The downward pressure was primarily driven by concerns over the potential elimination of the final tax status for CGT and dividends, which would align their tax rates with the normal income tax rate.
Additionally, Moody’s statement suggesting a status quo in the upcoming Monetary Policy Committee (MPC) meeting also exerted some pressure on the market. These negatives overshadowed positive developments during the week.
On the macro front, inflation in May'24 eased to a 30-month low of 11.8%YoY, resulting in positive real interest rates exceeding 1,000bps. This fueled market participants' expectations for rate cuts in the June 10 MPC meeting.
Furthermore, the announcement of monetary easing from developed economies, including the European Central Bank and the Bank of Canada, amplified this sentiment.
May trade deficit shrank by 15%MoM to US$2.1 billion, while record-high remittance inflows of US$3.2 billion, hinting at another potential current account surplus, raising expectations that FY24’s current account could close in surplus.
As the FY25 budget approaches, new tax measures have surfaced with the IMF demanding an additional PKR2.0 trillion in revenue, while the local officials considering additional taxation of PKR1.4 trillion.
With an overall volatility in market, participation also decreased by 5.3%WoW, with the average daily traded volume falling to 423 million shares as compared to 447 million shares a week ago.
On the currency front, PKR appreciated by 0.05%WoW to close at 278.2/US$.
Other major news flows during the week included: 1) FBR tax collection in May exceeded target by RPK15.21 billion, 2) Pakistan has to repay US$10 billion by July, 3) May Petroleum products sales was up 7% to 1.39 million Tons YoY, and 4) Cement sales was Up by almost 8% during May.
Top performing sectors included: Paper & Board, Jute, and Textile spinning, while the laagered included: Inv. Banks/ securities cos., E&Ps and Refinery
Major net selling was recorded by Individuals with a net sell of US$8.9 million. Insurance and Banks/ DFI absorbed most of the selling with a net buy of US$7.0 million and US$6.8 million.
Top performing scrips of the week were: YOUW, SHEL, MTL, SEARL and TRG, while the laggards included: CEPB, FFBL, PSX, PIBTL and OGDC.
Looking ahead, the upcoming MPC meeting on June 10th will be in the spotlight, with any rate cut expected to shift the market’s focus towards cyclical sectors.
Additionally, the Federal Budget 2025 will significantly influence investor sentiment. Given the prevailing uncertainties, the market is likely to remain volatile in the short run, with clarity expected to emerge after the budget announcement. Until then, AKD Securities advises investors to adopt a wait-and-see approach, although any corrections should be seen as opportunities for value buys.
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