KARACHI: The country’s largest stock market witnessed post-budget rallying, closing at another record high, driven by blue chip stocks. Investors welcomed the new budget where the government announced a cut in corporate taxes by a percentage point and pledged resolution of the circular debt issue in 60 days.
The benchmark KSE-100 index continued to defy gravity, and was the only stock market in the region that gained today after regional markets went red on concerns of a cut down in stimulus measures by central banks.
The Karachi Stock Exchange’s (KSE) benchmark 100-share index gained 1.94% or 433.15 points to end at 22,757.72 point level. Trade volumes rose to 471 million shares compared with Wednesday’s tally of 352 million shares. The value of shares traded during the day was Rs12.4 billion.
“Investors ignored the bloodbath in the region and remained aggressive buyers primarily in cements, oil and gas, and the energy sector as higher public spending and assurance of resolution of the circular debt issue gave birth to positive sentiments,” reported Faisal Bilwani, analyst at Elixir Securities.
Banking sector that does not gain much from the budget announcement rallied nevertheless, along with the broader market as fears of higher taxes were laid to rest.
Bank of Punjab (rights issue) was the volume leader with 66.31 million shares gaining Rs0.79 to finish at Rs3.44. It was followed by Fauji Cement with 52.74 million shares gaining Re1 to close at Rs12.78 and Pakistan Telecommunication Company with 35.11 million shares climbing Rs1.03 to close at Rs23.5.
Foreign institutional investors were net buyers of Rs730 million, according to data maintained by the National Clearing Company of Pakistan.
According to an analysis sent by JS Global Capital to its clients, the brokerage firms believes that the KSE welcomed the cut in corporate tax rates from 35% to 34% in the Budget 2013-14, which will increase the bottom-lines of the companies, however the reduction was not applicable to banks or energy and production companies.
The cement sector will be the key gainer of yesterday’s budget as higher fund allocation in the Public Sector Development Programme will boost their financials.
However, the budget bears bad news for the fertiliser sector as the government allocated a higher subsidy to urea imports of Rs30 billion and made it a mandatory requirement for producers to print retail prices and general sales tax on urea bags.
Increase in the GST to 17% will have a nominally negative effect on local of finished products for the textile sector, while higher taxes on locally assembled automobiles bears bad news for the local auto sector, already hurt by softer demand.
Published in The Express Tribune, June 14th, 2013.
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