KARACHI: Investors remained on the back foot on Monday on expectations of new budgetary taxation reforms in the upcoming federal budget fiscal 2014 due on June 12, which hurt prevailing positive market sentiments. Across-the-board selling was witnessed at new highs pulling the bourse down to close in the red.
According to reports circulating over the weekend, the government was considering at least three broad measures that can potentially have a negative impact on earnings of listed companies and consequently the Karachi bourse. In the upcoming budget, the government is expected to increase the corporate tax rate by five percentage points, slap three percentage points additional tax on listed companies with earnings retention ratio greater than 70% and raise the turnover tax rate from 0.5% to 1%, says a research note by Elixir Securities sent to its clients.
The Karachi Stock Exchange’s (KSE) benchmark 100-share index shed 0.93% or 208.22 points to end at 22,150.74 point level. Trade volumes fell to 277 million shares compared with Friday’s tally of 340 million shares. The value of shares traded during the day was Rs8.04 billion.
Shares of 382 companies were traded on Monday. At the end of the day 114 stocks closed higher, 228 declined while 40 remained unchanged.
The oil and gas sector, with the exception of Pakistan State Oil, faced immense selling pressure due to the government strategy on issuing bonds, term finance certificates to be more specific, to wipe off the circular debt, reported Veer Bajaj, analyst at JS Global Capital.
The financial sector became the victim of anticipated interest rate cut, which are already at a low and further cut will squeeze banking spreads further, while rumours of increase in gas infrastructure development cess (GIDC) forced selling in the fertiliser sector, said Harris Batla of Elixir Securities.
Thus adverse sentiments gave birth to institutional selling in blue chips such as the index heavyweight Oil and Gas Development Company and Pakistan Petroleum, and the banking sector including Bankislami Pakistan and Bank of Punjab.
Bankislami Pakistan was the volume leader with 24.8 million shares losing 0.26 to finish at Rs6.75. It was followed by Pakistan International Airlines with 23.35 million shares falling Rs0.33 to close at Rs9.61 and Bank of Punjab (rights issue) with 15.92 million shares shedding Rs0.72 to close at Rs4.71.
Foreign institutional investors were buyers of Rs707 million and sellers of Rs624 million worth of equity, according to data maintained by the National Clearing Company of Pakistan.
Published in The Express Tribune, June 11th, 2013.
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