Author: Faisal Shahnawaz

Equity market ends down by 120 pts on selling pressure

KARACHI: The equity market ended down by 120 points on Wednesday owing to continued selling pressure.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 39,568 points as against 39,689 points showing a decline of 120 points.

Analysts at Arif Habib Limited said that the market remained under pressure during the day despite starting with positive 30 points.

During the session, the index saw oscillation of 351 points (-194 points to +157 points) and the ended the session in red (unadjusted).

Following the trend in past couple of sessions, banking sector again topped the chart, mainly contributed by BOP with 18 million shares however, price declined slightly.

Besides banking sector, Cement followed suit and investors took interest in DGKC, FCCL, MLCF and LUCK among others.

E&P, O&GMCs and Steel saw selling pressure and little interest was seen in underlying scrips.

Sectors contributing to the performance include Banks (-29 points), O&GMCs (-26 points), Power (-25 points), E&P (-25 points), Tobacco (-10 points), Cement (+22 points).

Volumes declined significantly from 164 million shares to 81 million shares (-50 percent DoD). Average traded value also declined by 33 percent to reach US$ 28 million as against US$ 42 million.

Stocks that contributed significantly to the volumes include BOP, UNITY, KEL, FCCL and MLCF, which formed 44 percent of total volumes.

Stocks that contributed positively include BAHL (+19 points), PSEL (+18 points), LUCK (+9 points), EPCL (+8 points), and FCCL (+7 points).

Stocks that contributed negatively include OGDC (-24 points), HBL (-21 points), HUBC (-19 points), MCB (-14 points) and PSO (-12 points).

March 6, 2019
Rupee ends down by 11 paisas against dollar

ISLAMABAD: The Pak Rupee ended down by 11 paisas against dollar in interbank foreign exchange market owing to high demand for import and corporate payments. (more…)

March 6, 2019
FBR promotes customs officers to BS-18

Karachi – In a move aimed at strengthening the administrative core of the Pakistan Customs Service (PCS), the Federal Board of Revenue (FBR) has announced the promotion of three distinguished customs officers from BS-17 to BS-18 on a regular basis, effective immediately.
(more…)

March 6, 2019
Income Tax Ordinance 2001: furnishing customers’ information by banks

KARACHI: Banks are required to provide certain details of their customers and transactions to Federal Board of Revenue (FBR) for subsequent use of identifying new taxpayers and tax evasion.

After the implementation of Finance Act, 2018 and Finance (Supplementary) Act, 2018 there are various changes made to Section 165A of Income Tax Ordinance, 2001 related to furnishing of information by banks.

Section 165A: Furnishing of information by banks

Sub-Section (1): Notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962 (LVII of 1962), the Protection of Economic Reforms Act, 1992 (XII of 1992), the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject every banking company shall make arrangements to provide to the Board in the prescribed form and manner,—

(a) a list of persons containing particulars of cash withdrawals exceeding Rs50,000 (fifty thousand rupees) in a day and tax deductions thereon for filers and non-filers, aggregating to Rupees one million or more during each preceding calendar month.”;

(b) a list containing particulars of deposits aggregating rupees ten million or more made during the preceding calendar month;

(c) a list of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to rupees two hundred thousand or more during the preceding calendar month;

“(d) a list of persons receiving profit on debt exceeding one million rupees for filers and five hundred thousand rupees for non-filers and tax deductions thereon during preceding financial year.”

Sub-Section (2): Each banking company shall also make arrangements to nominate a senior officer at the head office to coordinate with the Board for provision of any information and documents in addition to those listed in sub-section (1), as may be required by the Board.

Sub-Section (3): The banking companies and their officers shall not be liable to any civil, criminal or disciplinary proceedings against them for furnishing information required under this Ordinance.

Sub-Section (5): Subject to section 216, all information received under this section shall be used only for tax purposes and kept confidential.

Section 165B: Furnishing of information by financial institutions including banks

Sub-Section (1): Notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962 (LVII of 1962), the Protection of Economic Reforms Act,1992 (XII of 1992), the Foreign Exchange Regulation Act, 1947 (VII of1947) and any regulations made under the State Bank of Pakistan Act,1956 (XXXIII of 1956) on the subject, every financial institution shall make arrangements to provide information regarding non-resident or any other reportable persons to the Board in the prescribed form and manner for the purpose of automatic exchange of information under bilateral agreement or multilateral convention.

Sub-Section (2): All information received under this section shall be used only for tax and related purposes and kept confidential.”

Sub-Section (3): For the purpose of this section, the terms “reportable person” and “financial institution” shall have the meaning as provided in Chapter XIIA of the Income Tax Rules, 2002.

March 6, 2019
Cement exports increase by 52 percent in eight months

KARACHI: Pakistan’s cement exports registered unprecedented growth of 52 percent during first eight months (July – February) of fiscal year 2018/2019 mainly on the back of rupee depreciation and focus on low margin exports.

The export of cement rose to 4.65 million tons during first eight months of current fiscal year as compared with 3.05 tons in the corresponding months of the last fiscal year, analysts said on Tuesday.

However, provisional cement data for the month of February 2019 displays a 9 percent MoM decline to 3.33 million tons (January 2019: 3.65 million tons) given surprise rainfalls across the country as well as extension in the winter season, according to analysts at Arif Habib Limited.

On a YoY basis, the slowdown in dispatches appeared more visible at 12 percent led particularly by weakness in domestic dispatches of 19 percent YoY to 2.82 million tons in February 2019.

Albeit, exports remained robust at 0.51 million tons (up by 69 percent YoY) in lieu of Pak Rupee depreciation against US Dollar, domestic over capacity allowing companies to focus on low margin exports, US sanctions on Iran opening up other exports markets for Pakistan as well as wasteful capacity cuts globally.

The analysts said that drop in local offtake was triggered by lackluster demand in North (down by 24 percent YoY to 2.31 million tons) for aforementioned reasons where local offtake underwent a dip of 25 percent YoY to 2.15 million tons.

This took the 8MFY19 total dispatches to 30.09 million tons, stable over SPLY, owed to a stunning 52 percent jump YoY in exports at 4.65 million tons which cushioned the 6 percent dip in local sales at 25.44 million tons.

Further dissection unveiled that South continues to show resilience with growth in total dispatches at 8.25 million tons, up by 49 percent YoY amid a sharp 3x escalation in sea-based exports to 2.79 million tons, whereas local offtake also remained healthy at 16 percent YoY to 5.46 million tons.

On the flipside, the North region sustained continuous pressure with dispatches pulling down by 11 percent YoY; local offtake depicted an identical decline to 19.98 million tons while exports dipped by 16 percent to 1.86 million tons.

March 6, 2019
Banking sector profits decline by 7 percent in 2018

KARACHI: The profits of banking sector have declined by 7 percent to Rs149 billion in 2018 as compared with around Rs160 billion in the preceding year, according to analysis of Topline Research issued on Tuesday.

The analysts said that for 2018, despite 10 percent YoY increase in Net Interest Income (NII), profits were down 7 percent YoY (ex-HBL penalty) due to 1.8x higher provision charge, 64 percent lower capital gains and 14 percent higher administrative expenses.

They expect net interest income to expand further due to the lagged impact of policy rate hikes. The analysts anticipate State Bank of Pakistan (SBP) to increase interest rates by further 75 basis points to 11 percent by December 2019.

However, during 4Q2018, Pakistan Banking Sector profitability rose to Rs38.3 billion, up by 6 percent YoY. The increase in profitability is primarily owed to 16 percent YoY increase in net interest income as well as 7 percent increase in non-interest income.

The analysts have taken results of all listed banks that have announced 4Q2018 financial results.

Moreover, for 4Q2018 reversals in pension charge and Workers Welfare Fund (WWF) amounting to Rs4.2 billion and Rs6.7 billion, respectively, also supported the bottom-line we believe.

Net Interest Income (NII) of the banks improved by 16 percent YoY to Rs135 billion in 4Q2018 as a result of a cumulative 425 basis points hike in policy rate during 2018.

Similarly, on a sequential basis, NII is up 10 percent as the lagged impact of asset re-pricing kicked in.

To note, SBP has raised policy rate by 425 basis points in 2018, with 150 basis points coming in 4Q2018.

Comparing the big-5 (MCB, HBL, UBL, ABL, NBP; profits down 24 percent YoY) versus the rest under our coverage (MEBL, BAHL, BAFL, AKBL), the analysts see that mid tier banks have outperformed their larger peers due to better sensitivity to interest rates as well as absence of significant provision charge during the outgoing quarter.

Profits of Mid-tier banks are up 32 percent YoY (they excluded BOP from mid tier numbers due to substantial one off provisioning in 4Q2017).

Despite 16 percent YoY growth in net interest income, profitability growth was contained to 6 percent YoY primarily due to high provision charge specifically by the large banks including HBL, UBL and NBP.

Cumulatively, total provision charge by the said three banks for 4Q2018 was Rs15.7 billion (around 73 percent of total provision by the sector), with NBP, UBL and HBL charging Rs6.8 billion, Rs5.6 billion and R3.3 billion, respectively.

Overall, the sector booked provision charge of Rs21.5 billion compared to Rs13.3 billion in the same period last year.

To note, BOP booked significant provision charge of Rs12.7 billion during 4Q2017 compared to reversal of Rs137 million in 4Q2018.

NBP booked significant provision charges on its loan portfolio, specifically with regards to its exposure to Omni group, the analysts believe. Similarly, majority of UBLs charge was related to NPLs (Rs5.0 billion) mostly from its international loan book and most of HBLs booked charge was also on account of NPLs (Rs2.3 billion).

Despite lower capital gains and dividend income, Non-interest income of the banks rose by 7 percent YoY mainly due to 17 percent higher fee income and 86 percent higher income from dealing in foreign currencies.

They attribute higher non-interest income to rapidly growing loan book, higher trade volumes as well as rupee depreciation.

Admin expenses grew by 20 percent YoY while non-interest expense rose by 14 percent YoY. The growth in non-interest income was contained due to reversal in provision for Workers Welfare Fund (WWF) by select banks (Rs6.7 billion in total).

Cost to income of the sector increased by 3.1ppts YoY to 64.2 percent in 4Q2018.

March 6, 2019
PM approves 20pc trade officers’ quota for overseas Pakistanis

ISLAMABAD: Prime Minister Imran Khan has approved quota of 20 percent for appointing overseas Pakistanis to the post of trade officers in Pakistan’s missions abroad.

The decision was taken during a meeting regarding reforms in posting of Trade Officers Abroad, a statement said on Tuesday.

It may be recalled that the prime minister had directed the ministry of commerce to revamp the entire system of postings of trade officers who are posted abroad to promote trade and commercial interests of the country.

The new policy approved by the prime minister focuses on transparent and merit-based selection of the trade officers, market diversification, involvement of Pakistani diaspora, rationalizing the expenditure, broad-based monitoring and performance evaluation and automation of the processes.

To effectively promote commercial interests of the country especially in the emerging markets and various regions across the globe, trade clusters have been focused in the new policy to ensure optimum utilization and maximum outreach of the trade officers.

The prime minister was informed that in order to ensure broad-based and real-time monitoring of the performance of the trade officers, the entire evaluation process has been made IT-based.

Secretary Commerce Mohammad Younus Dagha also briefed the prime minister about National Trade Data Analytics System which is being developed by the ministry.

The National Trade Data Analytics System with its comprehensive database of trade statistics, exporters/importers directory, product database and trade lead insight will help in better evaluation and promotion of trade interests of the country.

March 5, 2019
New LNG terminal: Instructions issued for completing formalities

ISLAMABAD: Finance Minister Asad Umar on Tuesday issued instructions for expeditiously completing formalities for setting up new LNG terminal at Port Qasim.

The finance minister issued the directive while chairing the meeting of Economic Coordination Committee of the Cabinet (ECC) on Tuesday. The committee considered proposals from different ministries/ Divisions.

Ministry of Maritime Affairs briefed the ECC on matters relating to establishment of new LNG terminals at Port Qasim.

The committee was informed that the Port Qasim Authority was looking at various choices with a view to find the most viable option.

The committee gave instructions to expedite the matter and directed for completion of all formalities for setting up the new terminal expeditiously keeping in view the growing energy needs of the country.

ECC approved proposal of Ministry of Energy based on request by Pakistan Petroleum Ltd for allocation of up to 9 mmcfd gas from Fazl X-1 field in distt Matiari to M/S SSGCL.

The Committee also considered and approved various proposals relating to Supplementary grants. It may be recalled that such grants were previously approved by the Ministry of Finance, however in order to make the process more transparent, these are now considered and approved at the ECC/ Cabinet level.

March 5, 2019
Rupee falls by 12 paisas against dollar in early trade

KARACHI: The Pak Rupee depreciated by 12 paisas against the US dollar in early trade on Tuesday owing to high demand for import and corporate payment.

The dollar is being traded at Rs138.80 in interbank foreign exchange market. The exchange rate was ended a day earlier at Rs138.68 in the foreign exchange market.

Currency dealer said that due to higher demand of dollar for import and corporate payment the rupee was witnessing decline.

March 5, 2019
Income Tax Ordinance 2001: Withholding agent requires to provide information of tax deduction

KARACHI: Every withholding agent is required to provide details of each person whose withholding tax is deducted or whom withholding tax is paid through a monthly statement to Federal Board of Revenue (FBR).

According to updated Income Tax Ordinance, 2001 the withholding agent is required to provide information including name, CNIC and address of each persons from whom tax had been collected.

Section 165: Statements

Sub-Section (1): Every person collecting tax under Division II of this Part or Chapter XII or deducting tax from a payment under Division III of this Part or Chapter XII shall, furnish to the Commissioner a monthly statement in the prescribed form setting out—

(a) the name, Computerized National Identity Card Number, National Tax Number and address of each person from whom tax has been collected under Division II of this Part or Chapter XII or to whom payments have been made from which tax has been deducted under Division III of this Part or Chapter XII in each month;

(b) the total amount of payments made to a person from which tax has been deducted under Division III of this Part or Chapter XII in each month;

(c) the total amount of tax collected from a person under Division II of this Part or Chapter XII or deducted from payments made to a person under Division III of this Part or Chapter XII in each month; and

(d) such other particulars as may be prescribed:

Provided that every person as provided in sub-section (1) shall be required to file withholding statement even where no withholding tax is collected or deducted during the period.

Explanation.— For the removal of doubt, it is clarified that this sub-section overrides all conflicting provisions contained in the Protection of Economic Reforms Act, 1992 (XII of 1992), the Banking Companies Ordinance, 1962 (LVII of 1962), the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject, in so far as divulgence of information under section 165 is concerned.

Sub-Section (2): Every prescribed person collecting tax under Division II of this Part or Chapter XII or deducting tax from payment under Division III of this Part or Chapter XII shall furnish or e-file statements under sub-section (1) by the 15th day of the month following the month to which the withholding tax pertains.

Sub-Section (2A): Any person who, having furnished statement under sub-section (1) or sub-section (2), discovers any omission or wrong statement therein, may file a revised statement within sixty days of filing of statement under sub-section (1) or sub-section (2), as the case may be.

Sub-Section (3): Board may prescribe a statement requiring any person to furnish information in respect of any transactions in the prescribed form and verified in the prescribed manner.

Sub-Section (4): A person required to furnish a statement under sub-section (1), may apply in writing, to the Commissioner for an extension of time to furnish the statement after the due date and the Commissioner if satisfied that a reasonable cause exists for non-furnishing of the statement by the due date may, by an order in writing, grant the applicant an extension of time to furnish the statement.

Sub-Section (5): The Board may make rules relating to electronic furnishing of statements under this section including,-

(a) mandatory electronic filing of statements; and

(b) determination of eligibility of the data of such statements and e-intermediaries, etc.

Sub-Section (6): Every person deducting tax from payment under section 149 shall furnish to the Commissioner an annual statement in the prescribed form and manner.

Through Finance Supplementary (Second Amendment) 2019, the following changes have been proposed in section 165,—

(A) in sub-section (1),—

(a) for the word “monthly”, wherever occurring, the word “biannual” shall be substituted;

(b) for the word “month”, wherever occurring, the word “half-year” shall be substituted; and

(B) for sub-section (2), the following shall be substituted, namely:—

“(2) Every prescribed person collecting tax under Division II of this Part or Chapter XII or deducting tax under Division III of this Part of Chapter XII shall furnish statements under sub-section (1) as per the following schedule, namely:—

(a) in respect of the half-year ending on the 30th June, on or before the 31st day of July;

(b) in respect of the half-year ending on the 31st December, on or before the 31st day of January”; and

(C) after sub-section (2A), the following new sub-section shall be inserted, namely:—

“(2B) Notwithstanding anything contained in this section, the Commissioner as he deems fit, may by notice in writing, require any person, collecting or deducting tax under this Ordinance, to furnish a statement for any period specified in the notice within such period of time as may be specified in the notice.”

March 5, 2019