Its a season of high profile visits at Karachi Stock Exchange; two weeks ago Asrar Rauf, member FBR, showed up at KSEs trading floor, followed by that of the UKs Foreign Secretary.
But perhaps few of these high profile visits in the bourses history had as much significance as that of Dr Hafeez Shaikhs arrival at the Karachi bourse on Monday. It was the Finance Ministers first tour to the exchange after taking charge and first after the announcement of Capital Gains Tax (CGT).
Contrary to the pre-visit excitement, however, Shaikhs trip proved to be a damp squib; in his press conference held after the meeting, he basically said what most already know.
That includes the fact the CGT will be implemented from July 1 onwards on sale of all shares", regardless of the date of purchase. He also said that investors will not be harassed as regards the inquiry of the source of funds by the revenue department.
For the purpose of confidence building measures, Shaikh also announced plans to form a committee that will include members of the local bourses and tax officials. The purpose of the committee would be to address grievances of stakeholders and also provide guidance in tax related issues.
He also informed of the plans to step up on the demutualization of bourses and the governments intention to encourage the number of listings at the exchange.
Aside from the committee formation initiative, Shaikhs statements were mostly known factors, Ahsan Mehanti CEO of Shehzad Chamdia Securities told BR Research.
Senior broker Aqeel Karim Dhedhi was also of a similar view. "The purpose of his (Shaikhs) visit was mainly confidence building," Dhedhi said who added that investors should now come out of the closet as there is hardly anything to worry about as regards the Capital Gains Tax.
Strangely enough, investors didn appear to gain confidence after Shaikhs visit. In fact, if it had anything to do with confidence, it was otherwise.
KSEs benchmark index marked its intraday high of 9,859 points around 11.15 a.m. - which is about the time when Dr Hafeez Shaikh was due to arrive. Following its day-peak, the index gradually descended to close 125 points lower - just a few points above its day low of 9,656.
Mondays selling could be a standard buy-on-rumour, sell-on-fact- but that would have been the case if the minister actually announced anything concrete.
The real dampener, therefore, was his failure to announce anything as regards the demand to allow foreign investors to adjust their CGT with exchange rate losses. Market participants had also pinned their hopes that the minister would announce a date for commencing margin financing, according to Mehanti, and thats why the market fell.
But then again, looking at KSEs recent behaviour and the explanations put forward by participants, the age old adage of market historians often comes to mind: when underlying sentiments are positive, the market could discount even a bomb blast, and when sentiments are negative, even a dead fly could hurt the market. And these days, it appears, the latter is the case.
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