Monday, 7 October 2013

Karachi Stock Exchange Daily Analysis

Cement sales increase
During  the  first  quarter of  the  current  fiscal year,  the  Cement  Industry  has posted a  growth of 2.17  percent  in local sales, compared with sales during the first  quarter  of  the  Last  Fiscal  Year.  However, exports recorded a 1.40 percent decline, compared with exports during the first quarter of last year. The  overall  situation  during  the  first  quarter  of  the  current  fiscal  year showed  1.12  percent  growth  compared  to  the  same  period  of  last  fiscal year. A spokesperson of the All-Pakistan Cement Manufacturer Association stated on Friday that after Negative Growth in cement dispatches during the first two months of this fiscal year, the industry recorded a robust growth in September by dispatching  2.951  million  tons  of  cement,  compared  with 2.611  million  tons  dispatched  in  September  last  year,  showing  growth  of 13.01  percent. Exports were down by 0.75 percent in July, 3.29 percent in August and 0.39 percent in September. Cement Exports have been declining continuously in the last 15 months and industry is now mainly depending on Domestic Market.  In  the  first  quarter  of  this  fiscal  year,  the  Cement  Dispatches were 7.796 million tons compared to 7.710 million tons during the same  period  last year.  The  cement  industry is  content that  during the  current  budget the  government allocated Rs1,155 billion for  the Public Sector Development Programmed, but so far industry has not been able to grow as expected  and  there  is  very  small  growth,  compared  with  the  same  period last  year.  Cement Exports To India Has Declined due to lower demand.  Export  To  Afghanistan  Has  Declined  due  to  the  uncertainty  prevailing  in  that country, with US and NATO troops planning a withdrawal by the end of 2014. During  the  last  budget  the  Cement  Industry  has  been  brought  within  the purview of the “3rd  Schedule,” which has increased the overall tax  burden and has resulted in increase in the prices.

Nawaz-Obama meeting to seal IP GASLINE Fate
The fate of Iran-Pakistan Gas Pipeline project would largely depend on out-come of Prime Minister Nawaz Sharif’s crucial meeting with US President Barack Obama on October 23. Energy crisis in Pakistan and the multibillion dollars gas pipeline project would be among the key items on the agenda of the meeting.  The government is working on various proposals to secure backing of the US President on the gas project. US sanctions regime do not apply to IP gas pipeline project, as it does not entail direct transaction with any of  the  public  sector  banks of  Iran.  Since the  project would  be  handled through  a  non-governmental  organization  of  Iran,  therefore,  there  was  no risk of US sanctions attached to the gas pipeline project.

Two percent extra ST imposed on import of items
The two percent extra sales tax has also become applicable on the import of items,  which  were  recently  excluded  from  Third  Schedule  of  the  Sales Tax Act under SRO 896(I)/2013. The rate of two percent was also worked out on the basis of actual value addition of these sectors from the manufacturers till retail stage. Technically after exclusion of items from 3rd schedule tax would be calculated on ex-factory price instead of retail price and normally there is at least 15 percent gap between retail or ex-factory price hence applying 17 percent sales impact the measure roughly give benefit around @ 2.55 percent at the other end extra levy was imposed @ 2 percent hence still tax payer would get some relief even after applying extra tax, further tax payer would no more require to follow complex procedure for printing and observing retail price on each of their items. Here it is important to note that now extra tax is  also  put on  imported items  whereas 3rd  schedule was  not applicable  on  imported goods hence  disparity between local product and imported goods were also settled at the one end and tax impact was enhanced on imported goods at the other end. The Federal Board of Revenue (FBR) however did not exclude application of further tax and sales tax withholding on items levied with extra tax was the measure required to be take up as per agreed principle and to achieve entire satisfaction of the business community are the reason behind negative reaction on this particular account by business community.

World Bank to give $2.2 billion for 15 projects
The government has reportedly claimed that the World Bank will provide $2.205 billion for 15 projects in the pipeline. The Senate Standing Committee on Finance was informed by the Economic Affairs Division that $500 million were in the pipeline for Dasu Hydropower Project and $300 million for Power DLI.  A revenue mobilization DLI project of $300 million is also in the pipeline for funding by the World Bank. The funding in the pipeline for other projects by the WB includes $150 million for Sindh Barrages (Irrigation), $100 million for Sindh Agriculture Growth and $160 million for Sindh Water Sector Improvement. The funding of $100 million for Indus Connectivity Project and $55 million for Nutrition Project is also in the pipeline. The WB would provide $50 million for Punjab Government and service delivery project, $50 million for immunization support project and $50 million for Punjab skills project. The meeting was reportedly informed that the funding of $150 million is in the pipeline for access to finance project and $200 million for Sindh On-Farm Agriculture Productivity Project and $40 million are in the Pipeline For CASA Project.

Italy to provide Rs5.7b debt relief to Pakistan
The Italian Ambassador to Pakistan Chiodi Cianfarani called on the Finance Minister Senator Ishaq Dar at his office on Sunday. The Italian Ambassador conveyed the sympathies of the people and government of Italy over the recent Earthquake In Balochistan  and  offered  to  donate  300,000  Euros  for  the  earthquake  affecters.  Ambassador  Cianfarani  also  informed  the minister that Italian Vice Minister of Foreign Affairs plans to visit Pakistan and would be accompanied by a business delegation. Italy, he said, is keen to expand the existing bilateral economic relations between the two countries. Ambassador Cianfarani informed the minister that Italy has agreed to provide a debt relief of Rs5.7billion to Pakistan, which can now be utilized by the Government of Pakistan for its poverty alleviation programmed as well as Citizens Damage Control Programs. The finance minister said that Pakistan values its relations with Italy and is keen to expand economic ties with it. He thanked Italy for supporting Pakistan’s case in IMF and expected the hope that it would also extend its support in European Union for grant of GSP plus to Pakistan.

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