Market slumps as investors remain cautious

Stocks were again lacklustre on Monday with the index ending lower as most investors chose to remain cautious ahead of the fiscal year-end and in the absence of any major trigger.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index fell 1.28 per cent, or 125.30 points, to close at 9,671.55.

“Trade has been dull in the last few days as there has been no trigger for the investors and they don’t want to take too much of a risk ahead of the year-end,” said Khalid Iqbal Siddiqui, director at Invest and Finance Securities.

Pakistan’s fiscal year runs from July 1 to June 30.

Dealers said uncertainties over the implementation of a new capital gains tax from July 1 has discouraged investors, particularly retail traders, in the past few days, resulting in lower trades.

A visit to the stock exchange by Finance Minister Abdul Hafeez Shaikh during the day also failed to lift sentiment in the absence of any concrete outcome, dealers said.

In its budget for the 2010/11 fiscal year, the government announced that a capital gains tax of 10 per cent would be imposed on stocks held for six months or less and 7.5 percent on stocks held between 6 months to a year from July 1.

Dealers said 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 2010/11 fiscal year 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.

Trade volume is likely to pick up once a decision if the Securities and Exchange Commission of Pakistan (SECP) decided to reintroduce margin buying.

The KSE authorities and the regulator met last week to discuss margin buying and other leveraged products. They decided to form a committee which is required to submit its recommendations within 15 working days.

Monday’s turnover was 8.4 per cent lower than Friday’s tally at 81.65 million shares. The total exchange value stood at Rs2.9 billion.

Trade was dominated by second and third-tier stocks. At the end of the day 114 stocks closed higher, 277 declined and 32 remained unchanged in value.

Lotte Pakistan (KSE: LOTPTA) was the volume leader with 6.93 million shares losing Rs0.36 to close at Rs8.03. SilkBank (KSE: SILK) came second with 6.28 million shares losing Rs0.01 to end at Rs2.67. TRG Pakistan (KSE:TRG) came third with 4.76 million shares losing Rs0.48 to close at Rs4.04.

KASB Bank (KSE: KASBB) was the KSE-100 top gainer of the day, its share price rising 10.03 per cent to finish at Rs3.4.

Published in The Express Tribune, June 29^th, 2010.