Stocks feel the heat as political mercury peaks

Stocks lost 1.2 percent to technical correction during the week but the news that apex court has disqualified former premier Nawaz Sharif for life came as a major blow on the rollover day, dealers said.

“We expect the market to remain dismal…until the budget 2018-19 is unveiled, which may turn out to be a non-event for the benchmark index,” an analyst at Habib Metropolitan Financial Services said.

He said they anticipate that a much hyped relief in the capital gains tax (CGT) regime would have a positive impact on the market. “The CGT is expected to be reduced to 10 percent from the existing 15 percent for the first two years of shareholding, which is zero-rated afterwards,” the analyst said.

During the week ended April 13, Pakistan Stock Exchange’s KSE-100 share index lost 566 points or 1.2 percent to close at 46,071 points, while KSE-30 share index shed nearly 1.8 percent to finish at 23,031 points. The market capitalisation slipped to Rs9.443 trillion during the compared with Rs9.532 trillion recorded last week.

Topline Securities in a report said the market participation was also on the lower side, where on weekly basis average daily turnover dropped 4.6 percent and average daily trade value fell 30 percent to 247 million shares and 80 million dollars respectively. Amongst major sectors, cement sector lost 3.2 percent and commercial banks 2.7 percent, whereas automobile was up 2.1 percent followed by chemicals 0.8 percent over the last week.

However, K-Electric led the trading chart where nearly 95.67 million shares changed hands. The main factor behind this surge was federal cabinet’s ratification for the issuance of National Security Certificate (NSC) for the potential sale of 66.4 percent stake of the power utility to Shanghai Electric Power. During the week, investors kept a close eye on several economic developments which spurred the stocks to close higher. “The proposed measure to remove/reduce Gas Infrastructure Development Cess (GIDC) on feed/fuel stock in upcoming budget led to a rally in fertilizer stocks, emerging as top contributor to index (+67pts),” said a report of Topline Securities. Amongst other beneficiaries of potential GIDC reduction Lotte Chemicals (LOTCHEM) and Engro polymers (EPCL), gained 2 percent and 5 percent, respectively during the week. However, despite a week that saw political mercury of the country going north, the foreigners remained net buyers and parked $17.5 million in local equities as against a net buying of $3.6 million last week.

Overtaken by topsy-turvy politics, investors totally ignored the Moody’s Investors Service’s encouraging review of the recently announcement of Tax Amnesty Scheme. “The government’s tax amnesty could relieve fiscal and external pressures on the economy “if successful”,” said Moody’s in a report. An analyst from BMA Capital said they expect the investors to track budget related news during the next week as sector specific proposals may trigger rally in certain sectors around the announcement of budget, most likely scheduled for on April 27, 2018. “With the start of quarterly results season, any earnings surprise may act as a catalyst for market direction,” the analyst said. The analyst added that some of the big names slated to announce their financial results next week, include Mari Petroleum Company Ltd , Attock Petroleum Ltd, Pakistan Oil Fields, and Attock Cement (Pakistan) Limited.