Author: Shabbir Kazmi

Oil prices declined after climbing to the highest in more than a year. Prices fell for a second day on Friday, retreating further from recent highs, as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather and power outages. US energy firms during this past week cut the number of oil rigs operating for the first time since November 2020. Brent crude futures ended the session down 1.6% at US$62.91/barrel, while US benchmark, West Texas Intermediate (WTI) fell 2.1%, to settle at US$59.24. For the week, Brent gained about 0.5% while WTI fell about…

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Index posts smidgen gain likely to remain shaky During the week ended on 19th February 2021, Pakistan Stock Exchange (PSX) remained volatile and closed the week at 46,228 points, posting 0.92%WoW gain. This was in continuation of the momentum witnessed a week ago and as a result of staff-level agreement with International Monetary Fund (IMF) for the release of US $500 million. Nevertheless, profit-taking by investors kept the Index under pressure during the week. Major news flows for the week included 1) commencement of COVID vaccine registration for citizens aged 65 and above, after successful vaccination of around 50,000 frontline…

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In Pakistan, Islamic banking has registered substantial growth over the last few years. Along with increase in number of branches, windows and diversity of Islamic banking products and services, the size of Islamic banking balance sheet has improved significantly. The growth continued during FY20, as the assets and deposits of the Islamic banking grew by 21.4 percent and 22 percent, respectively. Due to substantial growth, Islamic banking has become systemically important as it presently enjoys share of 15.3 percent and 16.9 percent of the overall banking assets and deposits, respectively by 30th June 2020. Financing to Deposit Ratio (FDR) of…

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Qatar witnesses a prosperous start to 2021, first scoring a major political goal by restoring diplomatic relations with Saudi Arabia and ending its almost 4-year long embargo. Following a political breakthrough come an unexpected revenue bonanza, which saw Doha happily riding the waves of spiking Liquefied Natural Gas (LNG) prices in Asia. The combination of both developments – Qatar casting away its pariah state and probably playing a more nuanced role as it finds itself between Saudi Arabia, Iran and the still-skeptical UAE, as well as its low-cost LNG production becoming a staple diet of North East Asian LNG demand…

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Index surges amid profit-taking; positive momentum may prevail in near term The benchmark Index of Pakistan Stock Exchange (PSX) closed the week ending on 4th February 2021 at 46,906 points, up 1.12%WoW amid volatile sessions, with heavyweight E&P sector supporting the Index, but profit-taking was witnessed in select scrips. E&P sector turned out to be the top performer during the week on rising oil prices and removal of dividend distribution cap on MARI. Average daily trading volume for the week declined to 675.4 million shares, from 932.5 million shares a week ago. The key news driving the market included: 1)…

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In an attempt to address circular debt issue, the Government of Pakistan (GoP) has increased electricity tariff by Rs1.95/Kwh or 15%. This is likely to translate into additional recoveries of Rs200 billion. Potential agreements with IPPs is also likely to result in savings of Rs800 billion over the next 20 years (annual savings of Rs40 billion), according to government calculations. Negotiations and termination with/of government generation companies (GENCOs) are expected to generate savings of Rs6 trillion over the next 30 years (annual savings of Rs200 billion), as per news reports and Ministers’ press conference. Analysts believe most of the savings…

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The State Bank of Pakistan (SBP) in its latest Monetary Policy Statement (MPS) has kept the Policy Rate intact at 7.0%. The Policy Rate has remained unchanged since 25th June 2020, when the SBP had reduced the Policy Rate by 100bps. The SBP, for the first time, has also provided forward guidance to facilitate policy predictability and decision making by economic agents. The Monetary Policy Committee (MPC) expects monetary policy settings to remain unchanged in the near term till economic recovery becomes more durable and economy returns to full capacity. If there are requirements for adjustments in the Policy Rate,…

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Volatility witnessed; sbp forward guidance, result season may comfort investors Pakistan Stock Exchange witnessed volatility throughout the week ended on 22nd January 2021. The week closed at 45,868 level after gaining 1,433 points or 3% month-to-date. Lackluster news on macro levels led to profit taking during the outgoing week, offsetting the result season driven exuberance. Major news driving the market included:1) hike in unified base tariff of DISCOS by Rs1.95/KWh as against a proposal of Rs3.34/KWh; likely to yield impact of Rs200 billion impact, adding to inflationary pressure in the upcoming months, 2) decision to disconnect gas supply to captive…

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According to the latest data released by State Bank of Pakistan (SBP), overall deposits of Pakistan banks have grown by 17% to Rs17.1 trillion in 2020. The growth is the highest in 4 years and is better than 10-year average of 13%. Growth in Deposits has been fueled by higher Remittances (+17.5%YoY in USD terms and 27.5%YoY in PKR terms during 11MCY20). It is also fears that the lack of business activity due to COVID-19 may have resulted in increase in bank deposits. Investments have grown by 31% to Rs11.5 trillion in 2020. At the start of the year high…

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Interview with Mr Irfan Wahid — Chief Executive Officer, Global Financial Solutions (GFS) Builders & Developers [box type=”shadow” align=”” class=”” width=””]Global Financial Solutions (GFS) Builders & Developers is a projectized organization offering a full range of construction services and investment management while maintaining a strong foundation of trust and mutual respect generated through positive relationship with clients, architects, engineers, sub-contractors and suppliers. A company-wide policy encouraging shared performance responsibility ensures the highest degree of professional service and result on all projects. GFS has been into the field of building and construction/land development for more than 15 years. GSF has built…

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Bullish sentiments likely to attract investors With the joy of a new year following through the trading floor for the first week of the year 2021 and the January effect in full steam (where investors re-allocate portfolios, driving volumes higher), the benchmark index of Pakistan Stock Exchange (PSX) gained 2.7%WoW to close at 45,654 points continuing the uptrend witnessed during the tail end of CY20. Additional catalysts were in the form of significant headway on circular debt resolution efforts initiated by the Government of Pakistan (GoP) in August 2020. The surprise crude supply cut by Saudi Arabia lifted crude benchmarks…

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It has truly been a year like no other, with the pandemic dominating not just every news cycle but each of our lives. From work to family life, where we went, and what we did, nothing was untouched by Covid-19. But as people got used to phrases like ‘self-isolate’ and ‘social distancing’, there were plenty of other news too. The year began with a new virus originating from Wuhan, China. Wei Guixian, a 57-year-old shrimp seller, is thought to have been the first person infected. “Every winter I always suffer from the flu,” she later told Chinese media. “So I…

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An inquiry report of the Competition Commission of Pakistan (CCP) has found massive profit-taking due to cartelization by the cement sector. The inquiry report was finalized for the cement units in the North Zone of All Pakistan Cement Manufacturers Association (APCMA) as the Sindh High Court had restrained the CCP from using material collected from the raids at offices of cement companies in South Zone (Sindh). The inquiry report has inputs from the Federal Investigation Agency (FIA) regarding forensic audit of all the electronic evidence collected from the offices of cement companies and the APCMA head office, Lahore. The names…

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Bulls rule persist and to carry on with The week ended on 24th December 2020, the rollover week started on a negative note on declining crude oil prices and concerns regarding a potentially more dangerous strain of Covid-19 coupled with increased border tensions. However, towards mid of the week, market went into a positive on the back of another current account surplus for November 2020 as well as slight improvement in oil prices. The benchmark index closed the week at 43,417 points, down 0.74%WoW. Oil and gas exploration and refineries were among the major laggards due to declining oil prices.…

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Cross-border paperless trade has great potential to not only grow trade competitiveness, but also to address new challenges associated with e-commerce and the digital economy. The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), in collaboration with the United Nations Commission on International Trade Law (UNCITRAL) and the Enhanced Integrated Framework (EIF) have launched an interactive guide to support readiness assessments on cross-border paperless trade. The Online Readiness Assessment Guide for Cross-border Paperless Trade is designed to support countries in the region to conduct self-assessments of legal and technical readiness on cross-border paperless trade. With the…

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The shipping industry is one of the most traditional sectors of the economy. As the time passes and technology improves the shipping industry also goes through transformation. Even today, digitization in the shipping industry is treated occasionally and is characterized by a lack of a holistic approach to its transformation. According to Ms. Maria Gourtsilidou, Senior Editor of Research and Data Analytics at the CEOWORLD magazine, the digital transformation of the shipping industry is significantly contributing to improving the operating costs of the ships. The total relative cost of the industry is estimated at US$100 billion worldwide with an ever-increasing…

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Bulls remain in the ring; political noise unlikely to sour sentiment Climbing for a third consecutive week on the back of stable participation (avg. daily turnover up 2.5%YoY), the benchmark index of Pakistan Stock Exchange (PSX) was up 0.6%WoW to close at 42,470 points on 11th December 2020. Key news flows affecting market included: 1) pronounced rise in political noise, 2) HUBC reportedly accepted the proposal of the Power Division, a major reduction in claimed CPP payments from the base plant in return for approval for PPA with KE for purchase of 600MW of Coal power by 2024 and commitment…

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Pakistan’s leading brokerage house, Topline Securities has revised its earnings forecasts fertilizer companies operating in the country. The upward revision has come on the back of: 1) higher than expected Urea offtake during first ten months of the current calendar year, 2) impact of Gas Infrastructure Development Cess (GIDC) review petition and 3) detailed review of first nine months accounts. Urea offtake is likely to beat expectations; the brokerage house expects the offtake to rise to 5.8 million tons, in line with last five years average offtake as against its earlier estimate of 5.5 million tons. To note, it had…

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The onset of the winter season is likely to have adverse impact on cement sales in November 2020 due to local dispatches likely to decline up to 27%MoM. Northern region is expected to witness a contraction up to 30%MoM, while sales in the South are likely to fall max by 15%MoM. The sequential decline is likely to be higher than the past two years’ average decline of 15%MoM during the month of November. It is believed because of restricted development work in the Northern region due to early onset of the winter season and increasing number of COVID-19 cases. That…

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Transit of goods through Southeastern Chabahar port of Iran has increased significantly in recent years due to offered incentives and the development of the port’s infrastructure. Loading and unloading figure have reached two million tons, while it was merely 200,000 tons just a few years ago. The port aimed at attracting regional markets that include India and Afghanistan as well as the Commonwealth of Independent States (CIS). Iran’s Ports and Maritime Organization (PMO) Deputy Head for Ports and Economic affairs said, transit of goods through Southeastern Chabahar port has increased significantly in recent years due to offered incentives and the…

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Gas and Oil first OMC to offer electric vehicle chargers in Pakistan The company set to 1,000 retail outlets across the country Deregulating the market likely usher into bright prospect Concerted effort needed to push investment in the sector for revenue boost Interview with Mr Khalid Riaz – CEO, Gas & Oil Pakistan Limited [box type=”shadow” align=”” class=”” width=””]Khalid Riaz, Chief Executive Officer of Gas & Oil Pakistan Limited (GO) is a veteran of the retail and oil transportation sector with rich experience in the field spanning more than 35 years. Khalid Riaz comes from a traditional family of Qabula Sharif, which…

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Market ends up; IMF plan progress, oil price movements and covid fear likey sway sentiments Pakistan Stock Exchange (PSX) began the week ended on 27th November 2020 on negative sentiment with government mulling over measures to contain rising cases of COVID-19, hinting a complete lockdown. To add, IMF hinting at government’s need to undertake unpopular measures (electricity and gas rate hikes, targeting higher tax collection, etc.) to resume the IMF program further dampened the sentiments. Decision of State Bank of Pakistan (SBP) to leave interest rate unchanged at 7% resulted in some exuberance among investors. A rise in international oil…

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Demand for gold dropped to 892.3 tons in Q3 – its lowest quarterly total since Q3 2009 – as consumers and investors continued to battle the effects of COVID-19. At 2,972.1 tons year-to-date (ytd) demand is 10% below the same period of 2019. Although, jewellery demand improved from the Q2 record low, the combination of continued social restrictions, economic slowdown and a strong gold price proved burdensome for many jewellery buyers, demand of 333 tons was 29% below an already relatively feeble Q3 2019 demand. By contrast, bar and coin demand strengthened, gaining 49% YoY to 222.1 tons. Much of…

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In Pakistan the three most contentious issues facing the farmers are: low productivity, distress selling of produce and huge post harvest losses. All these culminate at one point, low return to farmers, which does not allow them to undertake cultivation on modern lines. As a result, the country has not been able to achieve food security. This can be best understood if one examines what has happened in 2020. The country was been forced to import wheat and sugar, after witnessing a shortfall in output. Import of these basic commodities caused erosion in foreign exchange reserves of the country, payment…

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Bulls lead; market closely track US election outcome, but covid cases may trigger risk off sentiment Pakistan Stock Exchange (PSX) started off on a weak note, with the market participants pricing in rising domestic COVID-19 cases and uncertainty on the US election outcome. The benchmark index shed 1.94% on the first trading session of the week. Softer than expected inflation numbers, encouraging volumetric offtakes in Cement and OMC sectors, electricity package for the SMEs and general industry and rebound in global markets turned the tide. The Index registered 3.5% gain on the second trading session, paring all previous day losses.…

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In 1965, the Company was incorporated as Esso Pakistan Fertilizer Limited, to manufacture and market fertilizer. In 1968 urea plant was commissioned; which marked the largest foreign investment in private sector in the history of Pakistan. In 1978 Esso Pakistan Fertilizer Company Limited was renamed as Exxon Chemical Pakistan Limited. In 1991 Exxon divests its equity from fertilizer business globally; the Company was renamed as Engro Chemical Pakistan Limited through an employee led buyout. In 2005 annual production capacity was increased to 975,000 tons from 850,000 through de-bottlenecking of base plant. In 2007 construction of world’s largest single-train urea plant…

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Easypaisa is Pakistan’s first mobile banking platform launched in 2009, the only GSMA mobile money certified service in the country. Initially launched as a money transfer service, Easypaisa empowers underserved masses by bringing convenience and freedom to their lives, and has today become an icon in money transfers, synonymous with convenience and reliability. Easypaisa was launched in 2009, and began with just 4,000 outlets across the country. At present it has more than 84,000 outlets catering more than 7 million active users. Initially, it began with just money transfer through USSD codes sent through conventional mobile phones. Now Easypaisa is…

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Sateesh Balani is currently working with Ismail Iqbal Securities as Director Research and possesses a decade of diversified finance and investment related experience. Prior to Ismail Iqbal Securities, he has worked with HBL Asset Management as Head of Research where he was part of investment committee managing fixed income, equity and asset allocation portfolios. Prior to HBL AML, he has worked with Engro Corporation (and its energy holding company) where he was responsible for making feasibility & analyzing potential business ventures. He has also worked with Elixir Securities for four years in equity research and covered energy and industrial sectors.…

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Index rallies; FATF and companies outcome likely to keep volumes buoyant Battling significant headline risk from the FATF plenary meeting vote for Pakistan’s status on the grey list, the benchmark index of Pakistan Stock Exchange (PSX) rallied 2.7%WoW. Major earnings beats across Banks, Cements and Fertilizers provided fuel to the rally. For the week ended 23rd October 2020, the index closed 41,266 points. Volume leaders during the week were: HASCOL, UNITY, KEL and TRG. Stocks leading the index higher included, UNITY, ATRL, CHCC, while laggards included: GATU, ABOT and EPCL. Volumes spiked 57.3%WoW where major forces driving investor sentiment were…

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Interview with Ms. Aruna Hussain — Managing Director, Maersk Pakistan The first female CEO leading a multinational logistics company in Pakistan Maersk Pakistan’s progress rely on constant care, humbleness, uprightness, right team and image building For growth of country’s ports we need to keep focussing on improving both the cost of doing business and ease of doing business Gender equality gap still exists, but women can readily join supply chain and logistics fields [box type=”shadow” align=”” class=”” width=””]Ms. Aruna Hussain is an experienced entrepreneurial leader with exposure to several international markets that include Pakistan, United Kingdom, Australia and the Middle…

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Advanced Lab provides full range of routine and special tests at highly economical rates. Interview with Prof. Dr. Rafiq Khanani — Managing Director, Advanced Laboratories Private Limited [box type=”shadow” align=”” class=”” width=””]Dr. Rafiq Khanani is a pioneer in the development of clinical diagnostic services in Pakistan. He is a Founding Director of Dow Diagnostic Reference and Research Laboratories, Dow Institute of Hematology and Blood Transfusion, Dow Radiology Institute, Institute of Biological and Biomedical Sciences, and Citilab Diagnostic Centre. Advanced Laboratory Diagnostic Centre is a refreshed commitment by the founder of Citi Diagnostic Centre Professor Rafiq Khanani and his team. Citilab…

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Cherry-picking likely for short span as new covid fear, anti govt rallies may Killjoy With higher than expected inflation and heightened political tension, after announcement by opposition parties’ alliance to hold rallies across the country, trading started the week on a negative note, down 2.5% at the close of first session of the week. After remaining jittery in the second session, recovery was finally witnessed during third trading session and the sentiment remained positive till close of the week, on 9th October, last trading day of the week index close at 40,798 points, up 1.8%WoW. Top performers of the outgoing…

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Reduction in interest rate is a must for bringing down cost of doing business in the country On 21st September 2020, State Bank of Pakistan (SBP) announced to keep the policy rate unchanged at 7 percent. It was announced that as compared to the time of the last announcement in June 2020, business confidence and the outlook for growth have improved. This reflected the decline in COVID-19 cases in Pakistan and the easing of lockdowns, as well as the timely stimulus provided by the Government and SBP. At the same time, the forecast for inflation was raised slightly, primarily due…

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Market likely to snap out of rollover week as selling pressure eases Happenings over the political front together with rollover and rising COVID-19 cases kept the week ending on 25th September 20202 under pressure. The benchmark Index of Pakistan Stock Exchange recorded a loss of 803 points to close at 41,701 points, down 1.89%WoW. The market activity also witnessed contraction, with average daily trading volumes falling by 13.4%WoW to 465 million shares. Top gainers of the week were: ILP, SHEL, DAWH, ATLH and NCL, while laggards included TRG, ANL, OGDC, COLG and PPL. The activity was concentrated in speculative stocks,…

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During FY20 Pakistan received record remittances. On a cumulative basis, workers’ remittances increased to a historic high level of US$23.120 billion during FY20 as compared to US$21.739 billion received in FY19, witnessing a growth of 6.4% over Despite economic slowdown caused by the COVID-19, the remittances during March-June quarter of FY20 increased significantly helping the country get more than expected inflows. Workers’ remittances rose by a significant 50.7% during June 2020 to reach record high of US$2.466 billion as compared to US$1.636 billion received in June 2019. The inflows June grew significantly as compared to May when the country had…

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Pakistan Stock Exchange (PSX) held a gong ceremony to mark the successful book building and listing of Pakistan Energy Sukuk II amounting to Rs200 billion. The book building process was managed by Pakistan Stock Exchange. The gong striking ceremony was held to formally mark this exciting event of the first ever debt issuance through book building and listing of the debt issue at the Exchange. The Advisor to Prime Minister on Finance & Revenue, Dr. Abdul Hafeez Shaikh graced the occasion with his presence as the Chief Guest at the event. Also present were Aamir Khan, Chairman, Securities & Exchange…

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Banks, cements keep index moving up; coming week may be volatile Treading on gains posted in the earlier weeks, the benchmark index of Pakistan Stock Exchange (PSX) inched up 1.21%WoW to close at 42,531 pointed for the week ended on 11th September 2020. The rally supported by prominent performance of heavy-weights Banks and Cements. Banks came on the investor’s radar, being trading cheaply as valuations stretched elsewhere. Cement witnessed run up as Prime Minister announced Karachi uplift package of Rs1.1 trillion. E&P sector witnessed erosion in value on declining international prices of crude oil and cabinet ratifying CCoP’s decision to…

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During 2020 State Bank of Pakistan (SBP) has reduced interest rate, which is likely to impact earnings of commercial banks. Banks were also stopped from disbursing dividend and issuing Bonus Share to facilitate ample liquidity is the system. Over the months, shares of commercial banks witnessed selling pressure. As half year results have been announced, followed by briefings for analysts, sharing banks’ perspective may remove certain ambiguities. Topline Securities has revised earnings estimates for Meezan Bank (MEBL). The earnings revision stems from: 1) stellar deposit growth which surpassed Banks’ own expectations, 2) increase in frequency of Islamic instruments which is…

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In an exciting development for Pakistan’s capital market, TPL Trakker, a pure tech based company, was listed at Pakistan Stock Exchange (PSX). This was the second listing of FY21, which came after only five days of successful listing of The Organic Meat Company. The gong striking ceremony was attended by Ahmed Chinoy, Muhammad Ashraf Bawany – Board Members of PSX, Nadir Rahman, COO of the Exchange, Sarwar Ali Khan – CEO of TPL Trakker, Shahid Ali Habib – CEO, Arif Habib Limited (Consultant to the Issue), Muhammad Fakhar – Associate, Investment Banking at Habib Bank Limited (Corporate Advisor & Bankers…

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Companies policy matters and reports in focus The takeaways from Hub Power Company (HUBC) briefing narrate some interesting stories. A MoU execution committee has been formed by the government in which three members from IPPs will represent the sector. As regards excess payment to IPPs, the management said, numbers will be reconciled again and will be vetted against power purchase agreement. HUBC base plant is not part of 1994 policy power policy. However, the Company has negotiated its own terms, which are also communicated to investors through a separate notice to Pakistan Stock Exchange. There will be no termination of…

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Monthly sales of automotive industry for July 2002 were reported at 11,836 units, up 32%MoM, but down 10%YoY. This indicate a reversion to pre-COVID normalcy, completing a “V-shaped” recovery over five months while extending consecutive YoY downtrend to its 21st month (back to levels seen during 2009). Consequently, 7MCY20 total industry offtake was reported at 57,509 units, down 57%YoY), where major constituents moved down for Passenger Cars/LCVs. Recent comparisons reveal a double digit bounce back, with PC/LCV sales up 38/7%MoM, while within PC segment, 1,300CC+ witnessed improved sales, getting closer to market expectations. Resumption of business activity, teetering healthcare externalities…

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Pakistan offers the most efficient and cost effective transit trade facility to Afghanistan. In the recent past, Afghanistan started using Iran as an alternative facility, primarily to facilitate influx of goods of Indian origin. However, with China taking Indian place in Chabahar Port and other infrastructure projects Afghanistan is once again obliged to use Pakistan as a prime facility. [box type=”shadow” align=”” class=”” width=””]Reportedly, Iran and China have finalized a US$400 billion strategic partnership deal, and a significant political casualty is the Chabahar to Zahedan rail project with India, which Iran has called off citing delayed finances. It said Iranian…

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Positive news flow guides bulls keep rule for 8th consecutive weeks Continuing on its stellar bull run into eight consecutive weeks, Pakistan Stock Exchange (PSX) closed the week ended on 13th August 2020 at 40,291 points, up 0.65%WoW. Average daily traded volume was reported at 581 million shares. The top volume leaders included: HASCOL, UNITY, TRG and WTL. Top gainers were: HASCOL, KAPCO, SNGP and ATRL, while laggards included: HCAR, PSMC, AGP and IGIHL. Foreign portfolio investments recorded inflow of US$8.7 million. While individuals continued to buy (US$11.4 million), Banks (US$10.7 million) and Insurance (US$5.4 million) were net sellers during…

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Since March 2020 State Bank of Pakistan has cut interest rate by 625bps. It had also imposed restriction on payment of dividend and issue of bonus shares for two quarters. The two measures were taken to ensure ample liquidity in the market. Now the central bank has made lending for housing mandatory for the banks. On top of all there seems to be no containment in government borrowing from banks. Though, the SBP has deferred announcement of Monetary Policy in July, there is demand for further reduction in policy rate. This makes it all the more to explore the likely…

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Fauji Fertilizer Bin Qasim (FFBL) announced its 2QCY20 financial results posting an unconsolidated loss of Rs1,160 million (LPS: Rs1.24) as compared to a loss of Rs84 million (LPS: Rs0.09) in 2QCY19. It takes 1HCY20 earnings to Rs4,208 million (LPS: Rs4.5). The loss is higher than industry’s expectations due to lower than expected Gross Margins and higher than expected Other Expenses. Revenues of the Company declined by 15%YoY to Rs15,224 million as compared to Rs17,998 million in 2QCY19 amid decline in Urea and DAP offtake by 1%YoY and 13%YoY, respectively. Other Expenses were up 43%YoY to Rs1,391 million because of Exchange…

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Bullish trend persists, market braces for consolidation The week ended on 24th July 2020 was the 5th consecutive week, where the benchmark index of Pakistan Stock Exchange (PSX) closed in green. The market maintained its bullish momentum in the first three trading sessions and witnessed consolidation in the latter part of the week, closing the week at 37,608 points, up 0.74%WoW. Rumors about fines on cement companies as well as profit-taking brought the cement sector under pressure in last two trading sessions. Average daily traded volume during the week declined 4.5%WoW to 407 million shares. The scrips generating bulk of…

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The Organic Meat Company Limited is set to go public with its Initial Public Offering (IPO) and subsequent listing on Pakistan Stock Exchange. It is a processing and an exporting company of world class Halal beef and mutton. The prospectus of the company was published and made available to the public on 15th June 2020. The registration process is scheduled to take place from 30th June 2020, to 7th July 2020, while the book building process will be held on 3rd, 6th and 7th July 2020. The public subscription dates are 14th to 16th July 2020. Topline Securities Limited and…

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The Federal Budget FY21 has an estimated outlay of Rs7,295 billion, 11% lower as compared to last year’s budgeted outlay of Rs8,238 billion. The budget has been slated as a relief budget by the government, where the attempt has been to cushion the economic loss arising because of the COVID-19 outbreak. However, no major announcements in this regard have been made as such. Topline Securities, one of the leading brokerage houses of Pakistan believes that under the extremely tough economic conditions due to the COVID-19 outbreak, the government will have a huge juggling task to contain the fiscal deficit. International…

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PSE registers 39%wow increase in average daily trading volume Supported by significant retail participation, indications of stability in the resumption of commercial activity post COVID-19, and better than expected consumer spending outlook, the KSE-100 index closed 3.3%WoW higher, continuing its upward trajectory into a third consecutive week. Strong 39.1%WoW uptick in average trading volumes was a sign of enhanced liquidity. To read details click  http://shkazmipk.com/weekly-report-on-pakistan-stock-exchange/ Successful biding for the HNWI and institutional investor portion of Pakistan first IPO in CY20 (after a fifteen month pause since ILP on March 2019), which was oversubscribed by 1.7 times landing at a strike…

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When I sat down to write a commentary on Federal Budget FY21, I faced two odds: 1) there was not much to discuss and 2) there was no substantive explanation on how trillions of rupees additional revenue will be collected. To begin with FY21 budget look unrealistic, the GDP growth target of 2.1% is not likely to be achieved. In the best-case scenario, the economy will stagnate. In the worst-case scenario, it may contract up to 2%. In these circumstances, the budget targeting 27% higher tax collection can be termed diabolic thinking. On top of that there is no explanation…

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The Federal Budget FY21 has an estimated outlay of Rs7,295 billion, 11% lower as compared to last year’s budgeted outlay of Rs8,238 billion. The budget has been slated as a relief budget by the government, where the attempt has been to cushion the economic loss arising because of the COVID-19 outbreak. However, no major announcements in this regard have been made as such. Topline Securities, one of the leading brokerage houses of Pakistan believes that under the extremely tough economic conditions due to the COVID-19 outbreak, the government will have a huge juggling task to contain the fiscal deficit. International…

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Market likely to remain range-bound in short term During this past week ended on 26th June 2020, Pakistan Stock Exchange (PSX) remained under pressure due to a disappointing budget, providing incentives only to a few sectors against investor expectations of broad-based relaxations. The news of the week was reduction in interest by 100bps. At its meeting on 25th June 2020, the Monetary Policy Committee (MPC) of State Bank of Pakistan (SBP) decided to reduce the policy rate by 100 basis points to 7%. This decision reflected the MPC’s view that the inflation outlook has improved further, while the domestic economic…

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The government has imposed Rs40 million penalties on six oil marketing companies (OMCs) for their noncompliance with the storage requirements. It seems like an attempt to put an end to an ongoing blame game after the recent shortage of petrol and diesel in the country. Shell Pakistan and Total Parco were each fined Rs10 million, while Attock Petroleum, Puma, Gas and Oil Pakistan and Hascol were imposed penalty of Rs5 million each. A point worth noting it that a fine of Rs10 million has been imposed on Total Parco Pakistan, a company where Petroleum Secretary Asad Hayauddin is member of…

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Stocks remain down as investors waiting for budget 2020-21 outcome While the Federal Minister Hamad Azhar termed it a ‘relief budget’, investors classified it “a status-quo” and “disappointing”. It surprises many that the principal demand of elimination of capital gains tax for next 12-24 months that was made by the Pakistan Stock Exchange (PSX) and endorsed by the Securities and Exchange Commission of Pakistan (SECP) has been completely, which make the budget neither industry nor capital market friendly. No steps have been taken to reduce the super tax, turnover tax and corporate tax. Tax relief for new listings was also…

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Power Holding Limited (PHL), a public sector entity fully owned by the Ministry of Energy, is issuing a debt instrument to address the liquidity constraints being faced by Pakistan’s power sector. This is the first ever debt issuance through book building in the history of Pakistan Stock Exchange (PSX) and represents an important milestone. The local bourse is playing a key role in helping the government overcome one of its biggest economic challenges, power sector circular debt. Pakistan Energy Sukuk-II (PES-II) is a Government of Pakistan (GoP) guaranteed Shariah compliant security of Rs200 billion which is 100% SLR eligible, having…

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Interest rate cut, opening of businesses likely to give impetus The benchmark index of Pakistan Stock Exchange (PSX) closed the week ended 15th May 2020 at 34,008 points, up 2.23%WoW as investors focused on the reopening of parts of the economy and monetary policy announcement. There was an unprecedented contraction in economic activity (LSM down 22.0%MoM in March 2020), but market participants remained undeterred. The announcement of MSCI semiannual review brought fresh wave of interest in PPL and MARI (included in the small cap index, replacing NML and SNGPL). Other major news flows during the week included: 1) Prime Minister…

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As hopes are building for easing of lockdown, which should not continue for indefinite period, it is necessary to evaluate the prevailing situation and come up with our own homegrown plan. One of the positive points is, this time International Monetary Fund (IMF) and other multilateral financial institutions are more than willing to extend help to every country, Pakistan is certainly not an exception. The latest assessment of International Monetary Fund of Pakistan’s economy lays out immediate economic fallout from COVID-19, as well as provides initial guidance on program modalities once conditions become normal. It is necessary to examine the…

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Cement manufacturers in Pakistan have posted losses for 3QFY20 as compared to profit for 3QFY19 and 2QFY20. This raises concerns because the outcome of 4QFY20 could be even worse, because of prolonged lockdown and Ramadan impact. However, the silver lining is the package announced by the government for the construction industry. This analysis is based on a report by one of Pakistan’s leading brokerage house, Topline Securities, based on 11 listed cement manufacturers out of 15, representing 95% of the total sector market capitalization. The brokerage house has taken into account only those companies which have already announced quarterly results…

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Profit-taking spoilsport; monetary, lockdown ease and budget news may favour market After posting a spectacular performance in the previous week (up 3.98%WoW), the market lost some of its momentum on profit-taking. The benchmark closed the week ended on 8th May 2020 at 33,268 points, down 2.47%WoW. Top gainers of the week were: SHEL, YOUW, IDYM and HMM, whereas laggards included: KTML, CHCC and SERT. Average daily traded volume for the week improved only slightly more than 190 million shares as Ramadan factor persisted. Volume leaders being: HASCOL, UNITY, MLCF and TRG. The total liquid foreign reserves held by Pakistan were…

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Amid growing concerns about the potential economic impact of the COVID-19 pandemic, State Bank of Pakistan (SBP) in collaboration with Pakistan Banks Association (PBA) has announced a comprehensive relief package. This package is aimed at facilitating stakeholders including households and businesses (microfinance, SMEs, corporates, commercial, retail, and agriculture) to manage their finances through this temporary phase of disruption. Key highlights of the package are as follows: Banks’ overall pool of loanable funds has been increased To support the banking sector to supply additional loans to businesses and households, SBP has reduced the Capital Conservation Buffer (CCB) from its existing level…

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The world has changed dramatically during Jan-Mar quarter of 2020. A rare disaster has resulted loss of a large number of human lives. As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a ‘Great Lockdown’. The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes. This is a crisis like no other, and there is substantial uncertainty about its impact on people’s lives and livelihoods. A lot depends on the epidemiology of the virus, the effectiveness of containment measures, and adopting corrective…

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Index keeps surging on improved economic factors During the week ended 17th April 2020, the benchmark index of Pakistan Stock Exchange (KSE-100 Index) exhibited initial signs of consolidation, managing to close the week at 32,831 points, up 2.5% WoW. This was the third consecutive week of positive returns, a trend last observed at the end of 2019. Macro and policy developments remained in a state of flux, with sentiments broadly coming to a head at the tail-end of the week as foreign debt relief accompanied by the surprise 200bps policy rate cut changed investors’ sentiment. Key news flows during the…

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Pakistan Day is celebrated with great fervor every year, but this year the circumstances are very different. People are living under extreme fear due to coronavirus pandemic, not only in Pakistan but around the world. The death of dozens of people from the pandemic, reminds us hundreds and thousands of people, who were assassinated after the partition of subcontinent. This also reminds the helplessness and the difficult administrative and financial conditions prevailing at that time. At that time Pakistan emerged strong only because people were united and had the resolve. Around this time the country has a robust administrative structure, financial conditions are…

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At its meeting on 17th March 2020, the State Bank of Pakistan’s Monetary Policy Committee (MPC) decided to cut the policy rate by 75 bps to 12.50 percent. The decision reflected the MPC’s view that the outlook for inflation has improved in light of the recent deceleration in domestic food prices, significant decline in consumer price expectations, sharp fall in global oil prices, and slowdown in external and domestic demand due to the coronavirus spread. The Committee emphasized that it stood ready to take further actions if and when needed as more information becomes available on the outlook for inflation and growth. In reaching…

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Massive selloff witnessed, uncertainty on Covid-19 fear to persist The week ended on 20th March 2020 started on a massive selloff and increased concerns over growing cases of coronavirus around the world. Commodities also witnessed a slide on the back of decreasing demand projections whereas ongoing tussle between global oil players also took a toll on oil prices. That said, slight rebound was witnessed towards tail-end of the week as investors went after cheap valuations. Consequently, the benchmark index of Pakistan Stock Exchange (PSX) closed the week at 30,667 points, down 14.5%WoW. Foreign investors continued with the selling, in-line with the…

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The week ended on 13th March 2020 can be termed one of horrific weeks for crude oil producers and traders as prices went down about 50 percent since the start of the year. Oil rebounded a bit on Friday following movement in the US Congress to pass a coronavirus economic relief bill. Nevertheless, the near-term looks dire for oil markets, with supply rising quickly as demand continues to collapse. The added threat is likely hike in output by OPEC and Russia. Analysts anticipate oil prices to remain at current depressed levels for months amid a price war and the fight…

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Federal Reserve of United States has cut rate in an emergency that has created opportunity for other central banks around the globe to cut rate, especially for those who held off so far out due to domestic and external concerns. It is expected that State Bank of Pakistan (SBP) will also follow the suite. However, many analysts expect the SBP to and opt for status quo in the upcoming monetary policy announcement. There are indications that inflation rate is easing in Pakistan, many attribute this to high base effect, delay in utility rate adjustments and price normalization in certain food…

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Market remains under coronavirus fear, posts 5.7pc decline During the week ended 13th March 2020 Pakistan Stock Exchange (PSX) remained under pressure mainly due to coronavirus pandemic and plunging crude oil prices. Pak rupee also witnessed erosion in value. The benchmark index closed at 36,061 points, registering a decline of 5.7%WoW. Average daily traded volumes during the week grew by 9.0%WoW to 234.3 million shares. Volume leaders included: MLCF, FCCL, BOP and KEL. While gainers included: PIOC, CHCC, INDU and NCL, laggards were: POL, PPL, BOP and 4) MEBL. With the market in a clear under pressure depression (down 17%…

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Members of Organization of Petroleum Exporting Countries (OPEC) are scheduled to meet in Vienna in first week of March 2020. Top of the agenda item is to decide production quotas in the aftermath of coronavirus spread. To arrive at further production cut will not be easy because of United States emerging as one of the largest oil producing country as well as exporting substantial quantity. Even the bigger concern is that crude oil price has plunged below US$50/barrel. On Friday, 28th February 2020, oil prices fell for a sixth day in a row on to their lowest in more than…

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One completely fails to understand why even a thought of ending Saudi-Iranian animosity make the supporters of monarch jittery. If one could recollect lately Iraq made an attempt to ease tension between the two arc enemies, but turmoil was created in Iraq. Soon after two top military strategist, one each from Iran and Iraq were killed, the probability of war in the region increased manifold. Recently, Iranian Foreign Minister Mohammad Javad Zarif, who traveled to Germany to attend the 2020 Munich Security Conference, said that after the martyrdom of commander Qasem Soleimani, we received a message from Saudi Arabia calling…

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The market started the week on a positive note, following encouraging developments on macro front – soft inflation numbers of 12.4% for February 2020, supported by promising trade numbers and trade deficit falling by 19.7%YoY and 15.8%MoM. The benchmark index of Pakistan Stock Exchange (PSX) gained 1,312 points in the first trading session. However, the market was quick in losing 389 points in the next two trading sessions. The mid-week Fed’s emergency rate cut and consequent reduction in bond yields once again raised the easing expectation amongst market participants, which led to another brief rally of 475 points in the…

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Market stays dull but expected to pick up on FATF statement Amid uncertainty on the macro front, pertaining to IMF and FATF, performance of Pakistan Stock Exchange (PSX) remained lackluster. The benchmark index closed the week ended 21st February 2020 closed at 40,249 points, flattish WoW. The GoP continued to push for deferral of additional tax measures and energy tariff hikes till the next fiscal year amid backlash on inflationary pressures. The news flow indicated a lack of favorable response from the IMF. Meanwhile, Federal Board of Revenue (FBR) began its exercise on how to generate Rs200 billion additional taxes,…

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Smidgen gain witnessed; IMF’s development, earning reports keenly awaited During the week ended on 14th February 2020, the benchmark index of Pakistan Stock Exchange (PSX) closed at 40,243 points, up 0.25%WoW as trading activity remained muted. Foreigners remained net sellers with US$11.15 million that was mainly absorbed by insurance companies and other organizations. Top performers of the week included MLCF, HUBC and HBL, while PAEL, KAPCO and GWLC remained the laggards. Major volume churners included UNITY, HASCOL, MLCF, BOP and DGKC. The week started with market witnessing a major sell-off, amid fears of global slowdown on coronavirus outbreak in China,…

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In Pakistan there exists two distinct, but opposite opinions about the growth of Islamic banking in the country. The proponents are jubilant and claim that now a little less than 15 percent of total assets of the banking sector are now Shariah compliant. However, the other group insists that the quantum is paltry; keeping in view that the overwhelming majority of the population is Muslim. Therefore, it is necessary to first review the situation dispassionately and then come up a new strategy. After the judgment of the apex court that Pakistan’s banking system was not Shariah compliant, the Government of…

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Prior to the outbreak of virus in China, analysts were of the view that gold prices will hold above US$1,500/oz in 2020 and make modest gains in 2021. It was also believed that low interest rates and geopolitical uncertainly will bolster appeal of the precious metal. Lately price of precious metal, falling in the list of safe-haven assets has been hovering around US$1,600/oz. Prices shot up 18% last year — the biggest annual gain since 2010 — as global economic growth faltered and central banks responded by easing monetary policy. Gold has re-established its safe-haven status and analysts expect price…

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Inflation report push stocks down; earnings of banks, chemicals may drive volumes Higher than expected inflation recorded in January 2020 dampened investors’ sentiments on growing fears that monetary policy easing could be delayed. The benchmark index of Pakistan Stock Exchange (PSX) declined 3.6%WoW to close at 40,144 for the week ended 7th February 2020. Average daily trading volume plunged to less than 168 million shares, down almost 11%WoW as the beginning of earnings season failed to steer investors’ participation. Volume leaders for the week included: BOP, HASCOL, MLCF and UNITY. While FFC managed to post gains, laggard included DGKC, HASCOL,…

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Reportedly, utilization capacity, on stated double shift capacity basis of major OEMs for CY19 declined as compared to CY18 as the industry dealt with a hampered demand outlook, specifically as consumers suffered from ‘sticker-shock’ over rabid price hikes. The lessons for CY20 remain the persistence of the ‘new model effect’, witnessed in CY19 segment-wise sales, likely to play out in the case of INDU. Moreover, improvements in purchasing power, either from monetary loosening or relative rupee stability, accompanied by tax concessions for consumers (removal of FED) could catalyze demand in the coming year. CY19 total industry sales of 191,085 units,…

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Unchanged rates, weak corporate results mar sentiment; imf review keenly awaited Weak corporate results and State Bank of Pakistan (SBP) decision to leave interest rate unchanged marred investors’ sentiment. As a result the benchmark index of Pakistan Stock Exchange (PSX) closed the week ended 31st January 2020 at 41,631 points, down 2.35%WoW. Market participation also remained weak, with an average daily volume remaining flattish on WoW at 188.14 million shares. The top volume leaders included: MLCF, HASCOL, UNITY, AVN and BOP. While top gainers were: HASCOL, PSMC, NCL and INDU, laggards were: MCB, NML, UBL, POL, PPL and OGDC. Sector…

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Reportedly, the Government of Pakistan (GoP) has confirmed that the operations of local refineries had slowed down because of high production of residual fuel oil (RFO) and the international ban on its use for bunkering after 31st December, 2019. In a statement, Petroleum Division has said that because of new regulations issued by the International Maritime Organization (IMO), crude oil import had reduced during the first six months of the current fiscal year. Under these regulations, RFO containing more than 0.5% sulphur content is disallowed for use in ships and its violation carries heavy fines. Most of the refineries operating…

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Many Pakistanis, especially people living below the poverty line, are facing the brunt of brewing wheat crisis in the country. The news being printed in newspapers and aired by television channels are adding to the confusion, rather than easing the tension. However, it may be said in the simplest words that the brewing crisis is the outcome of gross mismanagement by the government. The story started with the failure of government in timely procurement of the staple food. Lack of storage facilities, ill-timed export and now the rush to import the commodity, clearly indicates that those at the helm of…

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Markets jump back; FATF, monetary policy outcome likely to guide After four consecutive sessions of retreat, the benchmark index of Pakistan Stock Exchange (PSX) staged a rebound on the last trading day of the week ended on 24th January 2020, closing at 42,633 points, but still down by 1.24%WoW. The market remained under pressure on fears of: 1) inflation likely crossing 13% mark in January 2020 putting on hold expectations of interest rate cut in forthcoming Monetary Policy announcement and 2) potential gas price hikes where the decision to reduce GIDC to Rs5/bag from Rs405/bag added to the uncertainty particularly…

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There are growing fears that the rate of inflation for January 2020 would be the highest in last nine years in Pakistan. It would be much convenient for the economic managers to blame the extraneous factors for this hike. However, the results could cause serious issues in Pakistan-IMF relationship, as the Government of Pakistan may not succeed in meeting the targets agreed with the lender of last resort. Reportedly, food inflation — reflecting pass-through of increases in international commodity prices, lagged impact of currency depreciation and a seasonal increase in certain commodities — remains key driver pushing headline number to…

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Index remains range-bound; results may offer easing Pakistan Stock Exchange (PSX) remained range-bound during the week ended 17th January 2020 and its benchmark Index closed almost flat at 43,168 points, after having crossed its 17-month high mark a week ago. Despite Fitch forecasting a stable outlook for Pakistan, the cautionary tone kept the investors on the sidelines. Top performers of the week included: PSMC, MEBL, HMB, BOP and CHCC, while laggards included FFBL, KEL and HASCOL. Additionally, sector wise developments including a massive spike in coal prices and dismal auto sales data kept cement and auto sectors under pressure. Preliminary…

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The Presidents and representatives of Habib Bank, National Bank of Pakistan, United Bank, MCB Bank, Allied Bank, Meezan Bank, Bank Al-Falah, Bank Al-Habib, Habib Metropolitan Bank and Faysal Bank have signed the shareholders’ agreement for the establishment of Pakistan Corporate Restructuring Company Limited (PCRCL). The agreement was signed at State Bank of Pakistan, Head Office. On this occasion, Dr. Reza Baqir, Governor of the central bank was also present. Under the provisions of Corporate Restructuring Companies Act 2016 and with an initial Paid-up Capital of Rs500 million, the above banks have decided to establish the Corporate Restructuring Company (CRC), which…

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Without mincing words, it may be said that Pakistani readers/viewers get no clue of the current United States-Iran conflict. To be precise they are lost by reading reports released by international media houses. The reason in most obvious, these media houses are owned and operated by anti-Muslim elements. Over the years, distorted news reports were released about Pakistan-India conflict that culminated at East Pakistan, becoming Bangladesh. During 1965 and 1971 Pakistanis became addicted to BBC, as they were made to believe that the reporting was ‘fair’. When Saddam Hussein of Iraq attack Kuwait Pakistanis were introduced to another fantasy, CNN,…

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Roller coaster week witnessed, local dynamics may take driving seat Pakistan Stock Exchange (PSX) went through a roller coaster ride during the week ended on 10th January 2020, mainly due to geopolitical tensions. Nosedive at the start of the week on heightened geopolitical tensions was followed by volatility in subsequent two sessions as markets looked for clarity. However, towards the end of the week subsiding tension formed the basis of strong recovery. The benchmark index closed the week at 43,207 points, up 2.1%WoW along with improved activity. Average daily trading volume for the week was up 7.6%WoW to more than…

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Seminar on Emerging Trends in Good Governance of Banking Sector in SAARC Countries held Dr. Reza Baqir, Governor, State Bank of Pakistan during his inaugural address in a seminar on “Emerging Trends in Good Governance of Banking Sector in SAARC Countries” highlighted the importance of efficient and robust governance structure in the banking industry for sustainable economic growth of a country. Besides Pakistan, the captioned seminar was attended by delegates from Afghanistan, Bangladesh, Bhutan, Sri Lanka and Nepal. While addressing to the participants from SAARC member countries at National Institute of Banking and Finance (NIBAF), Islamabad, Dr. Baqir said that…

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Hutchison Ports Pakistan created maritime history in Pakistan by welcoming maiden call of CV COSCO BELGIUM. It is the largest container vessel to ever call at any port of Pakistan, with length over all of 366 meters and a capacity of 13,386 TEUs. CV COSCO BELGIUM is deployed in the EPC 2 service and berthed at 2000 hours on 18th December 2019. The vessel sailed at 1400 hours on 19th December 2019 after handling 1537 moves during her stay. “The arrival of the CV COSCO BELGIUM to Pakistan is a matter of great pride for us as we are the…

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The decision by the Government of Pakistan (GoP) to restrict claimability of input sales tax from unregistered consumers through the Tax Laws (Second Amendment) Ordinance 2019 is expected to increase price of Urea by Rs40/Bag within the first month of 2020. The objective of this amendment, through Presidential Ordinance, is to bring major distributors into the sales tax regime. Speaking with an industry expert it was revealed that against the sales made to unregistered distributors who make purchases of Rs10 million on monthly basis or Rs100 million on annual basis, the manufacturers would not be granted input adjustments. Another fertilizer…

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Stocks get off to a lively start in 2020; geopolitical concerns, SBP decision may dominate Meeting the New Year on an exuberant note, with market expectations of economic stability crystallizing, the benchmark index of Pakistan Stock Exchange (PSX) closed at 42,323 points, up 3.6%WoW for the week ended 3rd January 2020. Average daily traded volume was 23% to 281 million shares. Based on NCCPL data, foreigners were sellers with US$7.3 million. The total liquid foreign reserves of Pakistan were reported at US$18,081.4 million on 27th December 2019. The break-up was: reserves held by the State Bank of Pakistan (SBP) amounted…

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