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Stocks decline as political, economic worries rattle investors

By Our Correspondent
December 18, 2018

The capital market declined on Monday amid profit taking triggered by political worries, concerns over high levels of debt and increase in quantum of sales tax in an expected mini-budget, dealers said.

Analyst Ahsan Mehanti from Arif Habib Corporations said, “Institutional profit taking continued on investor concerns for dismal economic outlook.”

Political uncertainty, investor fears over terms of IMF bailout package, falling global crude oil prices, and weak earnings outlook for auto, cement and oil sector played a catalytic role in the bearish close, he added.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 0.72 percent or 276.49 points to close at 38,309.17 points level. KSE-30 shares index followed suit with a low of 1.03 percent or 190.16 points to end at 18,215.75 points level.

Of 311 active scrips, 113 moved up, 176 retreated, and 22 remained unchanged. The ready market volumes stood at 66.826 million shares, as compared with the turnover of 98.522 million shares in the previous session.

Salman Ahmad, director research at Aba Ali Habib, said investor sentiment was depressed because of negative news both on political and economic fronts. “Volumes were thin, which showed that investors preferred to stay away from the market, as they wait for a positive trigger on the economic front; like parking of financial assistance from China and UAE,” he said.

Investors have been waiting for the government to strike an agreement with the IMF or to fill the deficit by announcing a mini-budget to increase sales tax or custom duties. “Any positive development can boost sentiment and the market might witness some positive rally in short-term.”

Adil Ghaffar, CEO of First Equity Modaraba, said, “With rising cost of doing business, the viability of brokerage businesses was raising alarms and the government should be cognizant of the matter before one more industry, yielding revenues for the government, collapsed.”

According to an analyst, reports suggested that Pakistan has prepared an economic revival plan, which has been shared with the International Monetary Fund. It has been learned that the main cause of concern for the government would be increasing the tax revenue, and they have little time to broaden the tax base.

“The only choice they have was to increase the customs duties, sales tax and excise duty to enhance revenue collection,” the analyst added. The move might raise inflation, as the companies would pass on all the taxes to consumers to not compromise on the earnings.

“The market has been in need of positive triggers like allowing non-filers to purchase vehicles and property, which help government to increase tax collection from the head of withholding tax,” said an analyst.

The highest gainers were Nestle Pakistan, up Rs100.00 to close at Rs8,850.00/share, and Siemens Pakistan, up Rs16.84 to finish at Rs910.59/share.

Companies that booked highest losses were Pakistan Tobacco, down Rs47.65 to close at Rs2,282.85/share, and Mari Petroleum, down Rs41.93 to close at Rs1,312.78/share.

Bank of Punjab recorded the highest volumes with a turnover of 10.039 billion shares. The scrip gained Rs0.21 to close at Rs12.95/share.

The lowest volumes were witnessed in Bank Al-Habib, recording a turnover of 2.173 million shares, and losing Rs0.23 to end at Rs74.00/share.