current week benchmark performance finally turned the year-to-date (YTD) return towards the green zone along with volumes crossing the 100 million shares mark on Wednesday and Thursday. The rumours regarding the potential withdrawal of CGT were a major force behind the recent bullish trend in the market. Market punters are expecting a CGT withdrawal in the current budget as stock market volumes and performance was severally impacted by its imposition.
The CGT reporting procedure was quite cumbersome for an ordinary investor, hence limiting small investor activity in the stock market. It seems the market is in a festive mood before the FY12 budget announcement. With Sheikh’s statement on the weekend that the upcoming budget would be for the common man, the government’s intention is evident. With the passage of time, rumours of increased taxation on banks and corporate sector are likely to be forgotten by the investor community. Furthermore, strong buzz regarding the removal of deemed duty on refineries was also negated up to a certain extent and provided the required push to stocks in the refinery sector.
In the last MPS on May 21, 2011, SBP kept the discount rate unchanged at 14 percent, sighting a current account surplus and government’s commitment to address the issues especially the fiscal deficit. Furthermore, the SBP is expected to maintain the same commitment in the upcoming budget. As per news reports on Friday, Budget outlay for the upcoming fiscal year is around Rs3.8 trillion, where as the government is expecting a tax revenue of Rs1.952 trillion against the current year revised target of Rs1.588trillion, which is up by almost 23 percent.
The government is estimating a budget deficit of 5.5 percent of GDP whereas the GDP is expected to grow by 4.2 percent in FY12. With the available information, we may expect GDP growth to be better in contrast with that of the current year, in which it was largely impacted by the disastrous floods in FY11, said Bilal Asif at HMFS. The only concern would be the IMF repayment schedule which is expected to kick off in 2012; hence liquidity management would be the key towards IMF repayments.
Looking at the individual stock performances, BOP, ANL and JSCL were amongst the top performers. News related to the resolution of JS group’s financial issues kept the stock in the limelight. After a long time BoP is in action as investors are hopeful that financial issues pertaining to the bank might be resolved, which triggered a price appreciation. Returns of the listed refineries improved during the week, largely on account of the news related to deemed duty. NBP lead the banking sector as its stock recovered from lower levels.
