Stocks may remain choppy on taxation despairs

Stocks market is expected to remain choppy in the coming sessions as the government gears up for new taxation measures to contain fiscal deficit with investors too worrisome about faint growth prospects, dealers said.

Brokerage BMA Capital Management said the market is likely to remain dull amid dearth of triggers with the market participants keenly tracking new taxation measures over the coming week.

“CAD (current account deficit) is also due to be reported in the coming week,” the brokerage said in a report. “Any positive surprises may provide some comfort.”

Analysts said the stock market’s performance during the outgoing week was dictated by a host of positive and negative developments, which restricted the move and the Index recorded a small rise of 24 points with volume remaining thin, heralding weakness on the part of investors to book sizable deals.

The KSE-100 Index of Pakistan Stock Exchange (PSX) closed on 38,585.66 points. An average daily turnover contracted by 25.7 percent to 121 million shares during the week.

Topline Securities said the KSE 100-share Index started the week off on a positive note after Prime Minister Imran Khan’s meeting with a PSX’s delegation, led by its chairman Sulaiman Mehdi last week.

However the index was unable to maintain the positivity due to lack of any triggers and fears of an impending economic slowdown. Resultantly, the index remained unchanged, adding a miniscule 24 points or 0.06 percent.

Analysts advised investors to tilt the portfolio exposure to export-oriented sectors as another episode of rupee devaluation seems to be in the offing with spare cash for bargain purchases.

The best performers for the week were engineering and textile as they cumulatively added 199 points. On the other hand, independent power producers also checked the index’s progress as they chipped away 62 points.

Foreigners’ selling for the week was $12.9 million versus $2.5 million in the previous week; that was the consecutive selling for the 32nd week. Among local investors’, insurance sector and individuals were net buyers amounting to $15.1 million.

Habib Metro Financial Services said the apex court announced its verdict in the high-rise construction case during the week, wherein it gave a go-ahead to the construction beyond six floors. However, the decision principally failed to lure interest in cement and steel stocks.

“Instead both sectors were seen under the hammer on the back of deteriorating fundamentals (rupee devaluation and rising interest rates) and a large influx of imported substitutes,” the brokerage added.

Ratings agency Fitch downgraded Pakistan’s long-term debt rating to B negative from ‘B’ on heightened external financing risk and elevated foreign debt repayments, as well as deteriorating fiscal position.

Moody’s reaffirmed rating of B3 negative. Their projection for downward revision in growth, together with delayed International Monetary Fund’s bailout package, is to take toll on the bourse, according to the analysts.