The benchmark index of the Karachi Stock Exchange witnessed its driest phase by registering its lowest volume for CY11 of around 37mn shares on Wednesday, whereas daily average volume for the week stood at merely 45.9mn shares which is significantly below the current month average daily volume of 61mn shares.
Furthermore, the benchmark index barely rose by 6 points to close at 11,973 points on Friday. Investors are fearful of investing in the present environment on account of two major reasons.
Firstly, the killing of Osama bin Laden in Abbotabad that has enhanced the political pressure on Pakistan to act on war footing to hunt extremist elements. Furthermore, risks pertaining to the upcoming budget and rumors pertaining to hike in the corporate tax rates that is expected to be enhanced from 35% to 40% threatens stock valuations. Prudent investors are waiting for a clearer sky and thus deferring their investment decisions.
The news on the economic front especially budgetary proposals from time to time impacted the stock market. Once again, the speculation of removal of deemed duty on refinery products has become the talk of the town, as its removal would make our refineries financially
unviable.
The recent provisional economic data revealed by the SBP and FBS suggest Pakistan’s GDP growth around 2.39%, which was largely in line with expectations. Keeping in view the post flood analysis, agriculture sector growth remains at a meager 1.21%.
Apart from that the LSM growth finally entering towards the positive zone, depicting a growth of 0.98%. Keeping in view the economic challenges being faced by the country, the economic performance seems reasonable. Reports regarding the outcome of budgetary meetings between the GoP and IMF seem relatively mixed. Furthermore the fiscal deficit is estimated to remain at around 6.5%, despite the introduction of the mini-budget in mid March 2011.
The positive current account balance of USD748mn can be considered as a major achievement for the current fiscal year, in months of FY11. Looking at the individual stocks, top tier companies were largely out of colour while low cap stocks dominated the top-ten volume leaders board that indicated the lackluster sentiment.
Once again Engro’s new plant’s gas supply was cut off, which kept the stock in the limelight while FFC’s dividend was adjusted on Friday lowered the stock’s return by around 2.52% for the week.
The Oil sector was marginally up with contributions by OGDC, PPL, POL and PSO whereas top tier banking stocks were largely tilted towards the negative zone except MCB. Analysts believe that investors are skeptical about budgetary measures where they expect additional tax burden being put on their shoulders. Hence it seems prudent to wait and watch rather than investing in the current environment.
