KSE index gains 433 points on new corporate tax rate

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The Karachi Stock Exchange benchmark 100-index reacted sharply to the reduction in corporate tax as it increased by more than 433 points on Thursday to touch a fresh high of 22,757.72 points, dealers said.


Aqeel Karim Dhedhi, chairman of the AKD Group, said that the market reacted positively to the announcement of five percent decline in corporate tax over the next five years.


More allocation in the Public Sector Development Programme will increase interest in the cement sector, besides starting of housing mortgage finance, which would bring new investment in this sector, he said. However, he said, half percent increase in the turnover tax was negative for the market investment.


Dhedhi said an increase in the sales tax will also have a negative impact and resolution of the circular debt will increase inflation. “The federal budget is not good for people but not bad for the capital market,” he said.


Analysts say although investors were cautious ahead of the federal budget, they cheered up on the decision of resolution of the circular debt of Pakistan State Oil (PSO), which invited renewed buying in the company that closed with the upper lock.


The KSE-100 index increased by 433.15 points, or 1.94 percent, to close at 22,757.72 points against 22,324.57 points recorded on Wednesday. The index during the intraday session reached the high of 22,832.84 points, while the lowest level of the day was recorded at 22,324.57 points.


The KSE-30 index also improved by 390.61 points, or 2.25 percent, to 17,787.71 points in the session against 17,397.10 points recorded in the last session.


Trading was mostly recorded in the second- and third-tier stocks. The Bank of Punjab (Right), Fauji Cement, Worldcall Telecom and Japan Power remained the dominant stocks. Of a total of 393 active companies, 232 closed in the positive territory, 133 declined, while 28 remained unchanged.


Along with the index, turnover, trading value and market capitalisation also improved in the market. Turnover surged by 118 million shares to 470.93 million from 352.44 million shares, trading value improved to Rs12.41 billion against Rs9.77 billion, while market capitalisation increased to Rs5.51 trillion against Rs5.41 trillion recorded in the last session.


The market was led by oil and energy stocks with PSO ending at the upper lock, while cement, telecommunication and banking stocks also performed well.


Zafar Moti, analyst and senior member of the KSE, said the market took reduction in the corporate tax positively along with the increase in PSDP and development of infrastructure, which invited renewed interest in the cement sector.


However, Moti said, the federal budget was over-ambitious and over-optimistic. “The way of collection and expenses of the government will only increase the fiscal deficit,” he said.


Ahsan Mehanti, an analyst at Arif Habib Corp, said that bullish rally was led by stocks across-the-board after corporate tax was reduced by 5 percent to 30 percent in the next five years. Measures to settle the circular debt within 60 days, auction of 3G licences in July and measures to bring down the fiscal deficit to 6.3 percent of GDP played a catalytic role in the bullish sentiment despite concerns over dismal economic data, he said.


Samar Iqbal, senior manager equity sales, Topline Securities (Pvt) Ltd, said the index rallied to yet another high after reformed focused budget announcement. “Fresh buying in oil marketing companies, independent power producers, cement and telecom sectors was witnessed, whereas contrary to investors’ expectations no new direct tax was imposed,” she said.


Ovais Ahsan, an analyst at JS Global, said the market witnessed a grand post-budget rally on Thursday driven by the index heavyweights. The finance minister’s categorical announcement to resolve the circular debt issue within 60 days increased the buying momentum. Record public sector development spending allocated in the budget and the announcement of new housing scheme pushed up the cement sector with Lucky Cement increased by five percent, DGKC by five percent and Fauji Cement went up by 8.5 percent, hitting the upper circuit breakers, he said.


Highest increase was recorded in the shares of Unilever Food, which rose by Rs150 to Rs5,000 per share, followed by Nestle Pak that improved by Rs110 to Rs6,600 per share.


Major decline was witnessed in the shares of Wyeth Pak Ltd, which fell by Rs40 to Rs1,490 per share, followed by Murree Brewery that declined by Rs13.42 to Rs281.58 per share.


Significant turnover was recorded in the stocks of the Bank of Punjab (Right), Fauji Cement, Pakistan Telecommunication Company Limited, Worldcall Telecom, Lafarge Pak, the Bank of Punjab, Japan Power, Telecard Limited, DG Khan Cement and Dewan Cement.


The Bank of Punjab (Right) remained the volume leader with 66.31 million shares as it increased by 79 paisas to close at Rs3.44 per share, followed by Fauji Cement with 52.73 million shares on an increase of Re1 to Rs12.78 per share.


PTCL remained third leading stock with 35.11 million shares as it went up by Rs1.03 to Rs23.50 per share, Worldcall Telecom’s 21.36 million shares on an increase of nine paisas to Rs3.57 per share, Lafarge Pak’s 20.90 million shares registered an increase of 79 paisas to Rs8.38 per share, the Bank of Punjab recorded trading of 17.72 million shares with the improvement of 76 paisas to close at Rs14.24 per share, Japan Power witnessed trading of 10.43 million shares as it posted a decline of one paisa to close at Rs4.81 per share, Telecard Limited’s 10.34 million shares were traded with an increase of 31 paisas to Rs6.06 per share, DG Khan Cement’s 9.12 million shares were traded with an increase of Rs4.02 to Rs84.51 per share and 8.93 million shares of Dewan Cement were traded with an increase of 86 paisas to close at Rs8.22 per share.


Shares turnover in the futures market increased to 28.28 million from 16.88 million shares traded in the previous session. Fauji Cement Company Limited’s June futures led the market with 7.74 million shares on an increase of Re1 to Rs12.84 per share, followed by PTCL’s June futures with 4.69 million shares on an increase of Rs1.05 to Rs23.60 per share.

Courtesy:   The News

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