STOCK MARKET UPDATE: 24.04.2012

Stock

Karachi Stocks Up 152.97 Points:
KARACHI, Apr 23: At close of trading, the KSE-100 index was at 14089.45, up 152.97 points.

April 23, 2012

 5 TOP GAINERS  &  LOOSERS:

UniLever Pak Ltd	Rs 139.99	Rafhan Maize	Rs (88.87)
Unilever Food	Rs 95.91	Fazal Textile	Rs (11.04)
Bata (Pak)	Rs 8.97	Colgate Palmoli	Rs (6.00)
Wyeth Pak Ltd	Rs 7.48	Shahtaj Sugar	Rs (3.54)
Shezan Int’l	Rs 6.79	Shell Pakistan	Rs (2.46)

Stocks sustain gains above 14,000-level

KARACHI, April 23: Stocks at the Karachi share bazaar shot through the roof on Monday with the KSE-100 index leisurely crossing the psychological barrier of 14,000 points.
Traders, brokers and investors, had reason to celebrate for they have made big fortunes over the last few months.
“The index accomplished the feat of crossing over the 14,000-level, on closing basis, after four years,” said several market participants, adding that though it had stepped over that level several times intra-day in previous sessions, the index was unable to give a breakout above that critical resistance at the close of trading.
But the shares settled at 14,083.44 points representing a giant leap of 146.96 points, or more than one per cent, over last closing on Friday.
Popular cement stocks were again the lead gainers, which, besides the stellar earnings of cement companies this season, was attributed to news of decline in prices of basic production material coal.
The volume of trade was slightly down to 213 million shares, from 244 million shares the previous session. Yet the deep penetration through the 14,000 level was thought to be an encouraging sign for the market.
Arif Habib, the former chairman of KSE, identified one major factor for an incessant bull-run, as the flow of liquidity in the market that had pushed volumes up and allowed price-discovery.
“Investors take the risk of price fluctuations of stocks, but not that of liquidity,” he said, adding that with the improvement in liquidity, the concerns of investors on that front were set at rest.
Other than that, he said that corporate results were showing remarkable growth and thought that several sectors, such as textile spinning and sugar were still awakening to a positive change in their bottom line in the upcoming quarters.
He attributed the bull-run also to scintillating growth in earnings of cement, oil and gas exploration and production companies and a change for the better in fundamentals of the banking sector.
With the provisioning of bad loans almost over, banks looked forward to better forward earnings as the repayment capabilities to banks by several sectors, such as real estate and textiles, was on the mend.
Moreover, the entry of retail investors had unlocked potential and price discovery inherent in second and third tier stocks. The influential broker observed that among the major triggers, going forward, were the expectation of signing of the SRO on reformed Capital Gains Tax (CGT) and the strong possibility of downward revision in corporate tax rate for listed companies, while raising the slab for individual and partnership firms vide the upcoming budget.
Chairman and Managing Director of National Investment Trust (NIT) Wazir Ali Khoja observed that the financial results showed handsome growth which mirrored an overall improvement in the economy.
Mohammad Sohail, CEO at brokerage Topline Securities, commented that in spite of the delay in new capital gains tax, the index closing above the 14,000-level meant that the market sentiments were still bullish.
The rise in stock prices represented the underlying excellent corporate results and some recovery in economy. “Investors are also hopeful that the budget announcement next month will provide more incentives to the corporate sector,” he said.
Bears were however waiting and watching. One thought that the index signalled an ‘overbought’ position and investors should only resort to cautious buy with strict ‘stop-loss’. But much of the market was intoxicated with over 30 per cent gains in less than four months of the current calendar year.
They pointed at high yield and price-to-earnings (p/e) ratio of 7.5 times at which the Pakistani stocks were placed, representing discount over the 12 times p/e at which most regional peers were currently trading.

Govt to allow investment of black money in stock market
ISLAMABAD: Yielding to pressure from brokers, the government has decided to allow through a presidential order investment of ‘black money’ in the capital market, giving them an opportunity to whiten millions of dollars in undeclared earnings.
A well-placed source told Dawn on Monday that the Federal Board of Revenue had vetted the required ordinance from the law ministry to make way for implementing the controversial decision, the first of its kind in the country’s history.
The FBR will send the draft ordinance to the presidency on Tuesday and President Asif Ali Zardari will promulgate it over the next 24 hours, the source said, adding that the urgency was clear from the fact that the president had convened the National Assembly session on April 25.
Different interest groups, especially stock brokers, have been putting pressure on the government for the past couple of months after its economic team, comprising Finance Minister Dr Abdul Hafeez Shaikh and the Deputy Chairman of the Planning Commission, Dr Nadeemul Haq, promised an amnesty scheme to whiten black money.
The government intended to announce the decision in the budget, but fearing a political backlash it decided to implement the controversial scheme through a presidential ordinance, which has a life of 120 days.
The Security and Exchange Commission of Pakistan (SECP), the regulator of stock market and a supporter of the scheme, has sought suspension of section 111 of the Income Tax Ordinance till June 2014. The section allows officials to tax income, assets and investment of a person whose nature and source are unexplained.
Under the proposed scheme, black money invested in the stock market for 120 days running will be exempted from the section 111. This means that since the FBR will not ask investors about the source of money, it will automatically become legal.
The SECP claimed that investors would invest the money earned by them over the past 36 years in the absence of capital gains tax.
But economists fear the amnesty scheme will open doors for corruption and further delay the much-awaited process of reducing the size of black economy.
A report by an Islamabad-based think tank, Sustainable Development Policy Institute, and the United Nations Office on Drug and Crime (UNODC) projected the size of informal economy at $34 billion in 2010-11. This is one-fifth of the formal economy and needs to be plugged through administrative measures.
The proposed scheme did not go down well with former economic adviser Dr Ashfaq Hassan Khan. He said the move would promote corruption through ‘legal means’. “We are promoting legal corruption, which is not good for the country. This will encourage people not to pay taxes and indulge in corruption.”
He said the scheme was also not politically viable for the government. “There is a general perception that corruption is at its peak. Bringing such a scheme, in my opinion, will not be politically advisable,” Dr Ashfaq said.
According to the source, tax officials were not in favour of the scheme in private and were of the opinion that the government should encourage the whitening of money through investment in infrastructure funds and treasury bonds instead of the stock market.
Last year the government imposed a 10 per cent capital gains tax (CGT) on holding of shares below six months and 7.5 per cent on holding shares for less than 12 months.
Exemptions were granted to holding of shares above one year. But the government has for failed to implement this decision.
Member Inland Revenue Service Shahid Husain Asad told Dawn that CGT rates would be implemented under the new package. However, he said, there would be a revised rate of eight per cent CGT on holding of shares for more than six months and less than one year and 10 per cent on holding of shares less than six months. He said there would be 0.1 per cent capital value tax on trading of shares as well.
An influential economic manager from Karachi told Dawn that the whitening of black money would create a short-term bubble. In the long-term, he said, the government would have to ensure transparency and investments through other schemes, instead of such unpopular ways.
About the collection of taxes, he said the FBR might generate some money, but tax officials could not locate the persons who paid the money through stock markets.
“Therefore, the scheme will not help in documentation of economy, he said, adding that such scope would again inflate the market artificially. Holders of black money would invest in the market and eventually leave it after whitening the money.
But former finance minister Dr Salman Shah said the scheme had both pros and cons. He said black money would wait for follow-up measures by the government in case no long-term measures were taken for documenting the economy. He said the government should also reduce tax rate and broaden the base. He called for documenting the economy and scrutinising the sources of black economy.
On the positive side, he said, the scheme would facilitate foreign capital inflows into the stock market. This could be followed by foreign direct investment.
Dr Salman ruled out speculations that capital flows would cause bubble in the market because the price-earning ratio in Pakistan was less as compared to other Asian markets.

Makers offer urea at half price

KARACHI, April 23: Local fertiliser manufacturers have urged the government not to spend millions of dollars on import of urea when it can procure the commodity locally at almost half of international price.
In a letter to the finance ministry on Monday, they said the government’s decision of importing 300,000 tons of urea to meet demand in Kharif would cost the country $170 million (Rs66,788 per ton).
They offered to provide the fertiliser at Rs35,900 per ton inclusive of general sales tax (GST). “Procuring local urea will not only save foreign exchange but it will also reduce the burden of subsidies by Rs9 billion on the national kitty,” they maintained.
“The fertiliser industry was given some hope at the highest level that the government may postpone urea import decision if the domestic fertiliser industry offers the commodity at a reasonable price.”
“Considering the current market situation and low demand, the domestic fertiliser sector offered to sell 300,000 tons at low price costing Rs10.77 billion against the imported urea which would cost Rs20.36 billion,” the letter added.

ANNOUCEMENTS/COMPANY NEWS:

1. PSO earns Rs8.97bn:  KARACHI, April 23: Pakistan State Oil posted a profit-after-tax of Rs8.97 billion for the first nine months (July-March) of 2011-12 as compared to Rs9.26 billion in the same period of 2010-11.
The Board of Management in its meeting on Monday reviewed the company’s performance for period ended March 31, 2012 (3QFY12).
During the period under review, revenue grew by 30.2 per cent to Rs863 billion as co-mpared to Rs663 billion in the corresponding period last year.
The board declared a first interim cash dividend of Rs3 per share for year ending June 30, 2012. While improvements in fuel price margins served to improve company’s earnings, the continued rupee devaluation and the financial costs related to the massive power sector receivables affected overall profitability of PSO.
Sales volumes for Black Oil reduced by four per cent whereas, White Oil grew by three per cent.
PSO share in the Black Oil and White Oil segments stood at 77.7 and 54.4 per cent respectively, thereby contributing to an overall market share of 64.9 per cent.
The board members showed concern over the ever rising balance of receivables of the company which stood at Rs191 billion as of March 31, 2012. The state-run company continues to constantly pursue the IPPs as well as the government for recovery of its outstanding receivables.

MOHAMMED SALEEM MANSOORI