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Category: Stock & Commodity

  • Removal of sunset clauses on CGT exemptions for real estate sector demanded

    Removal of sunset clauses on CGT exemptions for real estate sector demanded

    KARACHI: Pakistan Stock Exchange (PSX) has pointed out that at present timelines for exemption from Capital Gain Tax (CGT) are discouraging long-term investors from entering the Real Estate Sector.

    Moreover, different Real Estate Investment Trust (REIT) categorization have created distortion and excluded commercial and mixed-use REIT projects, the PSX highlighted the issue in its proposals for the upcoming budget 2021/2022.

    It further said that higher rate of tax on dividends as compared to mutual funds (enhanced through Finance Act 2019, rate of tax on dividend from REITs Schemes was enhanced from 15 percent to 25 percent.

    Sale of real estate to a REIT scheme at market value is a paper transaction required to transfer title of real estate in the name of trustee.

    Furthermore, REIT Scheme is exempt from income tax when 90% income is distributed as dividend and therefore advance tax cannot be adjusted.

    The PSX proposed exemption from CGT provided in clause 99A, Part 1, 2nd schedule of Income Tax Ordinance, 2001 should be applied to all categories of REITs (mix-use projects)

    – Remove sunset clauses

    • June 2023 for Developmental REIT Scheme and Rental REIT Scheme.

    — Rate of tax on dividend, which is 25% at present, be synchronized with mutual funds15 percent [First schedule, Part-1, Division-Ill, paragraph B]

    — Exempt advance tax on property transfers to/from a REIT Scheme u/s 236C & 236K.

    Giving rational to the proposals, the PSX said it will promote documented real-estate will attract more investments particularly by companies with disclosure of actual prices and income. Revenue impact will be positive as it will generate indirect and additional revenues from allied businesses.

  • Withholding tax exemption sought on commodity future contracts

    Withholding tax exemption sought on commodity future contracts

    KARACHI: Federal Board of Revenue (FBR) has been urged to exempt withholding tax on transactions made for future contracts at commodity exchange.

    The Pakistan Stock Exchange (PSX) in budget proposals 2021/2022 submitted to the FBR, highlighted the issue and stated that currently, buyer of a commodity withholds tax (4 percent-9 percent) from seller before making payment with the exception of growers.

    This tax adds cost and puts the investors at a disadvantageous position when dealing in actual commodity exchange at PMEX in futures contracts/e-WHR5 as grain markets are not documented and as such this tax is actually not being paid.

    The stock exchange proposed to exempt commodity futures contracts and EWRs from the application of section 153 of the Income Tax Ordinance, 2001 like these are exempt from GST under SRO 445(1)12004 June 14, 2004.

    It will be only applicable on physical settlement of futures contract by exchange of delivery of underlying commodity. On contract, CGT is already applicable.

    Giving rationale to the proposal, the PSX said that development of regulated and organized commodity markets will greatly benefit the agriculture sector.

    Revenue impact will be neutral to positive due to adjustability of withholding tax while documentation leading towards more income tax from traders and related parties.

  • Tax rate disparity discourages corporatization: PSX

    Tax rate disparity discourages corporatization: PSX

    KARACHI: Inequality in tax rates for corporate and non-corporate businesses has discouraging corporatization in the country, Pakistan Stock Exchange (PSX) noted in its proposals for budget 2021/2022.

    The stock exchange pointed out that corporate business profits are taxed twice: once at company level at 29 percent and on dividend distribution at 15 percent.

    As compare to 44 percent of total tax in case of companies, unincorporated businesses are being taxed from 0 percent to 35 percent in slabs.

    This inequity in taxation is discouraging corporatization and documentation as unincorporated businesses are subject to substantially lower taxes.

    Absence of clarity in tax laws is causing issues of taxation of Limited Liability Partnerships (LLP5) as companies whereas LLPs are essentially AoPs with perpetual life.

    Therefore, the PSX recommended that inequality of taxation of businesses shall gradually be removed by reducing corporate tax rate/increasing tax rates for AoPs [First Schedule Part 1, Division I, II, hA & Ill]. Rationale

    It said that equality of tax regime will promote corporatization culture leading towards documentation and will therefore generate more tax revenue.

    Adding clarity with respect to status of LLP will encourage more businesses particularly in services sector to opt for this perpetual business structure. It will also help in increasing tax revenue from these segments.

  • Weekly Review: stocks likely trade in positive on expectation of unchanged policy rate

    Weekly Review: stocks likely trade in positive on expectation of unchanged policy rate

    KARACHI: The stock market likely to remain positive during next week on expectation of no change in policy rate in the monetary policy statement schedule to be announced on May 28, 2021.

    Analysts at Arif Habib Limited said that the market likely to remain positive in the upcoming week.

    With the monetary policy scheduled to be unveiled next week (28th May’21), we foresee the SBP to maintain status-quo on its benchmark policy rate. We believe market performance will be dictated by budgetary expectations while key risk for the medium term remains spike in COVID-19 cases, the analysts said.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 6.8x (2021) compared to Asia Pac regional average of 15.8x while offering a dividend yield of ~7.2 percent versus ~2.6 percent offered by the region.

    After long Eid Holidays, the market commenced on a positive note given ease in lockdown restriction following drop in COVID-19 cases.

    Moreover, optimistic sentiment also stemmed from the MSCI Semi Annual Review, where Pakistan’s weight witnessed an increase (0.023 percent from 0.016 percent earlier), in lieu of the LUCK and TRG’s addition to the EM Standard Index and Small Index, respectively.

    Meanwhile, favorable budgetary measures for the capital market under the FY22 budget kept the momentum green. Whereas, oil prices (Arab Light) during the week dropped by 4 percent WoW, settling at USD 64.72/bbl. The market settled at 45,915 points, gaining by 740 points (up by 1.6 percent) WoW.

    Sector-wise positive contributions came from i) Cements (139  points) ii) Oil & Gas Marketing Companies (102  points), iii) Fertilizers (90  points), iv) Food & Personal Care Products (89  points) and v) Technology & Communication (64  points). Meanwhile, the sectors that contributed negatively include Commercial Bank (32  points) and Power Generation & Distribution (18  points). Scrip-wise positive contributors were TRG (93  points), UNITY (68  points), LUCK (62  points), MARI (57  points) and ENGRO (46  points).

    Foreign selling continued this week clocking-in at USD 49.4 million compared to a net buy of USD 1.0 million last week. Selling was witnessed in All other sector (USD 43.4 million) and E&P (USD 7.8 million). On the domestic front, major buying was reported by Individuals (USD 37.2 million and Companies (USD 18.1 million). Average volumes arrived at 609 million shares (up by 153 percent WoW) while average value traded settled at USD 137 million (up by 84 percent WoW).  

  • Short term tax policies should be avoided to attract investors

    Short term tax policies should be avoided to attract investors

    KARACHI: The government should avoid short term tax policies to ensure stable economic environment so investors can plan their investments in the country.

    Pakistan Stock Exchange (PSX) in its proposals for budget 2021/2022 said that as much as favorable tax treatment, investors need a stable and predictable tax environment.

    When making a long-term investment decision, they need to know what tax treatment their investment will receive over the term of their investment horizon. Otherwise, they may simply decide not to invest or adopt short term trading strategies (like most investors unfortunately tend to do).

    It should also be considered that the changes in policies should be prospective rather than retrospective in nature. One of such example is the amendment made in section 65B of the Income Tax Ordinance, 2001 through Finance Act 2019 where tax credit for investment in plant and machinery for the purpose of balancing, modernization and replacement was reduced from 10 percent to 5 percent retrospectively of the amount invested.

    Therefore, the stock exchange proposed to rectify all such amendments which have retrospective effect so that all the amendments made have a prospective effect.

    It further said that the government must move away from short term measures and frequent changes to tax treatment and adopt long term measures to promote savings and investment and development of the capital market.

  • Stock market gains 341 points on tax incentive hopes

    Stock market gains 341 points on tax incentive hopes

    KARACHI: The stock market gained 341 points on Friday as investors hoped tax incentives in the upcoming budget. The benchmark KSE-100 index closed at 45,915 points as against previous day’s closing of 45,574 points, showing an increase of +341 points.

    Analysts at Arif Habib Limited said that resolution of dispute between the members of ruling party as well as anticipation of tax incentives for the industries in the upcoming budget helped KSE100 index put up a formidable addition of 374 points during the session and ended the session +341 points.

    Deferral of OGDC and PPL for consideration of privatization resulted in a rebound in stock prices of both stocks.

    Banks, Cement and Steel sectors also contributed positively to the Index. The incentives  proposal for the refinery sector gave way to NRL, ATRL and PRL to post gains. Among volumes leaders, WTL led the table with 99.2 million shares, followed by BYCO (67.5 million) and HASCOL (48.3 million).

    Sectors contributing to the performance include Banks (+116 points), E& (+68 points), Cement (+31 points), O&GMCs (+29 points) and Autos (+29 points).

    Volumes declined slightly from 784 million shares to 710.4 million shares (-10 percent DoD). Average traded value also declined by 6 percent to reach US$ 128.2 million as against US$ 135.7 million.

    Stocks that contributed significantly to the volumes include WTL, BYCO, HASCOL, KEL and SMBL, which formed 41 percent of total volumes.

    Stocks that contributed positively to the index include HBL (+32 points), PPL (+31 points), OGDC (+28 points), UBL (+25 points) and PSO (+20 points). Stocks that contributed negatively include HASCOL (-8 points), PIBTL (-6 points), COLG (-4 points), TRG (-4 points) and PSX (-4 points).

  • PSX proposes elimination of capital gain tax to attract investors

    PSX proposes elimination of capital gain tax to attract investors

    KARACHI: Pakistan Stock Exchange (PSX) has proposed time-bound elimination of capital gain tax (CGT) in order to attract new local and foreign investors.

    (more…)
  • Equity market ends down by 108 points in range bound trading

    Equity market ends down by 108 points in range bound trading

    KARACHI: The equity market ended down by 108 points on Thursday as the trading activity remained range bound owing to political uncertainty.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 45,574 points as against previous day’s closing of 45,682 points, showing a decline of 108 points.

    Analysts at Arif Habib Limited said that the market traded range bound oscillating between +149 points and -163 points, ending the session -108 points.

    Political uncertainty continued playing with sentiments today besides selling in E&P stocks due to concern over crude oil price in international market and liquidity crunch affecting operational performance of underlying companies.

    Banking stocks followed suit with negative price performance. Besides, Technology stocks saw selling pressure in TRG that put additional pressure on the Index.

    BYCO, which saw significant share transfers in NDMs yesterday, realized healthy volumes with price uptick in the regular market, topping the volume leaders.

    HASCOL realized an upper circuit closing for the second consecutive day. Among scrips, BYCO led the table followed by WTL (77.7 million) and HASCOL (59.5 million).

    Sectors contributing to the performance include Banks (-102 points), E&P (-48 points), Technology (-25 points), Cement (-13 points) and Engineering (-7 points).

    Volumes increased from 578.3 million shares to 784.0 million shares (+36 percent DoD). Average traded value on the other hand remained at US$ 135.7 million as against US$ 135.5 million the other day.

    Stocks that contributed significantly to the volumes include BYCO, WTL, HASCOL, KEL and PIBTL, which formed 45 percent of total volumes.

    Stocks that contributed positively to the index include PIBTL (+15 points), HASCOL (+14 points), SEARL (+13 points), COLG (+13 points) and DAWH (+9 points). Stocks that contributed negatively include HBL (-49 points), OGDC (-24 points), HMB (-21 points), MCB (-17 points) and SYS (-17 points).

  • KSE-100 index ends down by 300 points on political rift

    KSE-100 index ends down by 300 points on political rift

    KARACHI: The benchmark KSE-100 index ended down by 300 points on Wednesday on reports of rift in ruling party, analysts said. The index closed at 45,682 points as against previous day’s closing of 45,982 points, showing a decline of 300 points.

    The analysts at Arif Habib Limited said that the market turned negative today which was a reflection of political uncertainty created by the rifts between the senior members of the ruling party.

    The index bore regression of 369 points during the session and realized a pull back, ending the session -300 points.

    Cement, O&GMCs, Banks, Refinery, Steel sector stocks saw selling pressure.

    However, the sentiment turned particularly negative due to persistent selling in Technology stocks. Among scrips, KEL led the table with 65.4 million shares, followed by UNITY (56.9 million) and HASCOL (44.1 million).

    Sectors contributing to the performance include Technology (-83 points), Cement (-72 points), Banks (-53 points), Textile (-29 points) and O&GMCs (-24 points).

    Volumes increased from 536.8 million shares to 578.3 million shares (+8 percent DoD). Average traded value also declined from US$ 150.8 million to US$ 135.7 million.

    Stocks that contributed significantly to the volumes include KEL, UNITY, HASCOL, WTL and TELE, which formed 41 percent of total volumes.

    Stocks that contributed positively to the index include MARI (+16 points), HASCOL (+14 points), KEL (+14 points), OGDC (+13 points) and ENGRO (+10 points). Stocks that contributed negatively include TRG (-70 points), LUCK (-24 points), HBL (-23 points), PSO (-22 points) and HUBC (-22 points).

  • Stock market gains 186 points in range bound trading

    Stock market gains 186 points in range bound trading

    KARACHI: The stock market gained 186 points on Tuesday in a range bound trading activity during the day. The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 45,982 points as against previous day’s closing of 45,796 points, showing an increase of 186 points.

    Analysts at Arif Habib Limited said that the market traded in a range during the session that saw an oscillation of -178 points and +238 points.

    The decline observed earlier, on the back of profit booking in Technology stocks which triggered selling pressure in Banks, E&P and O&GMCs.

    A rebound in buying activity brought back interest in PSO which helped pull stock price up by a good margin from LDCP.

    Activity remained skewed towards GGL, UNITY, TRG and TELE which have made a robust rally in the past couple of months. Among scrips, WTL topped the volumes with 49.5 million shares, followed by TELE (49.1 million) and GGL (47.2 million).

    Sectors contributing to the performance include E&P (+80 points), O&GMCs (+74 points), Vanaspati (+37 points), Technology (+30 points) and Fertilizer (+18 points).

    Volumes increased from 437.4 million shares to 536.5 million shares (+23 percent DoD). Average traded value also increased by 14 percent to reach US$ 151 million as against US$ 151 million.

    Stocks that contributed significantly to the volumes include WTL, TELE, GGL, UNITY and TRG, which formed 38 percent of total volumes.

    Stocks that contributed positively to the index include PSO (+50 points), TRG (+43 points), UNITY (+37 points), MARI (+31 points) and PPL (+21 points). Stocks that contributed negatively include BAHL (-26 points), LUCK (-15 points), MCB (-14 points), SYS (-13 points) and ANL (-12 points).