July 14 - 20, 2008

LAHORE: Lacking interest on the part of investors, high rate of inflation, widening trade deficit, uncertain political situation, devaluation of Pak rupee, deteriorating law & order situation and increasing prices of food items are putting negative effects on the country's bourses.

Lack of interest was weakening share price of scrip while no help was sought from any side, as big players were watching from sidelines. However, the market capitalization was improved by Rs 4.6 billion to Rs 3.655 trillion, a broker said while talking to PAGE.

Asif Baig Mirza, Chief Executive ABM Securities (pvt) Limited and Director Lahore Stock Exchange told PAGE that the Karachi Stock Exchange has almost lost 4000 points and market capitalization downed by over 1.04 trillion of rupees since the induction of coalition government as a result of February 18 polls.

He said that with country's internal political situation being non-conducive, inflation is on rise, poverty level is increasing, law & order situation is deteriorating, oil prices is increasing, there is spillover effect on the country's bourses.

He stated that the country's corporate sector is perceived to have lesser corporate profitability, higher cost of doing business and is likely to become non-competitive in the aftermath of increased utility charges.

Answering a question, he added that with exchange rate becoming unstable, the portfolio managers prefer to disinvest their positions and repatriated their funds back to their countries. He claimed that the portfolio investment is estimated to be reduced by US $450 million. He stated that the Foreign Direct Investment is not pouring in because of socio-economic and country's political situation.

To a query, he advised the small investors to focus on medium and long term investment and only invest in dividend paying shares.

He further said that Pakistan's trade deficit widened to $ 20.74 billion during the financial year 2007-08 showing an increase of 52.95 percent when compared to trade deficit of $ 13.56 billion in 2006-07. Pakistani's exports during the financial year 2007-08 were recorded at $ 19.22 billion, showing an increase of 13.23 percent when compared to last year's export of $16.97 billion, he added.

On the other hand, he said the imports in Pakistan grew by 30.87 percent by increasing from $30.53 billion in the financial year 2006-07 to $ 39.96 billion during 2007-08. In June 2008, exports from the country witnessed increase of 5.51 percent when compared to the exports of May 2008. Exports during June were recorded at $2.053 billion as compared to $1.946 billion in the month of May. Imports during the moth under review were recorded at $ 4.025 billion as compared to $ 3.883 billion in May, showing an increase of 3.64 percent, he said.

He said the trade deficit in June 2008 was recorded at $ 1.971 billion, showing an increase of 1.76 percent over the trade deficit of $1.937 billion in the month of May 2008. As compared to June 2007, trade deficit during the June 2008 widened by 57.44 percent by increasing from $1.252 billion to $1.971 billion.

Chaudhry Muhammad Rahat, Chief Executive Rahat Securities Limited told PAGE that the rate of interest is too high in Pakistan despite the fact it is facing downward trend world over. He said foreign investment in capital market is declining due to uncertain situation. He called for reducing the rate of corporate tax apart from checking double taxation on stock business.

He added that the investors want political and economic stability; therefore, the government should pay immediate attention to bring stability.

Moreover, the Federal Board of Revenue (FBR) has decided to conduct analytical audit of the corporate sector, with particular focus on banking, oil and gas sectors in a bid to make the revenue collection system more effective and transparent.

Sources said that 33-percent of corporate business shows losses, 33-percent shows no income while only 33-percent declares income from the business. The proposed analytical audit would particularly remain focused on banking, oil and gas sectors, the sources said, adding that the aim is to come up with objective analysis of revenue potential and the revenue collection from these sectors.