Analysts expect handsome rally at PSX after relief measures

Govt abolishes 0.02% advance tax, allows investors adjustment of losses up to 3 years

KARACHI: Stockbrokers and market analysts have anticipated a handsome rally at the Pakistan Stock Exchange (PSX) on Thursday (today) as the government has announced bourse-friendly measures.

They expect the benchmark KSE-100 index to surge in the range of 500 to 1,000 points in the first post-mini-budget session and maintain the uptrend to settle around 42,000 points in the next few days.

“The removal of 0.02% advance tax on the sale and purchase of shares, collected from brokerages, will increase trading activities in the market,” Arif Habib Limited Head of Research Samiullah Tariq said while talking to The Express Tribune.

“This is a relief to the stockbrokers as it will reduce their cost of doing business. Simultaneously, the increase in trading activities will bring liquidity in the market and create depth for larger sale and purchase of shares.”

Besides, the government has allowed investors to adjust losses against profits for up to three years under the capital gains tax (CGT) system. The new measure, announced for the first time in the bourse’s history, will allow investors to sell securities even if they book losses in the hope they will offset them against likely profits in the near future.

Finance Minister Asad Umar, however, did not announce the restoration of tax slabs under the CGT regime in line with those applied to property sale and purchase. Earlier, the minister had himself presented the idea of matching the CGT rates for stocks with those for property in order to create harmony between the two markets.

“The market may see a 500-point rally tomorrow (Thursday),” Tariq said.



“I bet the market will surge by at least 1,000 points,” PSX Stockbrokers Association General Secretary Muhammad Adil Ghaffar said. “I expect the market to move up by 5% to 42,000 points in the current bullish momentum.”

The benchmark KSE-100 index closed above 40,000 points on Wednesday after quite a long time, gaining 155.64 points to 40,057.85.

He recalled that the index stood at 42,000 points the day Prime Minister Imran Khan took oath in August 2018, but it then took a dive due to uncertainty over economic policy of the new Pakistan Tehreek-e-Insaf (PTI) government.

They pointed out that the early phase-out of super tax on non-banking companies from the beginning of next fiscal year would help listed companies realise higher profits. The super tax on banks will, however, be removed by 2021.

A massive cut of around 19 percentage points to 20% in the tax on income of banks from lending to small and medium enterprises, agricultural credit and house financing would help the financial institutions realise improved profits.



Besides, the withdrawal of 0.3% withholding tax on cash withdrawal for tax return filers is also positive for the banking sector.

The government has also lifted the ban on non-filers of tax returns in the purchase of new vehicles of up to 1,300cc engine capacity and has increased the tax on the import of cars of above 1,800cc, which are in favour of the listed car manufacturing companies at the PSX.

Moreover, according to Ghaffar, the government has removed the tax on dividend paid by subsidiaries to their parent companies and on the tax on profits retained with the objective of re-investment in the business, which are also positive for the industries and listed companies.

The announcement for the provision of cheaper loans for low-cost homes and creation of a fund worth Rs50 billion to provide unconditional loans for housing units should spark renewed buying in cement and steel stocks.

The market is yet to factor in the positive developments that took place during Prime Minster Imran Khan’s visit to Qatar during which Doha agreed to supply LNG on credit. “Budget worries did not let the market price in what is happening in Qatar,” he said.

The government has referred the GIDC issue to the cabinet for suggestion on how the tax could be reduced or removed on gas supply to fertiliser units for the benefit of farmers.

Besides, Adviser to PM on Commerce Abdul Razak Dawood will hold a press conference to announce details of the incentives for industries, especially the export-oriented units. 

Published in The Express Tribune, January 24^th, 2019.

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