BMA Today for June 12, 2019 
 
     WEDNESDAY 12 June 2019 
 
 

 

   

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At a Glance

Previous Market Session

Local Market    
 KSE 100 N.A N.A
 KSE T. Value PKRbn N.A N.A
 10YR PIB N.A N.A
 6M KIBOR N.A. N.A.
 PKR/USD N.A. N.A.
Asia Pacific    
 BSE SENSEX 30 N.A N.A.
 NIKKEI 225 N.A N.A.
 STRAITS TIMES INDEX N.A N.A.
 KUALA LUMPUR N.A N.A.
 JAKARTA COMP. N.A N.A.
 THAI SET 50 N.A N.A.
Middle East    
 DFM GENERAL N.A N.A.
 TADAWUL ALL SHARE N.A N.A.
 MSM30 INDEX N.A N.A.
 KUWAIT SE WEIGHTED N.A N.A.
 DSM 20 INDEX N.A N.A.
Global Markets    
 OIL (NYMEX) N.A. N.A.
 US 10YrBOND N.A. N.A.
 LIBOR6MTH N.A. N.A.
 FTSE 100 N.A N.A.
 DOWJONES N.A N.A.
 S&P 500 N.A N.A.
       
 
In Focus
Budget FY20 : An attempt at fiscal consolidation...
The Federal Budget unveiled by the incumbent PTI government cues optimistic targets, strides of austerity that bring along tough measures, and one of the lowest GDP growth rates to be seen in the past decade. Budget FY20 is set with an outlay of PKR8.24trn, up 39% YoY, with GDP growth target set at 2.4%. In totality, the budget tries to attain harmony between handsome revenue collection targets and broadening the tax net by tapping the untapped. A key measure in this regards is recognition of ‘non-filers’ as ‘tax avoiders’ or the one not on the ‘Active Tax payers list’. The distinction will allow the government to charge twice the normal withholding tax from those not on the active list and hence encourage return filing/ documentation by previously uncaptured segment. We believe the measure is a step in the right direction, however the impact may take sometime to transpire. Overall, the revenue collection target of 12.6% of GDP or PKR5.55trn (up 34% YoY) seems optimistic (though still well below the regional peers) where almost two-third of the measures relate to indirect tax. While the government has set fiscal deficit target of 7.1% for FY20 (primary deficit: 0.6% of GDP), we see a higher likelihood of fiscal slippages, going forward. The impact on corporate earnings is expected to be negative driven by a slew of tax measures (flat corporate tax rate, higher custom duties, imposition of FED, abolishment of tax credit etc). From capital market perspective, a negative market reaction seems likely, driven by surprise incidence of increased tax on dividend income from select sectors/companies while CGT expectedly remained unchanged. Sector-wise implications: Positive: Chemicals, Consumers, Paper & Board, Tobacco Neutral: E&Ps, Refineries, Fertilizers Negative: Banks, OMCs, Cements, Textile, Power, Autos, Steel Top Picks: PPL, MARI, MCB, EFERT, HUBC, LUCK, ENGRO, APL, EPCL, WAVES
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Media Watch

Economy: Take-home salary to take a hit thanks to new income tax brackets / Dawn
Sectoral: Bankers slam decision to channelise funds from banks / The News
Economy: C/A deficit projected at USD8.3 billion / Business Recorder
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DISCLAIMER
This memorandum is produced by BMA Capital Management Limited and is only for the use of their clients. While the information contained herein is from sources believed reliable, we do not represent that it is accurate or complete and should not be relied upon as such. Opinions expressed may be revised at any time. This memorandum is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell the securities mentioned.