The Cabinet Economic Coordinating Council

On Wednesday, the Cabinet Economic Coordinating Council (ECC) provided a simple tax system for non-resident companies to invest in local debt markets to deepen their national capital markets to attract portfolio investment. Under the new regime, the government has simplified the process of investing large funds in the stock and monetary markets by providing a simple regime for non-resident companies with no permanent establishment in Pakistan.

Finance and Revenue

The ECC meeting, chaired by PM's advisor to Hafeez Shaikh, has approved a new tax regime that will help increase foreign exchange inflows and reserves. ECC directs ministry to ensure stable supply of wheat and flour at regular prices. Currently, double taxation treaties with major countries also do not encourage large funds to invest in Pakistan. But under a simple tax regime, the government provided this fund with a 10% capital gain and a 10pc interest rate to invest in the local debt market. After the ECC meeting, a tax official said, We reaffirmed that there would be no additional taxes.

The purpose of the simplified procedure is to encourage the inflow of foreign currency into special converting rupee accounts, which can later be converted to local rupees to invest in currency and stock markets. The new process also reduces government debt costs. The ECC has also approved the payment of US $ 5.55 billion in amendment to the smoking cessation in the tobacco sector in fiscal year 2019-20 and gas subsidies to the fertilizer industry.

On the issue of wheat

The conference indicated that there are certain regions and places, such as Karachi, where prices have risen, but that prices are stable in most areas. The ECC consulted with all stakeholders to instruct the National Food Security and Research to ensure a steady supply of wheat and flour at a constant price. The Commission also considered the proposal of the Ministry of Energy on the 1st of July to apply the quarterly adjustments notified to industrial consumers of zero grade and to impose 7.5 cents on the reported tariffs on zero-grade industrial consumers.

Financial cost surcharges, Neelum-Jhelum Surcharge, taxes, and positive fuel adjustments will not be part of claims for industrial consumers in the zero-grade sector, but will be part of subsidies billed by the government. The former government provided Rs3.5 packages per unit relief to industrial consumers, which ended earlier this year, following the current government's decision to reduce subsidies. However, this measure increased the power bill for industrial consumers, who were promised a flat fee of 7.5 cents per unit.

This problem was shaken in the sense that the government back tracked the promise of higher input costs by industrial consumers. Therefore, the Department of Power suggested that certain additional charges for power bills should not apply to those consumers. The ECC also discussed the pros and cons of the proposal, taking into account its financial impact, and asked the finance department to hold meetings with stakeholders, including the power, commercial.

And industrial and production departments, and to resubmit the case to the ECC with a solid proposal. The ECC also addressed this issue to the Development Working Group, led by the Director-General for making appropriate decisions, taking proposals for the expansion and rehabilitation of the gas network in the oil and gas production area of ​​Khyber Pakhtunkhwa.

US Electricity Authority

On Wednesday, the US Electricity Authority (Nepra) allowed Rs1.78 per unit of power rate increase for all power distribution companies except K-Electric, due to fuel price adjustments for electricity consumed in July. The decision was made at a monthly hearing hosted by Nepra's Chairman Tauseef H. Farooqi. On behalf of Discos, the Central Power Purchasing Agency (CPPA) has filed a petition for a tariff increase that would allow an increase of Rs1.93 per unit, as the actual fuel costs for July are higher for consumers. It will recover from consumers next month.

Nepra did not allow some of the costs claimed by the CPPA, and increased Rs1.78 per unit, giving consumers an additional burden of about 2242 billion rupees and generating additional revenue for distribution companies. However, this adjustment does not apply to K-Electric consumers, but also to lifeline consumers who use less than 50 per month.

The regulator's case manager said that if the power company optimally utilizes LNG-based and other efficient power plants instead of expensive furnace oil-based units, the burden on consumers will be reduced to 5 billion rupees. The CPPA team followed an economic merit order in the power generation sector, but claimed that Nepra's case manager did not agree. Nepra Vice-President Rahmatullah Baloch has instructed.

The CPPA and the National Transmission and Despatch Company (NTDC) to submit a report on the July Approved Achievement Order and how to implement it. The CPPA in the petition in July charged consumers with a base tariff of Rs3.54 per unit, while the actual fuel cost turned out to be Rs5.46 per unit, so it should be able to recover Rs1.93 per additional cost.

From consumers next month

The total energy production from all sources in July is 14,231 GWh, reaching Rs74.90bn with an average fuel cost of Rs5.26 per unit. About 13,788 GWh was sold to Discos for Rs75.41bn. High tariff adjustments are not billed to lifeline consumers using up to 50 cars per month, but all other consumers in all categories, including industrial sectors and agricultural wells, will have to bear extra burden. The revised fee does not apply to K-Electric consumers.

National Security Council

The KSE-100 index fell sharply to 723 points (2.33% decrease) on Wednesday to return the benchmark to its March 2015 level and close at 30,277. As the National Security Council decided to downgrade diplomatic relations and review bilateral trade agreements with India, uncertainty over US-China trade war tensions continued to grow as geopolitical instability on the Kashmir issue increased. In addition, the Bureau of Domestic Responsibility arrested former Finance Minister Miftah Ismail after the Islamabad High Court refused to request a temporary bail extension in the LNG import case.

Trading volume skyrocketed from 54% to 24 million shares, compared to $ 16.6 million the day before, while the traded price jumped to $ 14.6 million at $ 34 million. Shares contributed significantly by K-Electric, Maple Leaf Cement, Lotte Chemical, TRG Pakistan and Hascol Petroleum recorded a total revenue of 27pc. The mutual fund sold $ 3.68 million worth of shares and was sold by individuals who bought $ 36 million of shares, resulting in a regional sale of $ 0.46 billion.

But foreign buyers showed that net buyers increased their position by $ 0.46 m. By industry, Habib and United Bank published financial results based on market expectations, but commercial banks led the index down as the financial world landed in a deficit.

Negatively contributing shares lost oil and gas development companies, 70 points, UBL 55 points, Hub Power Company 5 points, Pakistan oil 51 points and Engro Corporation 45 points. On the other hand, the winner was Dawood Hercules, who added a 9 point Shifa Int. 5 hospitals, 3 Kohinoor Textile Mills Ltd, 3 Fauji Fertilizer Bin Qasim Ltd, and 2 service industries.

The main reason for the recovery

Wednesday's stock market closed the KSE-100 index by 435.05 points (1.46%), closing at 30,244.73. The main reason for the recovery of investor attention is that most market leaders climbed to 10.50pc after revising the weight of the Pakistan Bureau of Statistics due to the low CPI figure during the month of August. However, when calculated on the existing basis, the August CPI was 11.60pc. Low CPI numbers were thought to enable rate cuts. In the early hours, the market struggled to sell shares in the banking sector, lowering the index to 342 points per day.

The index recovered all losses in the second half of the session to its highest level of 568 points. Investors have abandoned concerns about the geopolitical situation. Bangkok's upcoming financial action task force review and concerns about poor economic conditions. An important feature of the day's trading was the purchase of 'individuals' who stole $ 4.2 million worth of shares. Institutional participants and mutual funds generally remain collateral, but foreign investors sold $ 4,57m in equity.

The cement sector led the index's rise with support from the exploration and production (E & P) sector, which has hit the upper circuit by oil and gas marketing companies, oil and gas development companies (OGDC) and Pakistan oil companies (PPL). Closed cement stock in or near the upper circuit is D.G. Canned Cement, Lucky Cement (LUCK), Maple Leaf Cement Mill (MLCF), Pioneer Cement and Coconut Cement.

We witnessed value purchases in the E & P sector, where script prices in P & P, OGDC, Pakistan oil fields and Mari Petroleum are rising. Trading volume doubled from 64 million shares the previous day to 128.7 million shares. Transaction value also increased by 100pc per day to reach $ 31.2m.

Shares that have contributed significantly to the volume include MLCF, Fauji Cement Company Ltd, Unity Foods, WorldCall Telecom Ltd and Lotte Chemical, with a total volume of 35pc. The main heavyweights that raised the index are Engro Corporation 3.5pc, OGDC 3.8pc, PPL 4.2pc, LUCK 4.8pc and MCB Bank Ltd 2.7pc.
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