From Zeeshan Mirza
KARACHI: The Pakistan Stock Exchange (PSX) on Friday nosedived almost 5% (over 2,000 points), in a duration of approximately 22 minutes, after Prime Minister Shehbaz Sharif announced a new ‘super tax’ to target large-scale industries.
The PSX plunged to a one-year low at the closure of the first of two sessions Friday at 40,664 points at noon. The second session started at 2:30 pm.
“The announcement of the imposition of 10% super tax across the corporate sector triggered panic sale,” Arif Habib Limited Head of Research Tahir Abbas said.
“The tax would impact 10-12% net profit of each company,” he added. A PSX official clarified that the market was not halted by the management but was closed as per schedule at the end of the first session.
The official elaborated that the market halt is triggered if the Karachi Stock Exchange (KSE) 30 Index falls by 5% or more and fails to recover losses to less than 5% in the next five minutes.
Friday, the index fell by over 5% and persisted there for 4 minutes and 56 seconds, and the first session was closed.
If the market closure had not occurred for another four seconds, then the management would have had to halt the market.
The second session would be considered a new season and if the market drops by a fresh 5% from the level of the first session’s closure, then the market halt mechanism would come into play.
The sudden plunge came shortly after Prime Minister Shehbaz Sharif announced that the government would be imposing a 10 per cent “super tax” on large-scale industries to control the “storm of inflation”.
In his address, the premier discussed the “tough” economic decisions the incumbent coalition government took as the country neared default.
The prime minister stated that the revenue generated from the “super tax” would be beneficial for “poverty alleviation” to support the burden of inflation on the masses.
Sectors which will be subject to the tax include; steel, sugar, cement, oil, gas, fertilisers, LNG terminals, banking, textile, automobile, cigarettes, chemicals and beverages.