Market watch: Investors stay cautious over fears of tax hike

Benchmark 100-share index falls 79.11 points.

KARACHI: As news of the revision in capital gains tax (CGT) came in, investors at the stock market adopted a cautious stance on Thursday and the index slipped in the red zone amidst growing ambiguity over the upcoming budget.

At close, the Karachi Stock Exchange (KSE) benchmark 100-share index recorded a fall of 0.24% or 79.11 points to end at 32,763.48.

Elixir Securities analyst Jawwad Aboobakar said reacting to the morning news about the proposal for revision in the CGT on short-term holdings to 15% and above two-year holdings to 7.5%, the market started the day on a weaker note.



“Though volumes shrank by 60% with only 84 million shares exchanging hands, it was a day for retail favourites and third-tier companies,” said Aboobakar. “Likes of TRG Pakistan, Ghani Automobile Industries Limited (GAIL) and Sui Northern Gas Pipelines (SNGPL) ended up on their respective upper locks.”

He added that overall the market saw a dull day where most blue chips traded sharply lower and in a narrow range as lack of aggressive participation from leading investors keep the momentum low.

“Which side the momentum brings is yet to be seen with bulls citing reasons such as the record low interest rates, optimistic economic outlook and government gearing up for infrastructure development in the coming year that favour them.”

Bears, however, pointed to political uncertainty due to a judicial commission probing alleged rigging in 2013 elections for the sluggish activity, said Aboobakar.



A Topline Securities analyst said the Federal Board of Revenue’s proposal to increase the CGT in the upcoming budget affected investor confidence.

“Major activity was seen in Pak Elektron, additionally due to the proposed gas tariff hike, share prices of gas distribution companies – SNGPL and Sui Southern Gas Company – rose by 5% and 1.9%, respectively.”

Trade volumes fell to 148 million shares compared to 200 million on Wednesday.

Shares of 344 companies were traded. Of these, 147 companies closed higher, 173 fell and 24 remained unchanged. The value of shares traded during the day was Rs6.5 billion.

Pak Elektron was the volume leader with 14 million shares, gaining Rs0.26 to close at Rs68.16. It was followed by Byco Petroleum with 12.8 million shares, losing Rs0.28 to close at Rs13.54 and GAIL with 12.6 million shares, gaining Rs0.69 to close at Rs7.97.

Foreign institutional investors were net sellers of Rs132 million worth of shares during the session, according to data compiled by the National Clearing Company of Pakistan.

Published in The Express Tribune, May 29^th, 2015.

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