Weekly review: KSE-100 sheds 127 points on budgetary fears
Proposed imposition of new taxes along with reduction in subsidies negatively affected the market.
Proposed imposition of new taxes along with reduction in subsidies negatively affected the market.
KARACHI:
Lack of triggers along with fears surrounding the upcoming budget resulted in subdued trading at the stock market as the benchmark KSE-100 index shed 127 points (0.4%) to close at 28,756 points during the week ended May 23.
Despite a strong performance in the previous week, activity at the bourse has remained tepid since the conclusion of the earnings season and lack of any positive triggers. Investors also remain sceptical about the government’s plans to raise revenue in the upcoming budget by introducing more taxes and curbing existing subsidies.
The much-awaited monetary policy announcement proved to be a disappointment for investors, as the State Bank of Pakistan decided to keep the discount rate unchanged at 10%, leaving them in search for further triggers.
The unchanged discount rate came as little surprise for the bulk of the market as the KSE-100 index managed to close in the green on Monday, albeit with very little market participation. However, the index swung into the red on Tuesday as news regarding the budget began to roll out.
It emerged that the Federal Bureau of Revenue had proposed an increase in taxation for multiple sectors including the all-important fertilizer and cement sectors. The FBR proposed a special excise duty (SED) on the fertiliser sector at a rate of 1%-2.5%, while it also proposed an increase in the federal excise duty (FED) on the cement production from Rs400/ton to Rs500/ton.
Although the proposed duties are unlikely to have an impact on the profitability of both sectors (as the excise duty is passed on to consumers), it highlighted the governments aggressive approach towards taxation measures in the upcoming budget and was a damper on investor sentiments.
Macro data revealed during the week had a mixed impact as the country’s current account deficit for the 10-month period of the current fiscal year clocked in at $2.16 billion as compared to $1.57 billion in the same period last year. However, the country’s foreign exchange reserve position continued to show promising signs as total reserves crossed the $13 billion mark during the week.
Foreigners continued to be buyers at the bourse and purchased a net of $6.3 million worth of equity during the week. The number was far short of the $20 million figure of the previous week but did take the tally for total foreign buying in May to $39 million.
In sector-specific news, the only major news came for the power sector where the government refused to retire the Rs300 billion circular debt in order to contain the fiscal deficit. Many IPPs have threatened to stop power generation while PSO defaulted on its payments to international suppliers as a result.
Average daily volumes improved slightly by 12.5% but remain low at 149 million shares traded per day. As trading was mostly in second and third-tier stocks, average daily value improved only 3.3% to Rs6.19 billion per day. The market capitalisation of the Karachi Stock Exchange stood at Rs6.84 trillion at the end of the week.
Winners of the week
Murree Brewery Company Limited
Murree Brewery Company Limited specialises in the manufacture of beer and Pakistan made foreign liquor. The group also has juice extraction and food manufacturing divisions, located at Rawalpindi and Hattar respectively. Their glass division manufactures all the group’s bottles and jars.
Rafhan Maize Limited
Rafhan Maize Products Company Ltd produces corn oil, industrial starches, liquid glucose, dextrin, gluten meals, and other corn related products. The company also produces a wide range of co-products such as gluten feeds, meals, and hydrol.
Indus Motor Company Limited
Indus Motor Company Limited was created through a joint venture agreement between the House of Habib, the Toyota Motor Corporation and the Toyota Tsusho Corporation, in order to assemble, manufacture and market Toyota vehicles. The company is the sole distributor of Toyota vehicles in Pakistan.
Losers of the week
Pakistan Tobacco Company
Pakistan Tobacco Company Limited manufactures and sells cigarettes.
Shezan International
Shezan International Limited produces and sells juices, beverages, pickles, preservatives, and flavourings which are all derived from fresh fruits and vegetables.
Engro Foods Limited
Engro Foods Limited produces a wide range of dairy products. The company’s products include ice cream, flavored milk, fruit juices and milk powder.
Published in The Express Tribune, May 25th, 2014.
Lack of triggers along with fears surrounding the upcoming budget resulted in subdued trading at the stock market as the benchmark KSE-100 index shed 127 points (0.4%) to close at 28,756 points during the week ended May 23.
Despite a strong performance in the previous week, activity at the bourse has remained tepid since the conclusion of the earnings season and lack of any positive triggers. Investors also remain sceptical about the government’s plans to raise revenue in the upcoming budget by introducing more taxes and curbing existing subsidies.
The much-awaited monetary policy announcement proved to be a disappointment for investors, as the State Bank of Pakistan decided to keep the discount rate unchanged at 10%, leaving them in search for further triggers.
The unchanged discount rate came as little surprise for the bulk of the market as the KSE-100 index managed to close in the green on Monday, albeit with very little market participation. However, the index swung into the red on Tuesday as news regarding the budget began to roll out.
It emerged that the Federal Bureau of Revenue had proposed an increase in taxation for multiple sectors including the all-important fertilizer and cement sectors. The FBR proposed a special excise duty (SED) on the fertiliser sector at a rate of 1%-2.5%, while it also proposed an increase in the federal excise duty (FED) on the cement production from Rs400/ton to Rs500/ton.
Although the proposed duties are unlikely to have an impact on the profitability of both sectors (as the excise duty is passed on to consumers), it highlighted the governments aggressive approach towards taxation measures in the upcoming budget and was a damper on investor sentiments.
Macro data revealed during the week had a mixed impact as the country’s current account deficit for the 10-month period of the current fiscal year clocked in at $2.16 billion as compared to $1.57 billion in the same period last year. However, the country’s foreign exchange reserve position continued to show promising signs as total reserves crossed the $13 billion mark during the week.
Foreigners continued to be buyers at the bourse and purchased a net of $6.3 million worth of equity during the week. The number was far short of the $20 million figure of the previous week but did take the tally for total foreign buying in May to $39 million.
In sector-specific news, the only major news came for the power sector where the government refused to retire the Rs300 billion circular debt in order to contain the fiscal deficit. Many IPPs have threatened to stop power generation while PSO defaulted on its payments to international suppliers as a result.
Average daily volumes improved slightly by 12.5% but remain low at 149 million shares traded per day. As trading was mostly in second and third-tier stocks, average daily value improved only 3.3% to Rs6.19 billion per day. The market capitalisation of the Karachi Stock Exchange stood at Rs6.84 trillion at the end of the week.
Winners of the week
Murree Brewery Company Limited
Murree Brewery Company Limited specialises in the manufacture of beer and Pakistan made foreign liquor. The group also has juice extraction and food manufacturing divisions, located at Rawalpindi and Hattar respectively. Their glass division manufactures all the group’s bottles and jars.
Rafhan Maize Limited
Rafhan Maize Products Company Ltd produces corn oil, industrial starches, liquid glucose, dextrin, gluten meals, and other corn related products. The company also produces a wide range of co-products such as gluten feeds, meals, and hydrol.
Indus Motor Company Limited
Indus Motor Company Limited was created through a joint venture agreement between the House of Habib, the Toyota Motor Corporation and the Toyota Tsusho Corporation, in order to assemble, manufacture and market Toyota vehicles. The company is the sole distributor of Toyota vehicles in Pakistan.
Losers of the week
Pakistan Tobacco Company
Pakistan Tobacco Company Limited manufactures and sells cigarettes.
Shezan International
Shezan International Limited produces and sells juices, beverages, pickles, preservatives, and flavourings which are all derived from fresh fruits and vegetables.
Engro Foods Limited
Engro Foods Limited produces a wide range of dairy products. The company’s products include ice cream, flavored milk, fruit juices and milk powder.
Published in The Express Tribune, May 25th, 2014.