KSE ends on 3-1/2 month high

KARACHI: Karachi Stock Exchange (KSE) ended on a three-and-a-half-month high on Thursday amid hopes of a removal of a capital gains tax, which could be announced in the 2011/12 budget, dealers said.

The 2011/12 (July-June) budget is due to be unveiled on June 3.

According to media reports, the government may decide to remove the capital gains tax. A 10 percent capital gains tax is imposed on stocks held for six months or less and 7.5 percent on stocks held between 6 months to a year.

Officials from the finance ministry declined to comment.

KSE-100 share index ended 0.25 percent, or 30 points, higher at 12,198.12 on turnover of 101.51 million shares.

"Investor sentiment was positive on hopes that the capital gains tax will be reviewed in the upcoming budget," said Ahsan Mehanti, director at Arif Habib Investments Ltd.

In the currency market, the rupee ended firmer at 85.57/63 to the dollar, compared with Wednesday's close of 85.64/74. It hit a record low of 86.50 on Monday and dealers said the local unit may face pressure amid increased demand for dollar for import payments and a bleak outlook.

There are also concerns about the growing tensions with the West, which could choke off much needed foreign aid.

Concerns over a reduction in foreign aid have flared since US special forces found and killed al Qaeda leader Osama bin Laden early this month in a house near Islamabad.

The rupee has lost 1.24 percent of its value since then, almost the same as its total loss of 1.53 percent in 2010.

The rupee's slump to a record low comes a little over a month after it rose to an 11-month high suggesting its outlook has weakened because of uncertainty following bin Laden's death.

In the money market, overnight rates ended at the top level of 13.90 percent, compared with the previous day's close of between 13.75 percent and 13.90 percent, as there were scheduled outflows of 28 billion rupees ($326.6 million).

Dealers said there were scheduled outflows due on Friday amounting to 35 billion rupees ($408.26 million).

Copyright Reuters, 2011