Karachi - Pakistan's financial markets roiled by a month of
political uncertainty and rumours of fresh taxes being imposed
surprisingly on Tuesday welcomed the breakup of political coalition,
analysts said.
However, the overall reaction across the trading community was
mixed.
'It was certainly welcomed by the market hugely because the
politics is now going to be one-sided instead of in doldrums,' said
Khurram Shezad, head of research, at Invest Cap Securities.
The Karachi Stock Exchange's key KSE-100 Index was leaped up by
255 points to close at 14,542.50 against Monday's 14,286.61 points, a
hefty increase of around 1.9 per cent.
Similarly, in the inter-bank market the Pakistani rupee recovered
to close at 68.20/68.40 against the US dollar as compared with
68.25/68.75 on Monday.
In an unofficial open market the rupee also surprisingly
strengthened against the US dollar to close at 68.00/68.20 against
68.50/68.70 on Monday.
'Both inter-bank and open market traded in almost the same levels
today,' said a dealer at Dollar-East Exchange.
Nawaz Sharif, the former premier and head of Pakistan Muslim
league-Nawaz, the second largest coalition partner on Monday
announced the withdrawal of its ministers from the six-week-old set-
up as it failed to honour the pledge to reinstate some 60 judges axed
by President Pervez Musharraf.
The key finance minstry was amongst the 15 ministries that nine
ministers of PML-N were holding.
On Tuesday all cabinet members from the party tendered their
resignation to Prime Minister Yousaf Raza Gilani, who refused to
accept them, saying he would decide on the issue after consultations
with his Pakistan Peoples Party's head, Asif Ali Zardari, widower of
slain Benazir Bhutto.
However, the financial markets are buzzing with rumours that
change in the ministry of finance is on the cards. Pro-market faces
such as seasoned investment banker and former country head of
Citibank (Pakistan), Shaukat Tarin, or Naveed Qamr, who currently
holds a portfolio at the Privatization Commission, were being
discussed as outgoing minister Ishaq Dar's successors.
'Both are very good names and will be welcomed by the market,'
said Shehzad.
Dar was quite critical of the policies of previous government led
by Shaukat Aziz as well as the slow pace of tax collection.
He was planning to impose anywhere between 10 to 15 per cent of
Capital Gains Tax (CGT), something which Pakistan's financial markets
have been severely opposing for the last five years.
'The breakup in the coalition was certainly a welcomed move and
improved sentiments in the financial markets as both Tarin and Naveed
are very pro-market,' said Nabeel Iqbal, head of marketing at
Khannani and Kalia, the country's largest foreign exchange firm.
Shehzad said the change in the Finance Ministry would certainly
help the market pundits to convince the federal government for not
imposing the CGT in the upcoming budget for fiscal 2008-2009.
Pakistan is expecting a shortfall of around 20 per cent in tax
collections amid rising trade deficit of around 16 billion dollars in
10 months (July-March) compared with 13 billion in an entire 12
months last year (July-June) due to a sharp spike in international
oil prices. Pakistan imports 85 per cent of its energy needs.
The Pakistani rupee during the last month lost over 6 per cent
against the dollar while the KSE-100 Index lost over 700 points due
to directionless politics in the federal capital amid weak economic
fundamentals.
Meanwhile, across the country the sentiments of the overall
trading community were mixed and predicted an economic meltdown if
the contentious issue of judges' reinstatement was not resolved soon.
'Smooth running at this critical juncture is a must,' said Tanveer
Ahmed Sheikh, President of the Federation of Pakistan Chambers of
Commerce and Industry (FPCCI).
Tariq Sayeed, President of Chamber of Commerce and Industry for
South Asian Association for Regional Cooperation, a consultative body
among six South Asian nations said: 'The business community wants the
coalition to remain intact.'
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