By Khalid Saifuddin
Updated as on 9th June 2012
Now its time to discuss the differences between Federal and Provincial Budgets
Well the excitement of budget evaporated right from the beginning of the past week. Hope our readers understand why we were struggling to call it an overwhelming budget only, so far the interpretation of the budget not exciting daily traders, and it is specifically noticed the outflows in foreign investor’s account as the ongoing month reflecting outflows of USD$ 13,436,873 after four consecutive months of inflows. KSE-100 Index lost 318 points and volumes declined by 32.09% in past week, the move of the week was one sided, only third session of the week found with some excitement from investors, but that was indicated as short term bounce and an awesome opportunity for offloading positions “in our call for 6th June 2012”.
Investors and traders found with analyzing the interpretation of budget and trying finding the beneficiary sectors after the budget announcement for long term investments. It was expected to have more volumes but currently investors look little bit disappointed on reservation of opposition regarding the inclusion of the capital gain tax (CGT) ordinance into the Finance Bill 2012, which will allow investors to keep their sources of funding undisclosed till June 2014. No one doubted of incoming excitement in market in sense of participation of stakeholders after budgetary announcement, but so far traders and investors seem to be hesitant. Country’s foreign exchange reserves fell during the week ending May 31, 2012 and the decline was witnessed on account of scheduled debt repayments made by the SBP to various multilateral lending agencies. State Bank of Pakistan (SBP) has stated that monetary policy is less effective in the current economic landscape and decided to maintain discount rate at 12% for the next two months. This is expected to help index to grow provided the interest of major stakeholders.
The central bank has once again emphasized the need for fundamental restructuring of the economy. Although SBP is not expecting any sharp increase in inflation but worried over its persistence at high levels; largely due to monetization Budget announcement severely hurt the fertilizer sector moreover banking sector expected to show weakness in next quarter. Furthermore depreciation of PkR is alarming along with the decline in our forex reserves. We also seriously concern about the political moves of the parties in current scenario and as most of the parties already declare the current year is an election year, and keeping this in mind we may see more differences among the parties and the possibilities of consensus between the parties is in jeopardy. And above all the threatening law n order situation in Karachi and fear in business community about the extortion money is going to be worst in coming days.
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