Lahore - The KSE-100 index grew by 1.4 percent during the week to end at new closing peak of 37,223. Average volumes clocked-in at 239mn shares, down by 4 percent during the week. However, average traded value increased by 10 percent to Rs11bn (US$106mn).

Fauji Cement (FCCL) has witnessed significant increase of volume during the last two days, clocking-in at an average 35.6mn shares vs. 1.5mn shares during last week. This was on the back of reported shutdown of FCCL’s production line 2 due to collapse of its clinker silo.   

During the week, Textile Weaving sector was among the major gainer as it grew by 25 percent, whereas Tobacco was down 3 percent. 

Foreigners were net buyers of US$14.5mn in the outgoing week. Net buying of US$12.0mn and US$10.2mn was seen in Cement and Oil & Gas marketing sectors. On the other hand, major selling was seen in banking sector to the tune of US$8.9mn. 

As per provisional numbers released under Pakistan Economic Survey FY16, Pakistan GDP grew by 4.7 percent in FY16, after 8 years, compared to 4.0 percent in FY15 and last 3-year average GDP growth of 3.9 percent due to strong growth in Industrial sector. Decline in cotton crop (27.9 percent) negatively impacted GDP growth by 0.5 percent. Agriculture sector showed decline of 0.2 percent led by decline in Crops by 6.3 percent.

According to Pakistan Bureau of Statistics (PBS), Pakistan CPI inflation for the month of May 2016 stood at 3.2 percent YoY as against 4.2 percent in the previous period driven by lower food inflation. Food inflation was down 0.9 percent MoM vs. 2.5 percent in the previous month.

Engro Corp plans to build a second LNG terminal with a capacity of around 400 to 600 million cubic feet a day, in a move that seems to convey its strategic expansion in the energy sector, while holding back its traditional fertilizer business.

FXTM chief market analyst Jameel Ahmad commented while the ECB conference failed to provide any unexpected fireworks, the EURUSD still managed to decline down the charts and moved back to 1.11 after Mario Draghi reminded investors that policymakers are willing to take further stimulus action if inflation prospects do not improve. Overall, while the ECB President stressed the need for patience when it comes to the EU recovery and appeared slightly more upbeat about the current EU economic outlook; at the same time, he did also manage to maintain a cautious stance that will spell to the markets not to get overly carried away by any recent upturn in EU economic data.

Jameel Ahmed observed that one interesting point from Mario Draghi’s press conference was that the ECB President made what could be perceived as supporting comments about the United Kingdom remaining in the EU, stating a belief that there were mutual benefits to both Europe and the United Kingdom if the latter was to stay in the EU. This might raise the question to traders whether there might be a negative spillover to the Euro if the overall outcome to the EU referendum on June 23 results in a UK exit.

According to Topline CEO Suhail Ahmed, the Govt. has not made any changes in capital gain tax for tax filers, which is positive for market as most investors are filers. Currently, 15 percent CGT is levied on sale of shares within 12 months, 12.5 percent on sale between 12-24 months and 7.5 percent tax if sold between 2-4 years for filers.  For non-filers, capital gains tax will be 18 percent (compared to 15 percent for filers) if holding period is less than 12 months. If holding period is between 12 to 24 months, then the rate will be 16 percent (compared to 12.5 percent for filers). If holding period is 24 to 48 months then the rate will be 11 percent (compared to 7.5 percent for filers).

According to experts, the Govt., similar to CGT, has not changed the tax regime on tax filers for dividend income, which stands at 12.5 percent. However, for non-filers, tax on dividend income has been increased from 17.5 percent to 20.0 percent.

In Federal Budget FY16, the Govt. imposed Alternate Corporate Tax (ACT) of 17 percent of accounting income as companies were required to pay higher of the corporate tax or ACT. The Govt. in this budget has proposed to collect advance tax on ACT, which is expected to raise additional taxes of Rs16bn from companies. Ever since imposition of 5 percent tax on bonus shares, there has been a major decline in Stock Market . Ever since imposition of 5 percent tax on bonus shares, there has been a major decline in announcement of bonus shares by listed firms. The Govt. in this budget has not changed the tax regime for bonus shares. Corporate tax rate has been proposed to be reduced to 31 percent in FY17 from current 32 percent in line with the Govt. policy to reduce corporate tax rate gradually. This 1 percent reduction will increase profits of non-banks by 1.5 percent and is already incorporated in our forecasts. Super tax that was levied in Tax Year 2015 to meet revenue needs is being extended to Tax Year 2016. As per income tax ordinance, companies who are earning more than Rs500mn in pre-tax profits will be subject to 3 percent tax (4 percent for banks).