KARACHI: Pakistan stocks plunged by 923 points on Friday owing to weakening fiscal condition and concerns of further monetary tightening.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) ended at 41,315 points from previous day’s closing of 42,238 points, showing a decline of 923 points.
Analysts at Arif Habib Limited said that the benchmark KSE-100 index witnessed yet another bloodbath session today due to monetary tightening and inflationary concerns.
The market opened in the negative zone and remained under pressure throughout the day as investors opted for profit selling over uncertain economic scenarios.
Volumes increased from 157.0 million shares to 225.4 million shares (+43.6 per cent DoD). Average traded value also increased by 13.3 per cent to reach $30.3 million as against $26.7 million.
Stocks that contributed significantly to the volumes are KEL, PRL, CNERGY, PAEL and PIBTL.
KARACHI: The Federal Board of Revenue (FBR) has been urged to eliminate minimum tax regime for listed companies in order to encourage documentation of economy.
The PSX in its proposals for budget 2022/2023, submitted to the FBR stated that through 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.
It suggested that minimum tax regime should be eliminated from listed companies as such companies are strongly compliant towards specific documentation requirements of various statues.
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 complaint 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.
KARACHI: Pakistan Stock Exchange (PSX) has proposed rationalizing tax rates for listed companies through incentives and credits, in order to encourage documentation of economy.
The PSX in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR) 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 CGT. Hence it is important to encourage companies to get listed on PSX.
However, tax credit on enlistment under section 65C has been omitted by the Finance Act, 2021. This tax incentive was a very small carrot with no significant revenue impact. Had this section not been omitted, only 8 listed companies would have availed this tax credit which we estimate, based on their latest audited financial statements, the tax revenue impact would have been Rs. 342 million per annum.
Further, the CGT collected on these 8 symbols for the 6 months period from July 2021 to December 2021 is Rs. 237 million, and, extrapolating based on this 6 months average collection of CGT, the tax collection for the 12 months period could be Rs. 474 million, compared to the total estimated tax credits of Rs. 342 million that would have been availed by these 8 companies.
The average rate of tax in the Asian region is 19.62%; whereas, currently in Pakistan the corporate tax rate is 29%. 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.
To encourage documentation of the economy, the corporate tax rate should be permanently lowered for listed companies, by giving tax credit of 20% of tax payable for those companies that meet the prescribed requirements including a minimum free float of 25% throughout. This will be long term positive for tax revenue.
The table below outlines the five-year summary of listings and de-listings on the Pakistan Stock Exchange:
Particulars
Number of Companies
Capital (Rs.)*
New Listings
24**
57,381 Million
De-listings
38
7, 241 Million
Delisted due to Merger
9
120, 525 Million
*As of December 31, 2021
**It includes listings of preference shares of already listed companies.
Rationale
i) 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.
ii) 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
iii) Furthermore, with the government’s increased pace of privatization of its entities, the stock market will attract local and foreign investors and increase the market size. The average rate of tax in the Asian region is 19.62%; whereas, currently in Pakistan the corporate tax rate is 29%. As such it is imperative that the corporate tax rate after above tax credit is brought down reasonably to compete with the other regional and global countries. Following are the average worldwide corporate tax rates:
LOCATION
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Africa
29.0
28.3
27.9
27.9
27.5
28.73
28.81
28.45
28.50
27.97
Asia
22.9
22.1
21.9
22.6
21.9
20.05
20.65
21.32
20.06
19.62
Europe
20.4
20.6
19.7
20.1
20.5
18.35
18.38
20.27
19.99
19.84
Oceania
28.6
27.0
27.0
27.0
26.0
23.67
22.00
23.75
23.75
23.75
North America
33.0
33.0
33.3
33.3
33.3
23.08
23.01
25.85
26.06
26.37
OECD
25.2
25.3
24.1
24.9
24.8
24.18
23.93
23.59
23.51
23.04
Global
24.4
23.7
23.6
23.9
23.6
22.96
23.03
24.18
23.85
23.54
Proposed Amendment
Reinstate section 65C of Income Tax Ordinance, 2001 to be read as under:
“Where a taxpayer being a company opts for enlistment in any registered stock exchange in Pakistan, a tax credit equal to twenty percent of the tax payable shall be allowed for the tax year in which the said company is enlisted and for the following years for those companies that meet the prescribed requirements including a minimum free float of 25% throughout and”.
KARACHI: Pakistan stocks ended down by 518 points on Thursday owing to rising concerns of further monetary tightening.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) ended at 42,238 points from previous day’s closing of 42,756 points in interbank foreign exchange market, showing a decline of 518 points.
Analysts at Arif Habib Limited said that the the market continued selling momentum from the previous session as rise in 3 months Treasury-Bills yields went up by 75 basis points to 15.25 per cent which raised concerns over a possible hike in the policy rate.
It is pertinent to mention that the State Bank of Pakistan (SBP) in its latest monetary policy announcement on May 23, 2022 raised the policy rate by 150 basis points to 13.75 points.
The KSE-100 index made an intraday low of 623 points as selling pressure was witnessed across the board. Volumes remained dull although 3rd tier stocks were in the limelight.
Sectors contributing to the performance include Banks (-105.8 points), Fertilizer (-66.8 points), Cement (-62.3 points), Technology (-48.7 points) and Chemicals (-45.8 points).
Volumes decreased from 194.4 million shares to 157.0 million shares (-19.2 per cent DOD). Average traded value also decreased by 1.2 per cent to reach US$ 26.8 million as against US$ 27.1 million.
Stocks that contributed significantly to the volume are PRL, UNITY, CNERGY, SILK and WTL.
KARACHI: Pakistan Stock Exchange (PSX) has suggested the tax authorities to introduce grandfather provisions for tax treatment of listed companies.
In its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR), the stock exchange recommended grandfather provision for tax treatment of companies, which list on the PSX.
The stock exchange said in view of strong structural reforms in the capital market, companies in Pakistan have immense potential to raise funds from the capital market. This will result in greater documentation of the economy and increased tax revenue. At the same time this will help to grow the capital markets, provide attractive investment opportunities and hence improve the savings and investment rates in Pakistan. Listed companies become part of the documented, regulated and formal corporate sector. Hence, PSX is continuously endeavoring to encourage listings.
It is proposed that in order to encourage companies to list, their tax status should be grandfathered at the time of listing application i.e. no new cases for past tax returns should be opened, except for such pending cases on which proceedings have already been initiated under the Ordinance, before the date of listing application, will continue as per the provisions of law.
It is well known that a large part of Pakistan’s economy is undocumented and a significant number of companies operate in the informal sector. This will encourage such companies, particularly SMEs, to become documented and start paying taxes, without the fear that past tax returns or lack of them will be questioned. Moving forward they will be documented and paying full tax. Hence, this will be a significant revenue positive measure.
“The provision of section 122, section 176 and section 177 shall not be applicable to those taxpayers being companies which opt for enlistment on the Main or GEM Board of Pakistan Stock Exchange, except such pending cases on which the proceedings have already been initiated under the Ordinance, before the date of listing application, will continue as per the provisions of law.”
KARACHI: Pakistan stocks gained 38 points in range bound trading activity on Tuesday due to concerns of high inflation and tightening of money supply.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) ended at 43,078 points from previous day’s closing of 43,040 points, showing a gain of 38 points.
Analysts at Arif Habib Limited said that the market remained range bound throughout the day, due to concerns over rising inflation number and tightening of money supply.
The benchmark KSE-100 index opened in the positive zone but lackluster activity was witnessed during the day.
Volumes remained dry in the main board although hefty volumes were witnessed in the 3rd tier stocks.
Sectors contributing to the performance include Power (+64.2 points), E&P’s (+56.8 points), Technology (+21.7 points), Autos (+20.1 points) and Fertilizer (+16.4 points).
Volumes increased from 187.5 million shares to 285.3 million shares (+52.2 per cent DOD). Average traded value also decreased by 20.7 per cent to reach US$ 37.2 million as against US$ 30.8 million.
Stocks that contributed significantly to the volumes are SILK, PIBTL, PRL, PAEL and WTL.
KARACHI: Pakistan stocks gained 179 points on Monday owing to appreciation in rupee value against the dollar.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) ended at 43,040 points from last Friday’s closing of 42,861 points, showing an increase of 179 points.
Analysts at Arif Habib Limited said that the market opened in the positive zone and remained green throughout the day in expectations of resumption of loan program under Extended Fund Facility (EFF) of International Monetary Fund (IMF) in June 2022 which also help the rupee getting stronger against US Dollar.
Main board activity remained healthy in E&P and OGDC remained in limelight as expectation of nod from ECC to convert OGDC receivable from PHLP into Pakistan Investment Bonds. Although good volumes were witnessed in 3rd tier stocks.
Sectors contributing to the performance include E&P’s (+79.4 points), OMCs (+24.8 points), Technology (+23.2 points), Autos (+20.1 points) and Banks (+13.5 points).
Volumes decreased from 527.7 million shares to 187.5 million shares (-64.5 per cent DOD). Average traded value also decreased by 56.2 per cent to reach US$ 30.7 million as against US$ 70.2 million.
Stocks that contributed significantly to the volumes are TPLP, PRL, CNERGY, and GGL and OGDC.
KARACHI: In the upcoming week, the market may remain jittery due to political strains, as PTI has given six days to the Government to announce elections, analysts at Arif Habib Limited said.
However, it appears that the government’s removal of the subsidy on fuel and electricity will gain IMF approval.
Once the package comes through, other sources of FX should also open up, which will be a positive for the market.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 4.3x (2022) compared to Asia Pac regional average of 12.3x while offering a dividend yield of 9.2 per cent versus 2.7 per cent offered by the region.
In the outgoing week the market opened on a negative note, due to uncertainty over the outcome of the IMF program and the Monetary Policy Committee (MPC) meeting where the State Bank of Pakistan (SBP) decided to hike the policy rate by 150 basis points.
Consequently, this put pressure on the rupee which hit an all-time low of PKR 202/USD.
On the political front tensions were high as PTI marched toward the capital, adding more pressure to the market.
However, things turned for the better when the ex-PM Imran Khan decided to come back after 6 days.
Investor confidence was revived towards the end of the week when the government decided to hike petroleum prices by PKR 30/liter, paving the way for the resumption of the IMF program and other avenues of foreign funding. In other news, Saudi Arabia is in the final stages of extending the USD 3 billion deposit to Pakistan, and ADB is set to fund projects worth USD 2 billion.
The market closed in red at 42,861 points, shedding 239 points (down by 0.6 per cent) WoW.
Sector-wise negative contributions came from i) Fertilizer (132 points), ii) Commercial Banks (76 points), iii) Cement (56 points), iv) Oil & Gas Exploration Companies (41 points), and v) Power Generation & Distribution (29 points).
Whereas, sectors which contributed positively were i) Technology & Communication (66 points), ii) Refinery (40 points), iii) Automobile Assembler (32 points), iv) Oil & Gas Marketing Companies (15 points), and v) Food & Personal Care Products (14 points).
Scrip-wise negative contributors were FFC (63 points), EFERT (57 points), LUCK (48 points), HUBC (39 points) and OGDC (30 points). Meanwhile, scrip-wise positive contribution came from TRG (64 points), MTL (34 points), HBL (30 points), AVN (23 points) and CNERGY (19 points).
Foreign selling was witnessed this week, clocking in at USD 1.5 million compared to a net sell of USD 6.1 million last week. Major selling was witnessed in Cement (USD 1.8 million) and Banks (USD 1.4 million).
On the local front, buying was reported by individuals (USD 11.0 million) followed by Brokers Proprietary Trading (USD 2.9 million). Average volumes clocked in at 281 million shares (up by 27 per cent WoW) while average value traded settled at USD 39 million (up by 26 per cent WoW).
