Stocks slip as GIDC ruling triggers selling

Stocks fell on Thursday after the top court ruled in the favour of the government in Gas Infrastructure Development Cess (GIDC) case, pending since 2016, as the imposition of this tax was bound to dent the earnings of several index heavyweights, dealers said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index lost 0.45 percent or 182.44 points to close at 40,290.74 points level, while KSE-30 was fell 0.5 percent or 87.41 points to end at 17,538.41 points level.

Arif Rehman, director research at Fortune Securities, said, “Earlier during intraday trading, the benchmark index shed 550 points as Supreme Court (SC) announced its judgment on the GIDC case”. The decision came against the companies and in the favour of the government, whereby industries that use gas had been ordered to pay the accrued GIDC amount to the government, he said.

“This judgment will have material impact on the cash flow position of several companies of which the biggest blow is on Fertilizer sector.”

However, later in the day, market recovered most of its earlier losses backed by recovery in almost all sectors, but major sentiment was driven once again by cement sector and some punters’ favourite stocks, Rehman added.

Out of 419 active scrips, 179 gained, 220 lost, and 20 ended inert. Volumes edged lower to 556.146 million shares from 591.172 million in the previous session.

Ahsan Mehanti from Arif Habib Corporation, said, “Stocks closed bearish after Supreme Court verdict over GIDC appeal case with cash levies of Rs417 billion on corporates in cement, fertiliser, textile, and chemical sectors”. Dismal large-scale manufacturing data, concerns over uncertain status of $3.2 billion Saudi oil facility, and surging central bank bond auction yields played a catalyst role for bearish close ahead of long weekend, Mehanti added.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said, “The main factor behind the fall in share prices was GIDC verdict from the apex court”.

The impact, which would be sweeping, led to heavy selling but later it was realised that most of the companies belonging to fertiliser, chemical, power and other sectors had already accounted for the payments, he said. “The market has been strong and the downward correction was also due to the short week,” Ahmad said.

Muhammad Saeed Khalid, head of research at Shajar Capital, said, “The market remained range-bound during the session. The benchmark index went below 39,900 points mainly after the GIDC decision”.

As a result, investors booked gains in fertilisers, cements, and chemical sectors as All Shares Index marked volume of more than 550 million,” he said. “Investors also showed bullishness in Unity Food stocks as its ready shares marked an intraday volume of more than 60 million and right shares recorded over more than 50 million,” Saeed added. Shahab Farooq, director research at Next Capital said "The market lost ground primarily owing to the supreme court's decision on GIDC that calls for massive cash outflows from some of the index heavyweights”.

The top gainers were Sapphire Fibre, up Rs59 to close at Rs871/share, and Premier Sugar, strengthening by Rs32 to finish at Rs550/share, while Sapphire Textile, down Rs70.49 to close at Rs869.50/share, and Bata Pakistan, losing Rs48 to close at Rs1,600/share, were the main losers.

Unity Foods Limited was the volume leader with 60.265 million shares, gaining Rs1 to end at Rs13.90/share, whereas Pakistan Elektron was at the lowest rung in terms of turnover with 11.791 million shares, losing Rs0.05 to end at Rs34.12/share.