KARACHI – Negative signals on the part of IMF added to the nervousness of investors compounding anxiety of various economic and financial issues particularly due to various taxation measures being weighed for likely implementation in the upcoming federal budget. Dampened morale was evident in today’s trading after foreign investors offloaded investment amounting to $4.4 million in yesterday’s session. Locals are wary of the economic outlook and remained cautious as volume shrunk to a mere 56 million shares whilst the benchmark index lost 76 points.
POL earnings of Rs 11.15 per share were well below expectations which kept the scrip under pressure while HUBC despite better earnings registered a negative closing. Most of the banking sector stocks posted a negative close led by MCB and HBL. Indecisive market behavior has kept the KSE-100 oscillating within the range of 11600-11900 in a last month or so.
All major oil, fertilizer and banking stocks witnessed selling pressure to some degree despite better quarterly result announcements. POL’s 9MFY11 announcement came in line with market expectations (EPS of Rs33.14 per share for March) but failed to attract investors as it ended the day down 1.1 percent. NRL announced 9MFY11 result posting EPS of Rs 60.60 per share (Rs21.38 per share for the third quarter) but finished the day down 0.5 percent after some initial excitement in the scrip.
In contrast, ATRL gained 0.8 percent after posting 9MFY11 EPS of Rs 22.87 which was slightly higher than market expectations. The negativity that was quite evident from the early trade session led by low volume price erosion in the high priced stocks as stocks find it tough to sustain the attained levels, mainly due to the cautious approach by the market men despite availability of leverage.
While there remains a strong conviction amongst investors that CGT implementation modes needs to be changed to a presumptive mode for enabling local participants to reenter the arena and for the regeneration of activity, now with leverage available, true identification of the hurdles, will allow the local bourse to display strength mainly on volumes. However rumors and budget leaks suggesting the introduction of various new taxes and increase in existing tax slabs, along with a standoff with the US over drone attacks and its repercussions, along with likely add to inflationary pressure and rising local interest rates, which keep the outlook gloomy.
Despite the prognosis of investors, the proposed measure will indeed come as a breath of fresh air for the suffocated local equity market, caution remains paramount with the accumulation in fundamentally strong large cap stocks offering consistent dividend yields smoothly operating with low and cheap debt, said Hasnain Asghar Ali at AzizHusein.
