WEEKLY REVIEW: Uncertainty over CGT’s issue drags KSE 276 points down

Bears dominated most of the trading sessions during the week at the Karachi stock market in the wake of prevailing negative sentiments among investors who responded adversely to the announcement of capital gains tax (CGT) to be imposed on the capital markets from July 1, 2010.

The Karachi Stock Exchange (KSE) 100-share index was down by 276.33 points or 2.79 percent to close at 9,626.29 points as compared to 9,902.62 points of the previous week.

Analysts said other major factor that affected the market’s performance included delayed appointment of the finance minister following resignation by Shaukat Tareen and rising inflationary trend in the country.

The turnover was recorded at 157.22 million shares as against 171.22 million shares of the previous week, reflecting a decline of 8.17 percent.

“The market was flat despite 21-week high foreign buying,” said JS Sec analyst Sana Hanif. “The market ended on a negative note spurred by uncertainties surrounding CGT’s modalities and appointment of the new finance minister.”

Foreign interest in oil and banking sectors alongside recovery in the rupee’s value in the open market eased off investor’s concerns and provided the much-needed boost to the market, she said and added that NBP and UBL result announcements were the key highlights of the week, both posting an earning per share of Rs 16.92 and Rs 8.26, respectively.

The rupee’s appreciation by over Re 1 against the dollar in the open market, mainly on the back of improved foreign reserves (up $430 million to $14.8 billion) eased off investor’s concerns regarding further rupee depreciation, helping the market to recover.

Foreigners remained net buyers in the market, accumulating shares worth $24 million, a 21-week high level. Banks also accumulated shares worth $3.7 million, where companies emerged as net sellers of $15 million.

“Intense selling was witnessed as investors responded to new taxes on capital markets,” said Shahzad Chamdia Sec analyst Ahsan Mehanti. “Investors took positions in oversold blue chips while delay in appointment of finance minister, pending circular debt issue and rising inflationary trend in the economy were the reasons for the negative trend.