KSE-Low-priced scrips lead creeping rallyKARACHI, Feb 15: The share market on Wednesday maintained a firm trend for the fourth session in a row as a section of investors actively played in the undervalued scrips under the lead of JS & Co, Bank of Punjab and Azgard Nine amid alternate bouts of buying and selling but did not opt for the blue chips.
The KSE 100-share index posted a fresh modest rise of 49.19 points at 12,311.04 as compared to 12,261.85 a day earlier. The creeping rally may take the index to its next target of 12,500 during the next couple of sessions.
Floor brokers said active support being extended to low-priced shares reflected investor intentions to play safe until political situation showed positive improvement and billed it a “new phenomenon in the shares business”.
Investors were not inclined to go for overvalued shares both in the oil and fertiliser sectors owing to political reasons and high financial risks involved, analyst Ahsan Mehanti said.
“But the sustained creeping rally indicates that a snap big turnaround may be close and manifest itself in a big way any session backed by higher corporate payouts and earnings,” he said.
Analyst Samar Iqbal said reports of some positive developments on the settlement of Capital Gains Tax (CGT) issue were widely welcomed by the investors but they have still be transformed in the buying euphoria.
The market is weighed down as leading investors are not inclined to trade beyond low-priced scrips for obvious reasons and once they choose to pick up a few among them, the trading pattern would tell a different story, he added.
Traded volume maintained its upward drive rising to 172m shares from the previous 148m shares though 80 per cent of it went to the credit of low-priced shares, while gainers held a strong edge over the losers at 173 to 89, with 84 shares holding on to the last levels.
The active list was again topped by JS & Co, higher by 75 paisa at Rs7, followed by Azgard Nine, firm by 42 paisa at Rs6.15 on 15m shares, Bank of Punjab, up by 57 paisa at Rs7.08 on 10m shares, Fatima Fertiliser up 77 paisa at Rs23.47 on 10m shares, Arif Habib Corporation, higher by Rs1.45 at Rs30.75 on 9m shares, Pace Pakistan, steady by seven paisa at Rs1.86 on 6m shares and Engro Polymer, up Re1 at Rs9.63 on 5m shares.
They were followed by Dewan Salman, firm by 21 paisa at Rs1.78 on 4m shares, Fauji Cement, steady by six paisa at Rs4.62 also on 4m shares and Bank Alfalah, higher by 33 paisa at Rs12.83 also on 4m shares.
FUTURE CONTRACTS: Arif Habib Corporation led the list of actives on this counter, higher by Rs1.44 at Rs30.91 on a large turnover of 1.574m shares followed by Engro Corporation, easy by 89 paisa at Rs122.25 on 0.781m shares and National Bank, up 62 paisa at Rs47.08 on 0591m shares.
Other actives included D.G. Khan Cement, firm by six paisa at Rs24.96 on 0.501 shares and Fauji Fertiliser Bin Qasim, higher 61 paisa at Rs47.41 on 0.460m shares.
KSE investor protection fund raised to Rs75mKARACHI, Feb 15: The investor protection fund has been raised to Rs75 million, from the prevailing Rs20 million, per broker at the Karachi Stock Exchange so as to offer comfort to investors, the Managing Director at the KSE Nadeem Naqvi said at a press conference on Wednesday.
Chairman, Muneer Kamal, who was also present at the briefing, gave his input on various issues raised by the MD in his presentation.
The bourse chief said that during the 2008 crisis — which both top men insisted was not a stock crisis limited to the KSE, but the collapse of all of the financial sector worldwide — the KSE had received 6,000 claims against ten defaulter brokers.
The previous board of directors had settled nearly 5,500 cases.
In reply to a query, the management informed that between 16 to 65 paisa to a rupee were given in compensation to the claimants.
“With the investor protection fund now being raised, the bourse has sought regulatory approvals to grant additional sum to the already settled claimants,” it was said.
Dispelling doubts about the acceptance and applicability of the SECP proposals for modification in Capital Gains Tax (CGT) collection and calculation methodology, Muneer Kamal said that the former finance minister had given assurances on the floor of the exchange and progress was being made as the FBR official also visited the NCCPL on Tuesday to study the preparations.
The MD informed that the regulation in respect of Electronic Traded Funds had been approved and received by the exchange.
He referred to new products in pipeline which included: SLB, MTS, ETF’s, Sector Indices, cross-border index listings and options.
The MD showed that the stocks stood out as most profitable source of investment over the period of 10 years (2001-2010) giving out an average return of 33 per cent.
Yet the chairman acknowledged that Pakistan’s market had a lot of unrealised potential considering that the Market Capitalisation to GDP stood at 16.5 per cent for FY12, sharply down from 46.4 per cent in FY 07.
The MD argued that there was value creation since stocks were trading at 2.94 times the paid-up capital of listed companies.
Demolishing the notion of the failure of stock market as source of capital, the MD said that in the last 10 years (2002-2011), the sum of Rs316 billion was mobilised by listed companies through issuance of rights shares.
Identifying new initiatives to increase the number of listed companies, the MD listed Launch of IPO initiative by the three exchanges under umbrella of the South-Asian Federation of Exchanges (SAFE); cooption of investment banks, DFIs, investment banking divisions of large banks and top-tier brokers to market the IPO concept to privately held businesses; detailed review of listing regulations in order to reduce paperwork/application process timeline for listing, under the guidance of SECP and initiative for launching a dedicated Small and Medium companies Exchange.
Mr Nadeem Naqvi also highlighted new initiatives to broaden investor base. Those included increasing the number of investors to 0.50 million, doubled the current 0.25; to draw a comprehensive, time bound action plan to generate investor awareness by joint forum of all capital market institutions, SECP and reactivated Institute of Capital market; new regulations by SECP to encourage individual investor participation; new product rollouts, including sector indices, Options, ETFs, market-maker regulations, cross-listing of Regional Index derivatives.
The MD lamented loss of volume; the average daily turnover down to 79 million shares in CY11, from the peak of 365 million.
The MD specified the loss of revenue to the government with the KSE tax collection from equity market down to a paltry Rs0.4 billion in FY11, from Rs4.7 billion at its high at Rs4.7 billion in FY08.
He also mentioned the loss caused to stock brokerage firms whose net profit of Rs2.2 billion in 2008 turned to net loss of Rs1.3 billion in 2011. KSE itself experienced dismal performance with net profit slumping to Rs50 million, from Rs772 million.
He said that the Clearing House Protection Fund had strong cash balance of Rs3 billion, which was why there were broker defaults in 2008, but not that of the clearing house. The structural issues hampering market growth were discussed in detail.
Those included absence of market makers; lack of incentives for debt market; problems facing the Non-resident Pakistanis (NRPs) to invest in domestic equity market; lack of international marketing and lack of liquidity.
“Partnership/proprietorship Tax rate of 20-25 per cent, corporatized business tax rate at 35 per cent was a huge disincentive to list on the stock market,” said the MD.
He also brooded on poorly designed and inappropriately timed imposition of new CGT regime; perception of unfair treatment for equity investors against investment in government securities; no tax on agricultural sector and non-implementation of RGST on trade services. “Further, perceived fear of harassment by tax officials of individuals has driven out retail investors from the market,” he said.