The KSE-100 index rallied 6.9 per cent during the week, highest since April 03, 2009 (146 week high). Investor interest is also vindicated by 209per cent WoW improvement in average volumes to 87m shares. However, foreigners remained net sellers, offloading shares worth $3.7m. Positive expectations related to Capital Gain Tax (CGT) issue ruled the market sentiment, while continuing global economic crisis and uncertain domestic political environment failed to dampen the investor confidence. Moreover, the circular debt adjustment worth Rs150b through issuance of Term Finance Certificates (TFCs) and the raid by Competition Commission of Pakistan (CCP) at All Pakistan Cement Manufacturers Association (APCMA) office were the major highlights of the week.
The bulls linked with CGT: The news regarding the proposals sent by SECP to the Ministry of Finance pertaining to CGT, WHT and disclosure of the source of income created positive investor sentiment. Moreover, the announcement in the KSE regarding the visit of Hafeez Sheikh on the last trading day also provided impetus to the market as he is expected to announce some major changes to the CGT regime. TFC issue to adjust circular debt: The government has decided to adjust circular debt worth Rs150b through issuance of TFCs. Reportedly, the banks have agreed to subscribe to these issues that is likely to provide relief to the energy and banking sectors by converting loans of the energy companies into TFCs. Despite this news, Banking and Electricity sectors underperformed the market by 2.8per cent and 3.6per cent respectively.
LAHORE
AAHYAN MUMTAZ
The KSE-100 index rallied 750 points (+6.9 per cent WoW) which is the highest since April 03, 2009 (146 week high). Investor interest also saw rocketing recovery of 209 per cent WoW in terms of av. daily volumes which stood at 87m shares. This respite is attributed to positive expectations regarding the regulator’s move to ease CGT requirements, along with a circular debt adjustment on the back of news flows regarding PKR 150b worth TFC issues. However, foreigners remained net sellers of USD 3.7m worth of equities while the impetus was mainly provided by mutual funds and retail investors. The news regarding the proposals sent by SECP to the Ministry of Finance pertaining to CGT, WHT and disclosure of the source of income created positive investor sentiment. The regulator has proposed a CGT collection mechanism on the clearing agent level, accompanied by a 3 month grace period, reduction in WHT rate and relaxation with respect to source of income information in the filing of income tax returns. Further, The GoP has decided to adjust circular debt worth PKR 150b through issuance of TFCs. Reportedly, banks have agreed to subscribe to these issues which, in turn, is likely to provide relief to the energy and banking sectors by freeing up stuck loans of the energy companies into TFCs thus enabling restart of income stream for banks while providing them capital allocation benefits. Moreover, on the political front, confirmation that the hearing of the memogate case will be held next week provided further confidence.
Stock Specific Activity
The market witnessed strong buying spree in all the major sectors and stocks. In Fertilizer sector, ENGRO, FFBL and FFC were up by 10.5 per cent, 10.4 per cent and 6.2 per cent respectively mainly on the back of healthy results expected to be announced at the end of this month, however, FATIMA declined by 1.6 per cent. Oil & Gas and the Power sector witnessed improvements of 8.8per cent and 5.7 per cent respectively, on the back of circular debt relief. OGDC was up 11.0 per cent, PPL up 7.4 per cent, POL was up 5.6 per cent and PSO was up 6per cent. However, this performance was not replicated by the banking sector, which
underperformed the KSE-100 index by 2.8 per cent, as investors chose to remain cautious preceeding the announcement of results in the next week.
Forward Looking Expectations
The market is expected to remain positive with healthy volumes where corporate results, the outcome of the memogate hearing and the visit of SECP Chairman and Finance Minister to the KSE – implying developments on the CGT front – would drive market sentiment. In this regard, banking sector scrips are expected to be in the limelight with MCB, UBL, and ABL being top picks. Support from local institutions is expected to continue where investors would opt for selective buying strong scrips offering attractive valuations. While the element of profit taking cannot be ruled out following the impressive showing in the outgoing week, fertilizer stocks are expected to continue their strong performance trend.
