Investors shunned election uncertainty as budget details for fiscal 2014 announced.
The stock market showed no signs of slowing down and ploughed forward as investors shunned political uncertainty stemming from upcoming elections resulting in the benchmark KSE-100 index shooting up 690 points or 3.6% during the week ending May 11.
The index closed at an all-time high of 19,916 points, just shy of the historic 20,000 points level. It has been an impressive first half of 2013 for the index, which has climbed 17.8% since December 31, 2012.
Even though investors were not sure about a clear front-runner in the electoral race and a lot of uncertainty about the possible shape of any future government, the market refused to slow down. Investors cast those fears aside and took the stock market to levels never witnessed before.
The biggest news of the week emerged from the government when it announced an initial outlay of Rs3.2 trillion for the budget of fiscal year 2013-14. The budget envisages an optimistic revenue target of Rs2.8 trillion, out of which almost 40% will be used for debt servicing.
The new budget is likely to be announced in mid-June by the incoming government. The highlight for investors was that the new budget is likely to keep corporate taxation at 35% without increasing it further.
However, to achieve its audacious revenue targets, the Federal Bureau of Revenue (FBR) is likely to increase general sales tax (GST) from 16% to 17%. Zero-rated sectors are also likely to be slapped with the new 17% GST, while excise duty will also be imposed on sectors which are currently exempted, according to a report by KASB Securities.
On the macro front, the country’s foreign exchange reserves finally stopped declining and posted a mild increase of $100 million and ended at $11.8 billion, according to figures released by the State Bank of Pakistan. However, the country will be making significant payments to the International Monetary Fund in May and June, which is likely to result in a continued slide downwards.
In sector-specific news, telecom companies breathed a sigh of relief as the Sindh High Court suspended the verdict of the Competition Commission of Pakistan, pertaining to the illegality of the international clearing house. The SHC also suspended the penalties imposed on the long distance international (LDI) operators, which resulted in positive activity for the sector.
The auto sector was hit with bad news as sales in April plunged 19% year-on-year, while sales figures for the ten-month period of the fiscal year 2012-13 declined 24% year-on-year.
Trading volumes jumped sharply by 27.7% to 203 million shares per day on average, while average daily value at the Karachi Stock Exchange shot up 50% to Rs7.37 billion traded per day.
The market capitalisation of the KSE increased 2.9% to Rs4.89 trillion by the end of the week.
Published in The Express Tribune, May 12th, 2013.
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