARACHI: Stocks ended lower on Friday as investors squared their positions amid uncertainty over a capital gains tax on the stock market due to be imposed from July 1, dealers said.

The KSE benchmark 100-share index fell 0.32 per cent, or 31 points, to end at 9,645.71 points.

In the federal budget for fiscal year 2011, the government announced that a capital gains tax of 10 percent would be imposed on stocks held for six months or less and 7.5 per cent on stocks held between 6 months to a year.

Dealers said that the government had previously agreed with the exchange that the capital gains tax would be levied only on profits made from the start of the fiscal year 2011 on July 1.

But now there are concerns the government may seek to tax gains made before that date and demand quarterly tax returns instead of the annual filing preferred by brokers, they said.

“There was selling pressure towards the end of today’s session because of the uncertainty surrounding the capital gains tax,” said Sajid Bhanji, a brokerage dealer at Arif Habib Ltd.

Dealers also said there were reports of a possible hike in the central bank’s key policy rate to control inflation when it unveils its monetary policy in July.

Friday’s turnover was 135.3 million shares. The total exchange value stood at Rs5.46 billion.

During the day’s trade 176 stocks closed higher, 178 declined and 29 remained unchanged in value.

Lotte Pakistan (KSE: LOTPTA) was the volume leader with 15.65 million shares losing Rs0.21 to close at Rs8.8. Jahangir Siddiqui Company (KSE: JSCL) came second with 12.36 million shares losing Rs0.43 to end at Rs12.26. Azgard Nine (KSE: ANL) came third with 7.8 million shares gaining Rs0.57 to close at Rs11.5.

“Pakistan Telecommunication Corporation (KSE: PTC) closed 1.4 per cent up, after news that the government has asked $500 million dues from Etisalat,” said Ahmed Rauf, an analyst at JS Global Capital.

Pakistan International Airlines (KSE: PIA) was the KSE-100 top gainer of the day, its share price rising 9.81 per cent to finish at Rs2.91.

IGI Insurance (KSE: IGIIL) was in the losers list, its share price falling 3.83 per cent to close at Rs65.48.

Published in The Express Tribune, June 19^th, 2010.