The market has broken down. Between 11:40 and 12 on Friday, the KSE-100 index fell more than 2,000 points in less than 20 minutes.
In his press conference, Prime Minister Shehbaz Sharif announced a significant super tax or poverty alleviation tax on large enterprises in his “effort to relieve the general public of tax pressures.” This about sums up the market’s response.
Cement, steel, sugar, oil and gas, fertilizer, LNG terminals, textiles, banks, autos, tobacco, drinks, and chemicals are among the industries that have been subject to the super tax.
Investors rapidly raced to sell their shares in an effort to preserve their capital because the majority of these industries are included in the listed businesses on the PSX.
The KSE-100 index stood at 40,661.59 at the halfway point, a sharp drop of 2,055.38 points or 4.81 percent. After the break for Friday prayers, trading continued.
Sana Tawfik, vice-president of research and a senior analyst at Arif Habib Limited (AHL), told Business Recorder that “The market is reacting to PM Shehbaz’s announcement on imposition of super tax on the industries.”
Investors are awaiting clarification on whether the enforced super tax is flat or in slabs, she said, adding that markets might remain bearish with the imposition of a circuit breaker.
However, the analyst remained upbeat because a number of promising events are on the horizon.
“The International Monetary Fund (IMF) program could be revived in the coming days, and $2.3 billion inflows from China are also expected shortly, which would revive confidence in the market.
“The current account deficit figures will also impact market sentiment,” she added.
To read our blog on “After political clarity, KSE-100 index has gained over 1,400 points,” click here.
