Market Preview: Stocks set to cross another psychological level

Delay in RGST and political rift not to affect market: analyst.

KARACHI: The stock market is expected to continue its upward march and cross the 12,000-point barrier next week following a peaceful Muharram, said Invest and Finance Securities Research Head Khalid Iqbal Siddiqui.

The other factor that will bolster local and foreign investor confidence is Chinese Prime Minister Wen Jiabao’s visit to Pakistan which will lead to an increase in bilateral trade, said Siddiqui.

Offshore investors have bought shares worth $504.24 million at the local equity market this year to date. The recent record net buying worth $19.51 million in a single day was a sign of increased foreign interest. Siddiqui was of the view that the government’s decision to delay implementation of the reformed general sales tax (RGST) will only have a slight, or no, effect on the market.

Political rift did not deter the market from rising last week and there is no reason to believe that it will do so this week, he said. The market ignored all political concerns, including the sacking of Religious Affairs Minister Hamid Saeed Kazmi and Science and Technology Minister Azam Khan Swati and the pulling out of Jamiat Ulema-e-Islam-Fazl (JUI-F) from the coalition government. The KSE index gained 1.4 per cent to close at 11,786 points in the week ended December 15.

Banking and oil sectors to run the show

A delegation from the banking sector will meet government officials next week to try to persuade them to reduce turnover tax on the sector to 0.5 per cent from the current one per cent, said Siddiqui. This will cause a rise in interest in the banking sector.

Last month, refineries and oil marketing companies successfully managed to get a reduction in turnover tax following prolonged talks with the government.

Furthermore, the Abu Dhabi Group’s intention to offload its strategic stake in United Bank (UBL) will continue to generate investor interest in the sector.

Foreign investors’ favourite, the oil sector, will continue to remain in the limelight, a trend witnessed over the past three weeks. Rising international oil prices will also keep investors on their toes.

Pakistan’s leading equity market trades at a handsome discount compared with its regional peers and attracts significant foreign inflows.

Margin trading product: not anytime soon

No decision is expected on the introduction of a margin trading product until the Securities and Exchange Commission of Pakistan (SECP) gets a new chairman.

The SECP chairman slot has been lying vacant since Salman Sheikh stepped down after completing his tenure. The draft of Securities Bill 2010 currently with the SECP needs to be forwarded to the federal finance ministry for approval.

Farrukh Khan, co-founder and CEO of BMA, is widely tipped to be appointed as the new chairman of SECP.

Meanwhile, brokers remain hopeful that the introduction of the leverage product will take place soon so that dwindling interest in equity markets may be revived.

Published in The Express Tribune, December 19^th, 2010.