Volumes hit 18-month low as CGT keeps investors away

KARACHI: Stocks remained dull on Thursday with turnover at its lowest level in 18 months as a new Capital Gains Tax introduced in the market kept investors away from the market, dealers said.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index, however, ended a marginal 0.09 per cent, or 9.08 points, higher at 9,730.99.

In its budget for the 2010/11 fiscal year, the government imposed a Capital Gains Tax (CGT) of 10 percent on stocks held for six months or less and 7.5 per cent on stocks held between six months and a year.

The tax is applicable from Thursday, the start of the new fiscal year.

“The market was dead today. There was nothing happening,” said Mohammed Sohail, chief executive of Topline Securities.

“This clearly shows that investors are not happy with the Capital Gains Tax and it will hurt trade in days ahead as well,” he said.

However, some dealers said that trade volumes are likely to improve once margin buying is reintroduced in the market.

The KSE authorities and the Securities and Exchange Commission of Pakistan (SECP) 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.

Thursday’s turnover was only 20.83 million shares compared with 71.29 million shares traded on Wednesday and lowest since December 2008. The total exchange value stood at a disappointing Rs0.6 billion.

Trade was dominated by second and third-tier stocks. At the end of the day 217 stocks closed higher, 132 declined and 20 remained unchanged in value.

Javed Omer Vohra and Company (KSE: JOVC) was the volume leader with 2.64 million shares gaining Rs0.63 to close at Rs5.97. Amtex Limited  came second with 2.32 million shares gaining Rs1 to end at Rs12.54. Jahangir Siddiqui Company (KSE: JSCL) came third with 1.22 million shares losing Rs0.14 to close at Rs12.5.

Pace (Pak) was the KSE-100 top gainer of the day rising 7.28 per cent to Rs3.83. KASB Bank (KSE: KASBB) was in the losers list, its share price dropping 7.62 per cent to close at Rs3.76.

Published in The Express Tribune, July 2^nd, 2010.