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Sahem Weekly Trading Report [22-26/02/ [2015
The community movement at the level of the Palestinian economy is one of the most essential features of the current period. The draft of the economic plan of the private sector with its different institutions is currently discussed and aims to gear the national economy that is obstructed by the economic dependency to Israel. This plan is focused on emancipating this dependency, in addition to supporting the national products and decreasing the income taxes. On the other hand, all parties rely on creating tools to activate this plan on all aspects to attain the expected results in what they pour of enhancing the economy and increasing the GDP. In addition to what may benefit the community from this plan and increase the investments, Palestine Stock Exchange PEX- the most essential investment portal- may also benefit from this plan. While, the income tax reduction proposal on the companies has the most effect in enhancing the investment activity.
The plan involves amending the income tax brackets of the individuals, and imposes 15% taxes on the taxable income of the legal entities (companies) instead of 20%, but excludes the telecommunications companies and any other monopolistic companies. In this context, the proposed amendment will positively enhance the return on investment of the PEX’s listed companies, whereby, the income tax expense of the companies is directly correlated with the amount of dividends distribution for shareholders. In this matter, the PEX maintains a feasible average yield compared to the other regional stock exchanges, and this proposal will enrich its competitive advantage in terms of rewarding investment; especially compared to the relative high investment costs. Moreover, the tax expense is correlated to the companies’ plans, strategic growth and operation expansion. Lowering the imposed taxes will have a direct impact on the decision of redirecting the retained earnings towards expansion and investment diversification in order to achieve the optimum returns to shareholders.
Regarding the week’s trading in the PEX, the transactions were scarce in liquidity. Despite the end of the legal disclosing period that was generally characterized with “figures under control despite the uncontrolled obstacles”, but the investors’ appetite is still under the liquidity’s domination that lacks the momentum. It cannot be hidden from the observer that the PEX needs foreign and institutional liquidity with diversified investment targets, to overpass prices and psychological barriers. Al-Quds Index has traded around the 500-point level for a period of time, lacking the direction compass due to a lack in the liquidity momentum. The haunt of liquidity has dominated the stock market, investors and capital market’s elements for several years, which in turn makes any new liquidity flow into the market a target and opportunity to close investment positions by a category of traders that consider this flow as temporary.