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Friday March 29, 2024

Stocks likely to reflect traders’ fury over budget proposals

By Javed Mirza
May 28, 2017

Stocks are likely to remain under pressure as the federal budget proposals provoked the ire of traders; although MSCI picks at the tail end of next week may make up for the bearish sentiments, dealers said. 

Investors bought blue-chip shares during the outgoing week ahead of Pakistan’s formal inclusion in Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index from June 1.

“KSE-100 gained as investors accumulated Index heavy names ahead of MSCI EM’s inclusion next week,” Adnan Sami, analyst at Topline Securities.

The KSE 100-share Index was up 3.73 percent or 1894.87 points to close the week at 52,636.87 points. KSE 30-share Index rose 4.3 percent or 1,159.31 points to end at 27,946.64 points.

Mutual Funds were the biggest buyers, accumulating securities worth $53.7 million, while foreigners were the major sellers of equities worth $6.5 million during the week as against selling of $16.4 million last week. Most of the buying was concentrated in bank, oil and gas exploration and fertiliser sectors, while foreigners sold $8 million of cement stocks. Average daily turnover also improved as the benchmark Index crossed 53,000 mark in the intra-day trading. Index point leaders were Oil and Gas Development Company (up 9.4 percent), Engro (rising 7.40 percent), Hub Power (increasing 6.6 percent), Pakistan Petroleum (climbing 7.3 percent) and Habib Bank (jumping 3 percent) adding 720 points to the Index.

In terms of absolute return, MSCI EM small-cap surprises Thal Limited and International Steel gained almost 15 percent during the outgoing week. Engineering sector outperformed others with its capitalisation expanding 7.7 percent as the National Tariff Commission said China was dumping re-bars in Pakistan at half price, while exploration and production sector also beat the market gaining 7.5 percent. Fertiliser, power generation and banking sectors broadly tracked the Index, gaining between 4.0 and 2.8 percent. Auto, textile, pharmaceutical, food and cement sectors underperformed, increasing between 2.1 and 0.7 percent, while transport and sugar sectors decreasing between 2.4 percent and 2.3 percent. In the budget for fiscal year of 2017/18, capital gains tax (CGT) has undergone some tweaks with the three tax slabs changed to just one of 15 percent for filers and 20 percent for non-filers. Tax on dividends has been raised to 15 percent for filers up from an earlier 12.5 percent, while kept at an earlier 20 percent for non-filers. Tax on dividend from mutual funds has also been raised to 12.5 percent from an earlier 10 percent. Meanwhile, the coveted period for exemption of CGT has been kept intact at five years and tax on bonus shares remained unchanged at 5.0 percent.