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Category: Stock & Commodity

  • Stock exchange recommends 20 percent tax credit for listed companies

    Stock exchange recommends 20 percent tax credit for listed companies

    KARACHI: Pakistan Stock Exchange (PSX) has recommended a 20 percent tax credit should be granted to listed companies in order to encourage documentation of the economy.

    In its proposals for budget 2021/2022, the PSX said that it is generally observed that when companies opt for a listing on a stock exchange, their profits grow substantially due to effective corporate governance, better disclosures, and ability to raise capital from the market.

    Increased number of listed companies and higher profitability leads to higher tax revenue for the government, including incremental revenues from capital gain tax (CGT).

    Hence it is important to encourage companies to get listed on PSX.

    However, tax credit on enlistment under section 65C has been withdrawn through Second Amendment Act, 2021.

    This tax incentive was a very small carrot with no significant revenue impact.

    Presently, only 10 listed companies are availing this tax credit which we estimate, based on their latest audited financial statements, has a tax revenue impact of Rs. 175 million per annum. Out of these 10 companies, 4 companies are in their 4th or last year of this benefit and 4 companies have recently listed in the current financial year, the PSX said.

    In fact, the tax revenue benefit in the medium term is very large as the documentation of the corporate sector increases and hence tax revenue of Pakistan.

    Further, the CGT collected on these 10 symbols for the 8 months period from July 2020 to February 2021 is Rs.176 million, and, extrapolating based on this 8 months average collection of CGT, the tax collection for the 12 months period could be Rs.264 million, compared to the total estimated tax credits of Rs.175 million availed by these 10 companies.

    The average rate of tax in the Asian region is 21.32 percent; whereas, currently in Pakistan the corporate tax rate is 29 percent.

    As such it is imperative that the corporate tax rate after the tax credit is brought down reasonably to compete with the other regional and global countries.

    Therefore, in order to encourage documentation and create a long term positive impact on tax revenue, there should be reduced rates of tax for listed companies compared to unlisted companies.

    The PSX proposed that to encourage documentation of the economy, the corporate tax rate should be permanently lowered for listed companies, by giving tax credit of 20 percent of tax payable for those companies that meet the prescribed requirements including a minimum free float of 25 percent throughout.

    This will be long term positive for tax revenue.

  • PSX makes all time high volumes of 2.22bn shares as KSE-100 falls by 22 points

    PSX makes all time high volumes of 2.22bn shares as KSE-100 falls by 22 points

    KARACHI: The benchmark index KSE-100 index of Pakistan Stock Exchange (PSX) fell by 22 points on Thursday as the market recorded all time high volumes of 2.22 billion shares in a single day.

    The Index closed at 46,791 points as against 46,812 points showing a decline of 22 points.

    Analysts at Arif Habib Limited said that MSCI rebalancing created excitement today in the market with heavy flows in OGDC, LUCK and TRG which were the key subjects in the changes announced earlier during the month.

    Besides, WTL repeated the performance shown yesterday being the volume leader consecutively and helping the market realize total trading volumes of 2217 million shares, the highest ever after posting 1560 million shares yesterday.

    Since MSCI orders were mostly MoC, last half an hour caused the index to trade red with a decline of 137 points.

    Banking sector kept the index green for most part of the session, with particular interest in HBL and UBL. Among scrips, WTL topped the volumes with 950.1 million shares, followed by HUMNL (172.4 million) and SILK (126.3 million).

    Sectors contributing to the performance include Technology (+46p points), Inv Banks (+23 points), Fertilizer (-29 points), Tobacco (-21 points), Autos (-19 points), E&P (-14 points) and Engineering (-13 points).

    Volumes increased from 2,220 million shares as against 1,563 million shares (+42 percent DoD). Average traded value also increased by 51 percent to reach US$ 276.7 million as against US$ 183 million.

    Stocks that contributed significantly to the volumes include WTL, HUMNL, SILK, BYCO and KEL, which formed 65 percent of total volumes.

    Stocks that contributed positively to the index include TRG (+46 points), LUCK (+30 points), HBL (+23 points), DAWH (+17 points) and KTML (+8 points). Stocks that contributed negatively include PAKT (-21 points), FFC (-18 points), MTL (-16 points), MCB (-14 points) and BAFL (-12 points).

  • Stock market gains 512 points amid highest ever volumes

    Stock market gains 512 points amid highest ever volumes

    KARACHI: The stock market gained 512 points on Wednesday amid the highest ever volumes, analysts said. The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) ended at 46,812 points as against previous day’s closing of 46,300 points, showing an increase of 512 points.

    The analysts at Arif Habib Limited said that historic day at PSX that saw highest ever trading volumes of 1.560 billion shares, courtesy of WTL which realized trading volume of 706.5 million shares.

    Though E&P and Banking sector stocks helped the index maintain the momentum, the real head turners were the Technology and Telecommunication sectors where listed scrips of IT and Media made the sentiment.

    WTL, HUMNL, MDTL, PTC, TELE, AVN and UNITY remained in the limelight today. Among scrips, WTL led the table with 706.5 million shares, followed by HUMNL (112.3 million) and UNITY (45.1 million).

    Sectors contributing to the performance include Banks (+147 points), Technology (+99 points), E&P (+73 points), Textile (+46 points) and Power (+28 points).

    Volumes increased from 677.3 million shares to 1,563 million shares (+131 percent DoD). Average traded value also increased by 21 percent to reach US$ 183.1 million as against US$ 151.8 million.

    Stocks that contributed significantly to the volumes include WTL, HUMNL, UNITY, BYCO and PIAA, which formed 60 percent of total volumes.

    Stocks that contributed positively to the index include TRG (+72 points), OGDC (+45 points), PPL (+30 points), MCB (+29 points) and BAFL (+28 points). Stocks that contributed negatively include FFC (-22 points), FCCL (-9 points), MLCF (-8 points), EPCL (-5 points) and PAKT (-4 points).

  • Stock exchange recommends elimination of minimum tax

    Stock exchange recommends elimination of minimum tax

    KARACHI: Pakistan Stock Exchange (PSX) has recommended elimination of minimum tax regime for listed companies in order to promote documentation in the country.

    The PSX in its proposals for budget 2021/2022 recommended the elimination of minimum tax regime for listed companies. It said that though the concept of minimum tax is prevalent in a few other countries, however, in other countries, as a principle, it is levied only in cases where high-income taxpayers don’t pay any tax due to different tax exemptions available to them.

    The PSX proposed that minimum tax regime should be eliminated from listed companies as such companies are strongly compliant towards specific documentation requirements of various statutes.

    Giving rationale to the proposal, the stock exchange said that the application of minimum tax on listed companies has resulted in discouraging documentation of the economy.

    Listed companies have significant documentation and regulatory requirements and need to engage external auditors to audit their business affairs.

    The stringent regulations keep the listed companies strongly compliant towards filing of income tax / sales tax returns, paying quarterly advance taxes, adjustment of withholding taxes on sales and purchases and consequently filing withholding statements, statements on final taxation and fulfilling various other requirements which resultantly align their books of accounts with the statutory requirements and provide a comfort zone to the authorities and stakeholders over the reported numbers.

    However, the levy of minimum tax puts downward impact on the earnings of listed company despite having current and brought forward losses.

  • KSE-100 index gains 204 points in mixed trading

    KSE-100 index gains 204 points in mixed trading

    KARACHI: The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) on Tuesday increased by 204 points in mixed trading activities during the day.

    The Index closed at 46,301 points as against previous day’s closing of 46,097 points, showing an increase of 204 points.

    Analysts at Arif Habib Limited said that the market remained positive today adding a total of 272 points during the session and closed +204 points.

    O&GMCs bore selling pressure on the news of cancellation of operating licenses and probe by government, whereas E&P sector responded positively to the increase in international crude oil prices.

    Cement sector also performed in the expectation of an increase in cement price / bag. Technology sector stocks led the index today with across the board strong price performance, particularly from NETSOL, WTL and SYS. Among scrips, WTL led the table with 149.5 million shares, followed by UNITY (66.8 million) and TELE (37.6 million).

    Sectors contributing to the performance include Banks (+154 points), Cement (+39 points), Vanaspati (+32 points), Fertilizer (+17 points) and Textile (+17 points).

    Volumes declined from 766.6 million shares to 677.4 million shares (-12 percent DoD). Average traded value however, increased by 18 percent to reach US$ 152.3 million as against US$ 129.7 million.

    Stocks that contributed significantly to the volumes include WTL, UNITY, TELE, HUMNL and BYCO, which formed 46 percent of total volumes.

    Stocks that contributed positively to the index include HBL (+68 points), UBL (+31 points), UNITY (+31 points), DGKC (+21 points) and EFERT (+16 points). Stocks that contributed negatively include COLG (-27 points), HUBC (-19 points), MARI (-15 points), TRG (-10 points) and PSO (-8 points).

  • Stock market gains 182 points on GDP growth projection

    Stock market gains 182 points on GDP growth projection

    KARACHI: The stock exchange gained 182 points on Monday on official GDP growth projection and Moody’s assessment.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 46,097 points as against last Friday’s closing of 45,915 points, showing an increase of 182 points.

    Analysts at Arif Habib Limited said that the market posted decent gains earlier in the session by adding a total of 400 points, taking cue from Moody’s assessment of Pakistan’s credit reporting which was supported by a surprise growth in real GDP.

    Although the roll-over week began today, unlike past months activity remained low in tech stocks and in the end TRG closed below LDCP.

    E&P stocks remained poised on increase in crude oil prices, whereby OGDC scored high volume with an increase in stock price but failed to retain the gains by the end of session.

    Cement sector bounced back on the prospects of an impending increase in cement price / bag. Among scrips, WTL topped the volumes with 275.8 million shares, followed by SILK (36.6 million) and SMBL (36.5 million).

    Sectors contributing to the performance include Cement (+87 points), Banks (+42 points), Autos (+35 points), Fertilizer (+26 points) and Chemical (+22 points).

    Volumes increased from 710.4m shares to 766.6 million shares (+8 percent DoD). Average traded value increased by a nominal 1 percent to reach US$ 129.7 million as against US$ 127.8 million.

    Stocks that contributed significantly to the volumes include WTL, SILK, SMBL, HASCOL and FFL, which formed 51 percent of total volumes.

    Stocks that contributed positively to the index include SYS (+24 points), MTL (+23 points), PPL (+21 points), MLCF (+21 points) and COLG (+20 points). Stocks that contributed negatively include TRG (-43 points), HUBC (-12 points), PSO (-12 points), MARI (-8 points) and SEARL (-7 points).

  • 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).