Karachi Stock Exchange-100 index gains wiped off
Pakistan Times Business & Commerce Desk

KARACHI: Confidence of the investors was shattered once again by the reports that the government had intended to levy service tax on the earnings of the stock brokers in the forthcoming budget for 2005-06 giving a heavy blow to the KSE-100 diffusing the zeal of the traders at the stock market here Tuesday.

All of Monday’s gains were more or less wiped off at the end of the trading session. Sentiments were completely marred by the reports appeared in a section of the press that in the forthcoming budget the government may levy Central Excise Duty as service tax on commission earned by stock brokers of all the three stock exchanges.

It can be recalled that following the imposition of Capital Value Tax (CVT) in the budget last year, the stock market had reacted extremely negative reflected in the trading volumes which had depicted a massive plunge. Similarly, it can be expected that any fresh attempt to amplify the tax net on the stock market operations is likely to be met with severe resistance by the brokers and investors community.

Contrary to Monday’s high spirit when the market had posted a comprehensive 6.0% gain with the index closing well above the 8000 point level, all the gains were more or less wiped off Tuesday.

The PSO stock, which had emerged as the star performer showed depressingly poor performance and closed at its Rs431.00 lower lock.

The OGDC, another heavyweight of the index also declined by 2.6% to Rs111.00. Other top payers like PPL and PTCL too were not an exception and were among the prominent losers closing at their lower circuit levels.

Investors View

Meanwhile a report from Lahore says that the investors, who burnt their fingers in the recent stocks crises, have alleged deep involvement of Securities and Exchange Commission of Pakistan (SECP) official in stocks manoeuvring, a charge immediately denied by one member of a bourse on Tuesday.

The investors have alleged that interestingly, the major players in the bourses are operating with the help of their old friend, who was elevated as SECP commissioner despite being declared guilty by Commission’s own probing body for extending helping hand in manoeuvring the shares of defaulting KSE members and putting these shares in their personal accounts during May 2000 stock market crises.

"I have no information about the involvement of any SECP official," one member said on the promise of anonymity.

The investors have demanded that any investigator looking into the current manoeuvring must look into the transactions of these players as how they were fleecing the small investors.

They said when these players bought certain shares, they started extending ‘Badla financing’ to small shareholders especially those of having small liquidity.

However, when they complete their off loading of certain scrip, they start denying Badla financing as well as start increasing rate of Badla financing while extending one excuse or the other.

Interestingly, when weak holders off loaded their holdings to book losses, these players again throng the buying column and lift the same scrip at lower prices to once again put in the market.

Publicly or through interviews on TV channels some of these players are denying of taking leverage of current situation, but at the same time are all out to fleece those small and medium investors who try to be bullish in the market after working on the fundamentals of the market, they added.

They said that investigators if any should immediately take stock of ongoing transactions at both KSE and LSE and look into the affairs that who was selling and at what time. Whether at the same time he was forcing his borrowers of Badla financing to sell their shares or not?

The Stock markets are emerging more vulnerable to manipulation by a handful of stock brokers especially after getting low-priced financing by the banks. The investors seemed perturbed regarding ongoing manoeuvring of the market by some four big players who have become so strong that they have turned market into a hunting ground, investors at the Lahore Stock Exchange (LSE) said during a survey here on Tuesday.

Despite all the measures taken by the government through the SECP so far, these big players have emerged more influential especially after acquiring financing from banks as financial institutions are not inclined to offer carry over financing to individual investors.●