Bulls likely to rule PSX next week on tax cuts

KARACHI: After observing a lacklustre week, bulls are likely to rule the Pakistan Stock Exchange (PSX) next week with the support of the budget announcement, proposing reduced taxes, incentives to industrial sector and exemptions to automobile and IT sectors.

A report issued by the KASB Securities noted, after ages, Pakistan’s government had taken pro-investor measures by reducing the capital gains tax (CGT) to 12.5 per cent from the existing 15 per cent, reducing turnover tax to 1.25 per cent and removal of the withholding tax (WHT) on margin financing.

KASB Securities CEO Arsalan Soomro said that the market will react very positively on the CGT news.

Also read: Strong inflows may keep rupee stable next week

“Investors was asking for lower tax rates since it’s a documented source of investment. The government yielding to the demand will be a win-win for investors and governments. This fiscal year will be full of optimism and strong bull-run as long as oil prices do not go out of control.”

An analyst at JS Global Capital said with abundant incentives for various sectors across-the-board and some relief over CGT on stocks, the local equity market is likely to celebrate the Federal Budget FY22, going forward.

“We highlight construction-oriented sectors, autos, export-oriented sectors, technology sector, food sector and other manufacturing sectors, as key beneficiaries of the Budget FY22.

The KSE-100 shares index gained 0.19 per cent, or 93.02 points, to close the week June 11, 2021 at 48,304.72 points. The KSE-30 shares index declined 0.89 percent, or 175.92 points, to close at 19,478.73 points.

An analyst at the Topline Securities said the stocks inched up 0.2 per cent during the week, as the investors weighed 20 per cent sequential increase in the trade deficit, record remittances by overseas Pakistanis and pro-business and pro-people budget announced by Finance Minister Shaukat Tarin on weekend.

An analyst at Pearl Securities said the KSE-100 index moved both ways during the week on the back of Pakistan meeting 31 of the 40 Financial Action Task Force (FATF) recommendations, and Rs89 billion disbursement to independent power producers (IPPs). “Moreover continuing IMF negotiations and KSA approving financing of SR901 million for financing of Mohmand Hydropower Dam also guided the investors’ sentiment.

Ali Zaidi at JS Global Capital said the benchmark index closed the volatile week nearly flat. “Even though investors participation declined marginally this week, it was by no means unhealthy: traded volumes averaged at 1.08 billion shares/day, while average value of ‘the traded securities was recorded at $162 million/day.”

Moreover, net selling by foreigners went up this week, particularly in the index heavyweight sectors. Most of the foreign selling was absorbed on the local side by the mutual funds.

Over the week, the government finally cleared Rs89 billion to 20 IPPs. Moreover, news flows related to the Federal Budget FY22 continued to pour in during the week that helped build positive expectations for an accommodative budget. Moreover, the FATF Asia Pacific Group (APG) has cleared Pakistan on 22 more points.

Other news flows during the week included cumulative inflows of $1.25 billion in the Roshan Digital Accounts, record workers’ remittances increased 34 per cent to $2.5 billion in May 2021 and the trade deficit widened 30.6 per cent to $27.488 billion in the ii months of FY21.