Weekly review: Stock market makes modest recovery
President’s return along with proposed relaxation in Capital Gains Tax helps the index climb.
KARACHI:
The return of President Asif Ali Zardari improved market sentiments as the benchmark KSE-100 index gained of 2.5% or 273 points during the week ended December 23.
President Zardari, who left for Dubai a few weeks ago, returned to the country on Monday. The return brought an end to speculation that the army was planning to depose the President and possibly carry out a military coup. Investors reacted positively to the return as the KSE-100 index climbed 2.8% in the first two sessions of the week.
Political tensions had escalated to fever pitch in recent weeks and had played its part in the market’s recent woes.
Another positive development was a possible relaxation on the Capital Gains Tax (CGT) front as the KSE proposed collection of CGT under the presumptive tax regime for individual investors, according the JS Global’s analyst Furqan Ayub. Strong rumours resurfaced over change in capital gains tax collection methodology for individual investors with some hinting at a deduction of additional tax.
The market’s gains during the week, however, veiled certain issues that would have otherwise had a detrimental impact on the market. Primary amongst them was the ongoing memogate saga, with the Supreme Court still carrying out hearings in the scandal involving the president, the prime minister, the army chief and the chief of the country’s powerful intelligence services.
Tensions with the US also remained as the Senate passed a bill to block aid to Pakistan after the closing down of Nato supply routes to Afghanistan. The United States has still avoided apologising for the incident that resulted in the death of 24 Pakistani soldiers and tensions still remain high.
Sector-wise news was also disappointing as the government announced that it will be implementing Gas Infrastructure Development Cess of Rs197 per mmbtu on feedstock gas supply to fertiliser plants. The levy will have a negative impact on all urea manufacturers except Fatima Fertilizer, which will be provided gas at a fixed price as per their agreement with the government.
The outflow of foreign funds showed no signs of easing as there was a net outflow of $9.2 million during the week. Despite the market’s gains, volumes continued to lag and rose fractionally by 1.4% to 44.9 million shares traded per day.
What to expect?
As the year-end draws closer, the market’s attention will focus towards the upcoming earnings season, which will begin by mid-January. In the short-run however, market’s sentiments will be governed by the political situation along with the direction of foreign flows in the coming week.
Monday, December 19
Stocks ended higher but off the day’s peak as foreign investors sold their holdings amid concerns over political tensions. Dealers said the market rose early, after the return to Pakistan of President Asif Ali Zardari.
Tuesday, December 20
Stock market gained as activity rose to six-week high following some positive triggers. Strong rumours resurfaced over change in capital gains tax collection methodology with some hinting deduction of additional tax.
Wednesday, December 21
Burst in volume and an upward spree of the index was short-lived as bears returned to the market as investors opted to book profits. Investors booked profits as investors await resolution on capital gain tax issues.
Thursday, December 22
The stock market managed to close higher amid dull activity in the backdrop of ongoing political uncertainty in the country. The benchmark index managed to climb due to decent recovery in share prices of fertiliser stocks.
Friday, December 23
Investors seemed to have left a day early for the weekend as all the negative news flows took the bourse and activity level down. Value of shares traded dropped to five-month low of Rs1.1 billion.
Published in The Express Tribune, December 25th, 2011.
The return of President Asif Ali Zardari improved market sentiments as the benchmark KSE-100 index gained of 2.5% or 273 points during the week ended December 23.
President Zardari, who left for Dubai a few weeks ago, returned to the country on Monday. The return brought an end to speculation that the army was planning to depose the President and possibly carry out a military coup. Investors reacted positively to the return as the KSE-100 index climbed 2.8% in the first two sessions of the week.
Political tensions had escalated to fever pitch in recent weeks and had played its part in the market’s recent woes.
Another positive development was a possible relaxation on the Capital Gains Tax (CGT) front as the KSE proposed collection of CGT under the presumptive tax regime for individual investors, according the JS Global’s analyst Furqan Ayub. Strong rumours resurfaced over change in capital gains tax collection methodology for individual investors with some hinting at a deduction of additional tax.
The market’s gains during the week, however, veiled certain issues that would have otherwise had a detrimental impact on the market. Primary amongst them was the ongoing memogate saga, with the Supreme Court still carrying out hearings in the scandal involving the president, the prime minister, the army chief and the chief of the country’s powerful intelligence services.
Tensions with the US also remained as the Senate passed a bill to block aid to Pakistan after the closing down of Nato supply routes to Afghanistan. The United States has still avoided apologising for the incident that resulted in the death of 24 Pakistani soldiers and tensions still remain high.
Sector-wise news was also disappointing as the government announced that it will be implementing Gas Infrastructure Development Cess of Rs197 per mmbtu on feedstock gas supply to fertiliser plants. The levy will have a negative impact on all urea manufacturers except Fatima Fertilizer, which will be provided gas at a fixed price as per their agreement with the government.
The outflow of foreign funds showed no signs of easing as there was a net outflow of $9.2 million during the week. Despite the market’s gains, volumes continued to lag and rose fractionally by 1.4% to 44.9 million shares traded per day.
What to expect?
As the year-end draws closer, the market’s attention will focus towards the upcoming earnings season, which will begin by mid-January. In the short-run however, market’s sentiments will be governed by the political situation along with the direction of foreign flows in the coming week.
Monday, December 19
Stocks ended higher but off the day’s peak as foreign investors sold their holdings amid concerns over political tensions. Dealers said the market rose early, after the return to Pakistan of President Asif Ali Zardari.
Tuesday, December 20
Stock market gained as activity rose to six-week high following some positive triggers. Strong rumours resurfaced over change in capital gains tax collection methodology with some hinting deduction of additional tax.
Wednesday, December 21
Burst in volume and an upward spree of the index was short-lived as bears returned to the market as investors opted to book profits. Investors booked profits as investors await resolution on capital gain tax issues.
Thursday, December 22
The stock market managed to close higher amid dull activity in the backdrop of ongoing political uncertainty in the country. The benchmark index managed to climb due to decent recovery in share prices of fertiliser stocks.
Friday, December 23
Investors seemed to have left a day early for the weekend as all the negative news flows took the bourse and activity level down. Value of shares traded dropped to five-month low of Rs1.1 billion.
Published in The Express Tribune, December 25th, 2011.