Stocks soar on hopes of an investor-friendly mini-budget

Stocks soared for second straight session on Tuesday, driven by promises that the mini-budget, due today (Wednesday), will be rich in measures focusing on aggressively spurring local/foreign investment, as well as incentives for the capital market players, dealers said.

Analyst Ahsan Mehanti from Arif Habib Corporation said bullish activity was witnessed at the apex bourse amid upbeat trade deficit numbers for December 2018 showing it narrowed 19 percent year-on-year to $2.37 billion.

“Expectations for amendments in CGT (capital gains tax) laws, GIDC (Gas Infrastructure Development Cess) resolution and tax reforms for auto sector in the mini-budget pushed the market to a higher close,” Mehanti added.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index gained 0.91 percent or 358.44 points to close at 39,902.21 points, whereas KSE-30 shares index followed suit with a high of 1.17 percent or 221.44 points to end at 19,149.77 points. Of 348 active scrips, 214 moved up, 109 retreated, and 25 remained unchanged. Investor participation progressed today as ready market volumes stood at 136.802 million shares, compared with the turnover of 124.490 million shares in the previous session.

Adil Ghaffar, CEO at First Equity Modaraba said based on information, through different forums visited by the government’s financial team after the first money bill in September 2018, and the extra efforts put in by different business associations, if all that had been demanded was formalised through money bill, then the market seemed to be all-set for a stellar run. “With a recent increase in interest rates of different saving schemes and resultant yield available between KIBOR and saving schemes along with other factors, further monetary tightening cannot be ruled out”, Ghaffar explained.

Any further development on free trade agreement will provide impetus for stock market to make new high from last 18 months, he added. Hamad Aslam, Director Research at Elixir Securities, said if the mini-budget, was indeed investor-friendly then it should further help boost market sentiment. “However contrary to market talks, we expect increased taxation (particularly in the form of federal excise duty, general sales tax and higher income tax on salaried individuals), which may call for profit-taking,” Hamad added.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said the market had been in the positive frame of mind for the last couple of weeks on reports the government would take steps to increase business confidence and measures for ease of doing business.

“The government has assured stock market investors that they will hear positive news in the mini-budget announcement,” Ahmad said.

Prime Minister Imran Khan’s visit to Qatar, which seems promising in terms of Pakistan’s getting some relief in the form of an agreement for LNG on defer payment also improved the sentiments, Salman added. The highest gainers were Rafhan Maize, up Rs100.00 to close at Rs6900.00/share, and Nestle Pakistan, up Rs69.00 to finish at Rs8100.00/share.

Companies that booked highest losses were Unilever Foods, down Rs100.00 to close at Rs7100.00/share, and Wyeth Pakistan Limited, down Rs29.00 to close at Rs1021.00/share. TRG Pakistan Limited recorded the highest volumes with a turnover of 11.561 billion shares. The scrip gained Rs1.2 to close at Rs25.93/share. The lowest volumes were witnessed in Atlas Honda Limited recording a turnover of Rs1000 shares, whereas the scrip lost Rs13.75 to end at Rs383.25/share.