Pair Trade (Sector Neutral strategy)

Has ENGRO Bounced Back to Claim its Throne From FFC?

Last weekend, a number of interesting developments were observed in local equity markets. Firstly, a CGT tax implication related to unexplained income and assets was deferred until June 2014 providing a sigh of relief for the depressed market. Secondly, GST on tractor manufacturers was also revoked back to 5% from the level of 16% ending the tug of war between the GoP and tractor assemblers. In addition to these events, a crucial hearing was also scheduled in the Sindh High Court for recommencement of gas supply to ENGRO’s new plant, ENVEN. Although no decision was announced in the hearing, given the fragile situation surrounding the Gas Supply Agreement of ENGRO with GoP, it is expected that SNGPL will be required to resume the supply of gas to ENVEN at 75% for the winter season and 100% for the remaining year.

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