The week began on a positive note as speculation in domestic politics eased somewhat after the return of President Zardari. Concurrently, further impetus came on the back of rumours related to proposal of KSE to collect capital gain tax under the presumptive tax regime for individual investors. Nonetheless, contrasting views of government and army on the memogate controversy and a current account deficit (CAD) of $2.1 billion reported in 5M kept the market sentiment fairly cautious. Overall, KSE 100 Index gained 273 points, up 2.5 per cent WoW. Volumes also improved marginally by 1.4 per cent WoW to 45 million shares. Moreover, local bourse outperformed the regional markets by one per cent. Though, despite the recovery foreigners remained net sellers, offloading shares worth $8.9 million.
SBP annual report: Key projections for FY12: State Bank of Pakistan (SBP) expects the economy to grow in the range of 3-4 per cent in FY12. The reason highlighted by SBP for the expected underperformance is its bleak outlook on agriculture sector. SBP also believes that the fiscal deficit target of four per cent will not be met as flood in Sindh, dengue fever in Punjab, upcoming elections and absence of IMF programme are likely to take their toll on expenditures. Additionally, inflows from coalition support fund are uncertain on the back of strained US-Pak relationship.
Consequently SBP has projected fiscal deficit of 5.5-6.5 per cent of GDP for FY12. On the external front, SBP projects current account deficit (CAD) of 1.5-2.5 per cent of GDP in FY12 against the initial target of 0.6 per cent of GDP.
Individual Stocks: Mixed reaction in fertiliser stocks was witnessed amid the uncertainty on gas related issues. Fatima and FFBL outperformed the market by six per cent and two per cent, respectively, while both FFC and Engro unperformed by one per cent.
