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Tag: Pakistan Stock Exchange

  • PSX seeks permanent reduction in tax rate for listed companies

    PSX seeks permanent reduction in tax rate for listed companies

    KARACHI: Pakistan Stock Exchange (PSX) has recommended to lower the rate of tax for listed companies in order to encourage listing in the equity market.

    “The 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,” the PSX suggested in its proposals for budget 2020/2021.

    The stock exchange said that in order to encourage new listings, the Finance Act, 2011 introduced Section 65C of the Income Tax Ordinance, 2001; whereby tax credit equal to twenty percent (20 percent) for the tax year in which a company opts for enlistment on the Stock Exchange was allowed.

    Currently, the tax credit is given for four years from the date of listing, subject to the condition that for the first two tax years.

    This tax credit is very insignificant and not enough to attract new listings.

    It is generally observed that when companies opt for a listing on a stock exchange, their profits enhance substantially due to effective corporate governance, better disclosures, and availability to additional funds from the market.

    Increased profitability ultimately leads to higher tax revenue for the government as the number of listed companies on PSX grows. Higher listings, coupled with regulations to increase trading activity will result in higher liquidity, and also lead to incremental government revenues from capital gain tax.

    The table below outlines the five-year summary of listing and de-listing on the PSX:

    ParticularsNumber of CompaniesCapital (Rs.)*
    New Listings2462,607 Million
    De-Listings4212,971 Million
    Delisted due to merger9140,535 Million

    *As of December 31, 2019

    Giving rationale to the proposals, the PSX said that It is generally observed that publically-listed companies are able to improve profitability due to effective corporate governance, better corporate disclosure and availability of additional funds.

    The incremental benefits arising from the preferential tax structure for listed companies will foster a business environment that encourages new listings on the stock exchange, resulting in higher trading volumes and lead to:

    a) Higher tax revenue from listed companies’ income as a result of higher corporate profits

    b) Higher revenues from tax on brokers activity on new listings

    c) Higher revenue from Capital Gains Tax on disposal of newly listed securities.

  • PSX proposes reduction of withholding tax on margin financing transactions

    PSX proposes reduction of withholding tax on margin financing transactions

    KARACHI: Pakistan Stock Exchange (PSX) has proposed to reduce the rate of withholding tax in the gross income earned on margin financing transactions to 2.5 percent from existing 10 percent.

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  • Weekly Review: market likely remain range bound

    Weekly Review: market likely remain range bound

    KARACHI: The stock market likely to stay range bound in coming week owing to ease in lockdown.

    Analysts at Arif Habib Limited said that the market to remain range bound in the coming week.

    With standard operating procedures in place, lockdown will be easing off next week, business community and economy will get a sigh of relief.

    Whereas, given foreign reserves clocking-in at USD 18.8 billion, up by USD 292 million WoW, Pak Rupee is expected to remain stable against the greenback (which is a major positive for foreign investment).

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.0x (2020) compared to Asia Pac regional average of 10.2x and while offering DY of ~8.4 percent versus ~3.1 percent offered by the region.

    Market commenced on a negative note this week, with investors resorting to profit taking.

    With a massive fall in exports by 54 percent YoY in last month followed by a fall in cement dispatches by 24 percent YoY in April 2020 amid lockdown weak sentiment prevailed.

    Furthermore, IMF’s prediction regarding total foreign reserves depletion by USD 1.9 billion in the coming 15 months added fuel to this decline.

    Moreover, 12 month T Bill cut off yield climbed up by 28 basis points. Meanwhile, Federal Govt.’s decision to ease off lockdown from Saturday and onwards was not received well given alarming jump in COVID-19 cases on day-on-day basis.

    Whereas, announcement of reduction in RLNG prices for the month of May 2020 cushioned the dip.

    The KSE-100 index settled at 33,268 points, shedding 884 points (down by 2.5 percent) WoW.

    Sector-wise negative contributions came from i) Commercial Banks (231 points), ii) Cement (211 points), iii) Power Generation & Distribution (156 points), iv) Fertilizer (148 points) and Oil & Gas Exploration Companies (99 points).

    Meanwhile, sector-wise positive contribution came from i) Oil and Gas Marketing Companies (76 points), Food & Personal Care Products (34 points) and Technology & Communication (21 points). Scrip-wise negative contributions were led by HUBC (126 points), LUCK (102 points), HBL (82 points), FFC (76 points) and MCB (74 points).

    Foreign selling continued this week clocking-in at USD 17.8 million compared to a net sell of USD 11.6 million last week.

    Selling was witnessed in Exploration & Production (USD 7.1 million) and Commercial Banks (USD 5.1 million).

    On the domestic front, major buying was reported by Individuals (USD 20.3 million) and Companies (USD 5.7 million).

    Average Volumes settled at 190 million shares (up by 7 percent WoW) while average value traded clocked-in at USD 46 million (down by 5 percent WoW).

  • Share market falls by 424 points on profit taking

    Share market falls by 424 points on profit taking

    KARACHI: The share market fell by 424 points on Thursday as profit taking witnessed which resulted in selling pressure during the day.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 33,304 points as against 33,728 points showing a decline of 424 points.

    Analysts at Arif Habib Limited said that the market opened on a negative note today and could only manage to pull back into green for a brief time, before plunging due to selling pressure.

    Regardless of what the international crude prices are trading at, local E&P and O&GMCs which responded positively to the ascend in international crude prices last week, remained oblivious to further price gains.

    Profit booking is clearly on investors mind, who have so far been cashing out from Fertilizer, Cement, E&P and O&GMCs.

    Banks, on the other hand, which have weathered the flow from foreign investors (possibly due to MSCI rebalancing), showed initial signs of recovery on the prospect of expectation of status quo in the upcoming monetary policy.

    This is reflected by the yield change in secondary market for 10yr PIBs, which marked a low of 7.64 percent on April 17, 2020 and have since then recovered to 8.23 percent today, indicating that there may be a status quo on policy rate.

    Cement sector led the volumes with 41.8 million shares, followed by Banks (19.1 million) and O&GMCs (18.9 million). Among scrips, HASCOL topped with 16.1 million shares, followed by MLCF (12.6 million) and DGKC (8.2 million).

    Sectors contributing to the performance include E&P (-127 points), Cement (-56 points), Power (-54 points), Fertilizer (-41 points) and O&GMCs (-39 points).

    Volumes declined from 208.9 million shares to 175.8 million shares (-16 percent DoD). Average traded value on the other increase by 4 percent to reach US$ 46.8 million as against US$ 45.1 million.

    Stocks that contributed significantly to the volumes include HASCOL, MLCF, DGKC, UNITY and FCCL, which formed 30 percent of total volumes.

    Stocks that contributed positively to the index include UBL (+28 points), HBL (+24 points), EFUG (+11 points), SYS (+8 points) and MTL (+5 points). Stocks that contributed negatively include OGDC (-51 points), PPL (-48 points), HUBC (-44 points), LUCK (-34 points), and BAHL (-28 points).

  • Share market ends down 265 points on selling pressure

    Share market ends down 265 points on selling pressure

    KARACHI: The share market fell by 265 points on Wednesday owing to selling pressure in major scrip witnessed during the day.

    The Index closed at 33,728 points as against 33,993 points showing a decline of 265 points.

    Analysts at Arif Habib Limited said that the market opened on a positive note today with +114 points but could not sustain selling pressure, which brought the index down in negative territory and witnessed a decline of 317 points.

    The index made some recovery by the end of session and closed -264 points.

    Banks, Cement and E&P stocks weathered selling pressure regardless of international crude oil prices.

    Fertilizer stocks traded no different than the rest and saw decline in stock prices.

    Among Banks, HBL saw low prices due to MSCI rebalancing and concerns among investors about a possible exit.

    Technology stocks managed to post the highest volumes with 28.9 million shares, followed by O&GMCs (28.2 million) and Cement (24.1 million).

    Among scrips, HASCOL topped with 23.8 million shares, followed by UNITY (20.4 million) and TRG (14.5 million).

    Sectors contributing to the performance include Banks (-99 points), Cement (-53 points), E&P (-39 points), Fertilizer (-34 points), Power (-34 points).

    Volumes declined from 261 million shares to 208.9 million shares (-20 percent DoD). Average traded value also declined by 22 percent to reach US$ 45.1 million as against US$ 57.6 million.

    Stocks that contributed significantly to the volumes include HASCOL, UNITY, TRG, MLCF and PIBTL, which formed 36 percent of total volumes.

    Stocks that contributed positively to the index include NESTLE (+9 points), TRG (+8 points), BAFL (+6 points), SHEL (+6 points) and ANL (+6 points).

    Stocks that contributed negatively include MCB (-56 points), HBL (-42 points), HUBC (-36 points), LUCK (-24 points), and FFC (-18 points).

  • PSX proposes tax relief for exchange traded fund

    PSX proposes tax relief for exchange traded fund

    KARACHI: Pakistan Stock Exchange (PSX) has proposed Exchange Traded Funds, transfer of Portfolio (basket of securities) from Authorized Participant (AP) to ETF’s Account should not be treated as disposal.

    In its proposal for budget 2020/2021, the PSX suggested that in order to facilitate the market for Exchange Traded Funds, transfer of Portfolio (basket of securities) from Authorized Participant (AP) to ETF’s Account should not be treated as disposal and therefore holding period of ETF constituents be carried forward to the ETF, upon conversation of Portfolio Deposit to ETF units, for the purpose of CGT calculation.

    Tax relief for ETF instrument will play a significant role in not only the benefit to existing ETFs recently launched but also in the successful launch of further ETFs in Pakistan, as the current structure would trigger capital gains in the creation of ETFs units. Moreover, a rationalization rate of tax on ETF investments, at par with the tax on other asset classes, would attract more investors towards ETFs.

    An Exchange Traded Fund (ETF) is a pooled investment vehicle, with shares which can be traded throughout the day on a stock exchange, at a price determined by the market. Similar to a traditional mutual fund, an ETF provides investors a proportionate share in a pool of underlying securities.

    ETFs are one the fastest growing category of passive fund investments. Globally ETFs are an integral part of product offerings in the capital markets. It is a product with significant presence in over 47 countries.

    Internationally, there are over 8,000 ETFs with aggregate Assets Under Management of about USD 6.5 trillion by the end of 2019 and estimated to grow to around USD 7.6 trillion by the end of 2020.

    ETFs typically track an underlying index; they can also be based on sectors and strategies. They hold immense potential for investors to gain exposure to various market themes, without paying excessive management fees for getting a diversified exposure or developing a portfolio.

    PSX proudly announced on March 24, 2020, the successful listing and commencement of trading in Pakistan’s first ever Exchange Traded Funds (ETF).

    Two ETFs, namely NIT Pakistan Gateway ETF and UBL Pakistan Enterprise ETF, were launched on March 24, 2020 by the National Investment Trust Limited and UBL Fund Managers Limited, respectively.

    Given the current circumstances and in the interest of safety, a first of its kind virtual launch was organized by PSX for the landmark launch of the ETFs.

    This virtual launch is a step taken to make sure that the message of availability of ETFs in the Pakistani Capital Market goes across to all investors and market participants while ensuring their safety in the wake of the current threat of the potential spread of the Covid-19 virus.

    Therefore, as PSX is working actively with all market participants and regulators, the tax structure for ETFs needs to be rationalized to incentive prospective Aps to deal in ETF’s Account (both maintained with Trustee), would trigger Capital Gains Tax (CGT).

    Internationally, the growth and attraction of ETFs has been driven by the essential requirement that creation of ETF units by authorized participants are not subject to capital gains.

    A fundamental feature of ETFs is that the creation of their units are made in-kind, and not in cash as in the case of a mutual fund, so it does not trigger capital gains tax.

    In almost every market where ETFs are traded, regulators have allowed the practice of in-kind transfer portfolio securities. Examples include Saudi Arabia, Canada, UK, and USA.

    The following proviso should be inserted after sub- section 3 of section 37A to the Income Tax Ordinance, 2001;

    “Transfer of Portfolio (basket of securities) from Authorized Participant (AP) to ETF’s Account should not be treated as disposal and therefore holding period of ETF constituents be carried forward to the ETF, upon conversion of Portfolio Deposit to ETF unit, for the purpose of CGT calculation.”

    Appropriate amendment to be made in the Income Tax Rules, 2002.

  • Stock market gains 76 points amid profit taking

    Stock market gains 76 points amid profit taking

    KARACHI: The stock market gained 76 points on Tuesday amid profit taking during the day.

    The benchmark KSE-100 of Pakistan Stock Exchange (PSX) closed at 33,993 points as against 33,917 points showing an increase of 76 points.

    Analysts at Arif Habib Limited said that courtesy of crudes’ performance in the international market, KSE-100 posted decent gains during the session, realizing +469 points and closing the session +76 points.

    E&P and OMCs remained in the limelight but also saw profit booking near yesterday’s levels and caused OGDC and PPL to settle low.

    Cement and Fertilizer sectors saw further weakness, whereas Banks also contributed to downside in Index. Cement sector topped the chart with 58.4 million shares, followed by O&GMCs (38.7 million) and Technology (26.9 million). Among scrips, HASCOL realized trading volumes of 33.8 million shares, followed by UNITY (25.4 million) and FCCL (17.8 million).

    Sectors contributing to the performance include E&P (+83 points), O&GMCs (+49 points), Food (+13 points), Cement (-39 points), Banks (-23 points).

    Volumes increased from 216.5 million shares to 261 million shares (+21 percent DoD). Average traded value declined by 1 percent to reach US$ 57.6 million as against US$ 58.4 million.

    Stocks that contributed significantly to the volumes include HASCOL, UNITY, FCCL, MLCF and PAEL, which formed 41 percent of total volumes.

    Stocks that contributed positively to the index include PPL (+34 points), ENGRO (+34 points), OGDC (+27 points), PSO (+23 points) and POL (+18 points). Stocks that contributed negatively include HBL (-33 points), FFC (-29 points), COLG (-19 points), EFERT (-10 points), and KTML (-10 points).

  • PSX proposes funded pension scheme

    PSX proposes funded pension scheme

    KARACHI: Pakistan Stock Exchange (PSX) has proposed funded pension scheme that should offer old age benefits to retired employees at public sector enterprises and government workers, without putting burden on the annual budget.

    At present, Pakistan’s pension scheme for government employees is an un-funded, pay-as-you-go scheme. Government of Pakistan exclusively finances the pension expenditure by obtaining a provision in the annual budget for this purpose.

    This has all the making of an impending pension crisis in future, and places unfair burden on future generations. In case of public sector enterprises too, much of the pension liability remains unfunded.

    The future monetary obligations are taken to be met from taxation, which places undue fiscal burden and responsibility on future generations. Age analysis of population suggests growing state pension expenses given the expected increase in the older age group.

    These conditions have led to increasingly stressed pension arrangement.

    Pension’s system reforms are focused on extending coverage to funded pension systems, which are professionally managed, extend to the informal sector, and facilitate switching from the existing employer schemes.

    While in the public sector, funds have been created at the provincial level to pre-fund the future liability.

    The PSX said that government of various countries have actively worked to provide financial security for their aging populations by maintaining adequately funded pension funds.

    These pension funds invest in a diversified range of global assets including equities, bonds, mutual funds, ETFs, and even real estate, infrastructure, and alternative assets.

    In Canada, the CPPIB (Canada Pension Plan Investment Board) is the government’s primary pension scheme, and has grown to become one the largest pension funds in the world.

    The CPPIB invests in the full stack of assets outlined above and returns are used to finance government’s pension liabilities every year. This takes the burden of pensions away from the annual budget.

    The CPP fund now manages over $409.5 billion in asset, up from $128 billion in 2010.

    An actively managed government pension fund in Pakistan will also help channel investment towards capital markets, since equities feature heavily at global pension funds.

    In Pakistan, the federal government could set up such an investment holding as a single-purpose asset management company with 100 percent control, and run by professional investment managers.

    The government should start funding its pension liabilities to avert a future pension crisis and encourage capital formation in Pakistan. An adequately funded pension scheme would offer old age benefits to retired employees at public sector enterprises and government workers, without putting burden on the annual budget. Further, it is recommended that a certain percentage of the funded pension scheme be invested in the capital markets.

    With Pakistan facing very high levels of poverty and the Government of Pakistan facing a rise in the old age population and having a scarcity of resources and funds to provide any old age benefits. An adequately funded pension scheme is one of the resources which the Government of Pakistan could offer to facilitate retired public sector employees.

    This would result in improvement in liability management of Federal Government Employees Pension Scheme.

    Appropriate amendment to be made in the Income Tax Ordinance, 2001.

  • Stock market falls by 195 points amid profit taking

    Stock market falls by 195 points amid profit taking

    KARACHI: The stock market witnessed decline of 195 points on Monday amid profit taking during the day. The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 33,916 points as against 34,112 points showing a decline of 195 points.

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  • April gains result best performing month for equity market in past 10 years

    April gains result best performing month for equity market in past 10 years

    The Karachi Stock Exchange (KSE) experienced an extraordinary surge in April 2020, recording an impressive increase of 4,880 points. This translates into a return of +16.7 percent Month-on-Month (MoM) and +21.5 percent in USD terms, marking the best-performing month since March 2009.

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