Author: Shabbir Kazmi

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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The Executive Board of the International Monetary Fund (IMF) on 19th December 2019 completed the first review of Pakistan’s economic performance under the Extended Fund Facility (EFF). The completion of the review allowed Pakistan to draw SDR 328 million or US$ 452.4 million, taking total disbursements to SDR 1,044 million or US$ 1,440 million. The Executive Board approved the 39-month, SDR 4,268 million or US$6 billion at the time of approval of the arrangement, EFF for Pakistan on July 3, 2019. Following the Executive Board’s decision, David Lipton, First Deputy Managing Director and Acting Chair, issued a statement stating, “Pakistan’s…

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The year 2019 witnessed a mix of some predictable events—such as Organization of Petroleum Exporting Countries (OPEC) and Russia extending their cooperation pact, but a few unpredictable i.e. attacks on Saudi oil facilities and ships carrying oil. Many of the geopolitical issues lingering on in year 2020 could take unpredictable twists. Still, governments and corporate sector in oil consuming countries have to plan and remain vigilant to minimize the intensity of shocks. Some of these are: US shale production Keeping in view the declining number of active rig counts, it may be said that US shale growth is slowing down,…

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In its first full year of rule, PTI government lead by Imran Khan introduced a number of regulatory actions in CY19, mostly to comply with the conditions imposed by International Monetary Fund (IMF) to remove macro imbalances and structural issues in the energy chain. Major regulatory actions include: 1) adoption of new flexible market determined exchange rate regime as against managed float previously, 2) withdrawal of tax exemptions to various sectors to improve tax collection, 3) utility rate adjustments both in electricity and gas sectors, 4) injection of Rs200 billion in the energy chain to improve liquidity situation and 5)…

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Volatility witnessed; imf tranche, fatf talks may shape market direction Pakistan Stock Exchange (PSX) witnessed volatility during the week ended 27th December 2019 and closed flattish at 40,849 points. The market opened on a weak note due to increased political uncertainty and start of the rollover week. The benchmark 100-Index recovered over the next two sessions on receipt of US$454 million from International Monetary Fund (IMF) and a positive outlook given in the first review by the Fund. The announcement about discovery of fossil reserves by PPL changed the market sentiment. After revising downward the FBR’s target to Rs5.2 trillion,…

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Reportedly, tourism has grown faster than the global economy for the eighth consecutive year. It is estimated that more than a billion people travel internationally, with around half of these journeys destined to developing countries. Pakistan is uniquely placed to take advantage of this trend as travellers can experience the historical heritage of one of the oldest civilizations in the world, worship at the rich collection of Sufi shrines, Hindu temples, Sikh gurdawaras and Buddhist monasteries, scale some of the highest mountains in the world, or simply experience natural beauty ranging from blossoming trees against a backdrop of snow-clad peaks…

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From Hong Kong to Tehran to Buenos Aires, the world is in persistent turmoil. A question is getting louder, what is triggering global unrest. There is so much unrest throughout the world at any point that it would appear to be merely the normal chaos. However, a point is very clear reasons for turmoil are unique for each country and often multiple. Hong Kong, Tehran and Buenos Aires are very different places, each with its own geopolitical circumstances. One of the conspiracy theories suggests one element that is common to them all, economic chaos of 2008. More than a decade…

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Contrary to the expectations of many Pakistanis, Prime Minister Imran Khan opted not to attend Kuala Lumpur Summit. The overwhelming perception is that the Prime Minister Imran Khan decided to stay away from the Summit under the pressure of Saudi Arabia. It is no secret that the Kingdom has been extending help to the incumbent government to avert the economic crisis, ever since Imran Khan came into power. Reportedly, Imran Khan had telephoned his Malaysian counterpart Mahathir bin Mohammad to express his regrets for not being able to attend the summit. He also conveyed the same to Turkish President Recep…

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Profit-taking, political news killjoy positivism, sentiments may stay weak After closing positively for seven consecutive weeks, the benchmark index of Pakistan Stock Exchange (PSX) closed in red due to political pressures for the week ended 20th December 2019. The market started off on a strong note with the KSE-100 Index gaining 728 points on Monday, with the rally driven by main-board stocks particularly the E&P sector. However, profit-taking and negative news flow on the political front dented market sentiments with the benchmark Index closing flat at 40,833 points, down 0.2%WoW. OGRA’s proposal for a hike in gas prices by 31.6%…

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Oil producers’ cartel led by Saudi Arabia and Russia agreed on Friday, 5th December 2019 for deeper oil output cuts during the first quarter of 2020, aiming at averting oversupply and supporting prices. The group of more than 20 oil producers agreed to cut an extra 500,000 barrels per day (bpd). The cartel seems fully cognizant of overflowing crude oil market, weak refining margins and no excess inventory. The cut has come at a time of year when demand should be the strongest and should also add pressure to hike product prices. While the market response may be muted, the…

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According to media reports, tougher rules on sulphur emissions from ships will come into effect next year in the biggest shake-up for the oil and shipping industries for decades. International Maritime Organization (IMO) will ban ships from using fuels with sulphur content above 0.5%, existing limit is 3.5%. The regulations are aimed at improving human health by reducing air pollution. Only ships fitted with sulphur cleaning devices known as scrubbers will be allowed to continue burning high-sulphur fuel. Ship owners can also opt for other sources of cleaner fuel such as liquefied natural gas (LNG). Failure to comply with the…

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Index remains up for 7th consecutive week, likely to resistance levels During the week ended on 13th December 2019, the benchmark Index of Pakistan Stock Exchange (PSX) closed positively for a 7th consecutive week, gaining 184 points WoW or 0.5%, the was despite three negative sessions. During the week Index crossed 41,000 level before closing at 40,917 points, in doing the Index also reached the highest level in last 41 weeks. Based on NCCPL data, foreigners sold equities worth US$9.05 million. On the domestic front, Mutual Fund emerged buyer of US$7.6 million, but corporate remained seller to the tune of…

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Mercury level has already started declining and fears of gas load shedding are rising, historically load shedding of gas has been a regular feature in Pakistan. Not only gas supply to CNG stations and industries is curtailed/suspended, but domestic consumers also have to face the brunt of low pressure. This year low international gas prices offer an opportunity to Pakistan to avoid load shedding of gas for the industries and keep them running on optimum capacity utilization. The reason is simple – excess liquefaction capacity coming on-stream has created supply glut as offtake is not increasing. According to some media…

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One wonders why Middle East and North Africa (MENA) continue to suffer from internal turmoil as well as proxy wars. Some analysts say the single largest reason behind the present turmoil can be ongoing attempts to keep crude oil prices high to facilitate other countries to boost their domestic oil production. The latest evidence was attack on Aramco facilities in Saudi Arabia to attract high subscription to Initial Public Offering (IPO). The immediate success was, China opting to take US$10 billion stake in one of the largest energy production facility in the world. Reportedly, Saudi Arabia is making efforts to…

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A delegation of more than 40 representatives from industrial, commercial and trade organizations from 17 countries paid a visit to Chinese solar panel maker Risen Energy Company. These countries border the Chinese government’s Belt and Road Initiative’s route and representatives from Slovakia, Brunei and Panama were also present. After touring Risen Energy’s production facilities, learning about its development and market portfolio and communicating with its executives, the representatives were thoroughly impressed and praised Risen Energy’s contribution to the Belt and Road Initiative. Since 2013, when the Belt and Road Initiative was first launched by the Chinese government, Risen Energy has…

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Index ends Nov-2019 on highest note since 77months; stocks may move under pressure Pakistan Stock Exchange (PSX) closed positively for third consecutive month and gained 15% during November 2019, which was highest index gain in last 77 months. Investors’ sentiments remained positive on the back of successful IMF review and encouraging macroeconomic indicators that included: 1) higher interest in local debt securities of Pakistan, depicted by inflow of US$713 million (T-Bills and PIBs) in SCRA account during the outgoing month, 2) Pakistan reported current account surplus of US$99 million for first time in last 4 years and 3) expectations of…

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During 3QCY19 aggregate profitability of listed Pakistani commercial banks (excluding Silk Bank) rose to Rs45.5 billion, up 48%YoY. The increase in profit is primarily on the back of a 33%YoY increase in net interest income and 17%YoY growth in non-interest income. Biggest increase was posted by BankIslami, followed by Habib Bank and Meezan Bank. Cumulative 9MCY19 profits of the listed banks grew by 20%YoY to Rs127.7 billion. In absolute terms, the highest quarterly profit was earned by MCB Bank (Rs5.7 billion) followed by National Bank (Rs5.2 billion) and UBL Bank (Rs5.0 billion). Net Interest Income (NII) of the banks during…

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All the indicators suggest that global crude oil market is suffering from supply glut, mainly because of high shale oil production. Nothing seems to be moving oil price in any way other than Sino-US trade war. The Western media is still trying to prove that very thing hinges on the two powerhouses striking a deal, be it global economic growth or oil demand. Any attempt to try to create bullish sentiments seems completely artificial and far away from ground realities. The markets appear to have turned decidedly bearish with supply/demand imbalances drowning out everything else to the extent that even…

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Monetary Policy Committee of State Bank of Pakistan (SBP) has decided to leave the policy rate unchanged at 13.25%. The decision reflects the Committee’s view that recent developments have had offsetting implications for the inflation outlook. On the one hand, recent inflation outturns have been on the higher side. On the other, the causes behind these outturns have primarily been increases in food prices, which are expected to be temporary. Also market sentiment has begun to gradually improve on the back of sustained improvements in the current account and continued fiscal prudence. The SBP’s projection for average inflation for FY20…

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Profit of fertilizer manufacturers of Pakistan has declined by 31%YoY to Rs8.6 billion for 3Q2019, primarily due to 1) decrease in gross profit margins, 2) increase in administrative expense up by 33%YoY, and 3) spike in finance cost by 110%YoY. The analysis is based on sample of 4 largest listed companies, namely Fauji Fertilizer (FFC), Engro Fertilizer (EFERT), Fatima Fertilizer (FATIMA) and Fauji Fertilizer Bin Qasim (FFBL). The analysis is based on unconsolidated statements of FFBL and FFC and consolidated statements of EFERT and FATIMA for true depiction of their fertilizer business. During the period, Urea sales of these companies…

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Interview with Mr Nadir S. Qureshi – Chief Executive Officer, Engro Fertilizers Limited [box type=”shadow” align=”” class=”” width=””]Nadir S. Qureshi serves as the Chief Executive Officer of Engro Fertilizers Limited. Engro Fertilizers is a diversified agricultural, manufacturing and sales company providing a range of agri-products including urea, DAP, specialty fertilizers, seeds and crop protection. The Company has a market cap of US$600 million with urea manufacturing capacity of 2.3 million tons and operates the world’s largest single train ammonia urea plant. Nadir S. Qureshi is currently also a Director on the Boards of Engro Polymer & Chemicals Limited, Engro Vopak…

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Interview with Mr. Ejaz Ali Shah — Managing Director, Pakistan Mercantile Exchange Limited (PMEX) [box type=”shadow” align=”” class=”” width=””]Managing Director Profile Mr. Ejaz Ali Shah is the Managing Director of Pakistan Mercantile Exchange Limited. He has over two decades of diversified experience in the financial markets of the country. Previously, he served for 16 years as General Manager at Central Depository Company of Pakistan Limited (CDC). As a part of CDC’s founding team, Mr. Shah played a vital role in developing, positioning and nurturing CDC as a diversified service provider in Pakistan. Before CDC, Mr. Shah has served in Cordoba…

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Interview with Mr. Fahd Kamal Chinoy – Chief Executive Officer, Pakistan Cables Limited Pakistan Cables Limited launched its e-store in October 2019. The PAGE team spoke to Mr. Fahd Kamal Chinoy, Chief Executive Officer on Company’s latest advent in e-commerce, making it Pakistan’s first wires and cables manufacturer to sell online. PAGE: Is Pakistan Cables the first to launch sale of cable through ‘online’ store? Fahd K. Chinoy: Yes! Pakistan Cables is the first wires and cables manufacturer in Pakistan to launch its very own e-store in Pakistan, through which customers can now easily shop online for general wiring and have…

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A candid interview with Imran Batada – Director, ICT & CICT IBA PAGE: Tell me something about yourself and your institution: Imran Batada: I have been associated with Institute of Business Administration (IBA) Karachi for more than a decade. I am currently working here as Director ICT Department, which primarily functions to provide and manage IT facility across IBA Karachi. I am also Founding Director of Center for Information & Communication Technology (CICT) which aims at imparting education and training in the ICT field. IBA has established itself as a premier business school in Pakistan with a strong track record of…

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Volatility witnessed and to persists in coming week The week ended on 22nd November 2019 can be termed a volatile one for Pakistan Stock Exchange (PSX). The benchmark index touched a low of 37,101 and a high of 38,564, but finally closed at 37,926 level. The market was driven by expectations surrounding monetary policy and current account position. Pakistan posted US$99 million current account surplus in October 2019. Expectations of rate cut dampened soon as the latest T-Bills auction witnessed a marginal uptick in yields. Average daily trading volume rose to 330.9 million shares, from 311.2 million shares in the…

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When the Government of Pakistan (GoP) entered into an agreement with the International Monetary Fund (IMF) for a bailout program one of the biggest apprehension was that the conditions imposed by the Fund may plunge the country deeper into problems. After the conclusion of recently held review the Fund has asked the GoP to definitely achieve the revenue target, keep a cap on issuing new guarantees and put into effective implementation of circular debt reduction strategy. The IMF advice can be summed up as, ‘address longstanding issues by undertaking structural reforms and strengthening institutions through legal framework to make the…

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Palladium, relatively unknown precious metal in Pakistan, has lately emerged one of the most valuable four precious metals around the world. Its price has doubled in a little more than one year, making it more expensive than gold. Analysts say an acute shortage of the commodity is driving its prices to record levels and remain on upward trajectory in the near future. Speculative positioning remains relatively muted, suggesting genuine industrial demand is driving the prices. Palladium price is likely to rise still higher after growing demand from automakers and a gaping supply shortfall pushing prices to record levels above US$1,700…

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Growing momentum persists; investors to book profits expected The benchmark index of Pakistan Stock Exchange (PSX) continued the upward momentum attained in the earlier and started the week on a strong footing, recouping 900 points in first trading session, supported by declining yields in the latest PIB auction. Additional stimulus was provided by easing noise on the political front. Encouraging numbers of external account also provided support. The positive impact of all the positive factors put together helped the index to close all 5 trading days of the week in green. The week ended on 8th November 2019 closed the…

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As per the United Nations, the number of undernourished people has dropped by almost half in the past two decades because of rapid economic growth and increased agricultural productivity. However, in many developing countries, extreme hunger and malnutrition still remains a huge barrier to development. There are 821 million people estimated to be chronically undernourished as of 2017, often as a direct consequence of environmental degradation, drought and biodiversity loss. Nearly 151 million children under the age of five, being 22 percent of World population, were still stunted in 2017. Asia accounted for nearly two-thirds or 63 percent, of the…

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In the recent past, businesses in Pakistan have been marred by exorbitantly high costs of doing business. The macro-economic adversity that was triggered by historic twin deficits has trickled down to every facet of business operation. The massive erosion in rupee value and hike in interest rate have further escalated the costs of doing business. The businesses in the current environment are facing server downturn as margins have squeezed and operational costs have skyrocketed, added to these is subdued demand for various products, due to shrinking purchasing power of people. The recent upsurge in the rail freight that cumulatively amounts…

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Index retains rally as no reflect of political development observed Pakistan Stock Exchange (PSX) retained momentum during the week ended 1st November 2019, gaining 2.14%WoW to close at 34,338 points after remaining under pressure in the backdrop of FATF developments and application of ‘minimum brokerage commission’. Average daily trading volume improved to 166.3 million shares, up 33.5%WoW. Top performers included CHCC, PIOC, DGKC, ASTL and PSO, while laggards were HASCOL, NCL, FFC, MEBL and OGDC. Market was driven by: 1) resolution of issues between the government and traders, 2) decline in PIB yields raised expectation of an early interest rate…

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The pressure of trade and industry is mounting on State Bank of Pakistan (SBP) to curtail policy rate to bring down rate of inflation in the country. The basic premise is that country suffers from cost pushed inflation, which is also a key hurdle in boosting GDP growth rate and exports of the country. Some analysts are of the view that the current low international oil prices and expectations that these would hover below US$60/barrel in near future, offer an opportunity to SBP to seriously consider cutting policy rate. It has become all the more necessary as most of the…

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Mixed sentiment witnessed; political noise may push back investors Tensions on the eastern border and tough call from the FATF demanding swift action dampened investors’ sentiment. The benchmark index of Pakistan Stock Exchange closed the week ended on 25th October 2019 at 33,657 points, 0.63%WoW lower. The index lost 785 points in the first trading session of the week, but was quick to recover and pared 86% of the earlier losses in the next three trading sessions, as the investors shifted their focus on positive macro: narrowing CAD, improving EODB ranking and declining yields on short tenor government papers. Market…

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In Pakistan more than 50% of the farm land is owned by less than 10% of farmers i.e. land holding is concentrated in hands of rich zameendars/agriculturalists. However, the remainder 90% of farmers have very small land holdings, which highlights the significance of small and subsistence farmers in Pakistan’s agri-sector employment. In this scenario, the subsidy given by government on urea produced on imported LNG is directly and disproportionately benefitting the large farm owners and zameendars whose agricultural income remains untaxed. Punjab Agriculture Minister, Malik Nauman Langrial while talking to a select group of journalists disclosed that government plans to…

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The Center for Business and Economic Research (CBER) held the second Coffee@CBER session on 12th October 2019 at Institute of Business Administration (IBA), Karachi. The theme of the forum was “SME Financing: Issues, Challenges and Future Prospects”. The forum was attended by policymakers, government and business leaders, and visionaries to discuss the key issues that face the SME sector; especially in meeting their financing needs. This session was a second of a series of round table discussions that CBER will host on different aspects of the Pakistan’s economy. Panelists included G. M. Abbasi, Director Infrastructure, Housing and SME Finance Department…

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Rally fizzle out on FATF effects, result season; political events may creep into the limelight During the week ended 18th October 2019, the benchmark index of Pakistan Stock Exchange (PSX) witnessed erosion of 605 points and closed at 33,870 level, down 1.76%WoW. Average daily volume also declined by 51%WoW on the back of uncertainty surrounding FATF plenary meeting. Investors remained cautious ahead of volatile result season where cement sector is expected to be a major drag. Top performers during the week were: HASCOL, EFERT, ENGRO, ASTL, and BAHL, whereas laggard were: PSO, PPL, INDU, PAEL and PIOC. Volume leaders at…

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Global commodity prices rose by 3.8%MoM in September, as against a drop of 5.3% in August and marking the strongest increase in five months. September rebound mostly reflected a surge in energy prices, as well as sizeable increases in prices of base and precious metals. Overall, the price of three commodity groups was positively affected by news that China and the United States would resume trade talks and US President Trump’s comment that a deal could he reached sooner than expected. On the flip side, agricultural prices declined in September for the seventh time in the last nine months. Weak…

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Bulls control persist; outcome of FATF meeting may sway the market The benchmark Index of Pakistan Stock Exchange (PSX) closed the week ended on 11th October 2019 at 34,476 points, up 4.37% marking the second consecutive week closing in green. Top performers during the week included FFBL, MEBL, HASCOL, PAEL and EFOODS, while FCCL and PSMC were among the major losers. The inverting yield curve, stable currency over the last three months and upcoming Eurobond and Sukuk issues, expected to shore up foreign exchange reserves, boosted bullish sentiment. The week began with the release of FATF report on Pakistan, indicating…

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Pakistan enjoys enormous cultivable area, the largest man-made irrigation system, excellent and high yielding varieties and hardworking farmers. However, yields of different crops have remained below global average. Farmers’ income is further reduced due to huge postharvest losses. Production of various crops can be doubled without increasing area under cultivation. This target can be achieved by applying balanced nutrients, introducing farm mechanization, improving knowledge and induction of modern farming technologies, increasing lending to farmers It is encouraging to note that banks disbursed Rs1,174 billion or 94% against the ambitious target of Rs1,250 billion set by Agricultural Credit Advisory Committee for…

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Index rises as cement shares shine; october remains an exciting month for participants For the week ended 4th October 2019 the benchmark index of Pakistan Stock Exchange (PSX) closed at 33,033 points, up 3%WoW. After a choppy start of the market, cement companies remained in limelight after the hike in cement prices by up to Rs15/bag. It was further supported by the expectation of double digit growth in cement sales during September 2019, signaling a revival in construction activities. The momentum gained strength as key stakeholders from government assured their support to business community. Investors’ participation increased significantly with average…

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At present Pakistan suffers from precarious balance of payment situation. Its exports are too paltry to finance imports. Though, remittances are reasonable, meeting debt service obligation has got out of control. Even the recently acquired facility from International Monetary Fund (IMF) and other countries will soon prove insufficient. In the prevailing situation the country has to expedite the two-pronged strategy of boosting exports and containing imports. While boosting exports may not be easy, one industry stands distinguished in terms of its ability to support the cause and that industry is urea manufacturing. Manufacturers have the spare capacity and what is…

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According to CNBC, when the world was beginning to believe that Sino-US trade tensions were easing, Chinese officials cut short their US visit and President Donald Trump announced he doesn’t really need to pull together a trade deal before the 2020 election. The news didn’t lead to huge losses, but hampered the markets from its attempts over the week to reach new highs. It was also a reminder of how sensitive stock markets are to the news headlines. With October to begin; Goldman Sachs predicts the month to be a wild one. Reportedly, stock markets remain calm in September, but…

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Index almost flat; macro data, tax collection figures may drive investors’ sentiments The benchmark Index of Pakistan Stock Exchange (PSX) closed the week ended on 27th September 2019 at 32,071 points, almost flat. The index lost 677 points in the first four trading sessions, as investors resorted to profit-taking following last four weeks’ strong performance. However, strongly bounced back on the last trading session, recovering 94% of earlier loses. Foreigners offloaded US$8.76 million worth of equities during the week. The market participation remained weak, with average daily trading volume declining 10.3%WoW to 107.96 million shares. Top performers of the week…

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The Daily Telegraph, Britain based leading newspaper has termed Pakistan’s Ehsaas program, one of the most comprehensive welfare programs ever undertaken by a national government. The newspaper in one of its issues said that Pakistan is leading the way with its welfare state policy and the world can learn from its innovation. The program is led by Dr. Sania Nishtar, Special Assistant to the Prime Minister of Pakistan on Poverty Alleviation and Social Protection, who has been mandated to work in partnership across multiple federal ministries that these policies will be driven by, as well with provincial governments who have…

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Pakistan continues to suffer from ‘confidence deficit’, mainly because of poor economic indicators. Over the last one year, the level has gone down further because of the disparity because the officially released data and the ground realities. The miseries are multiplied due to the failure of economic analyst to link Pakistan’s economy with the regional and global landscape, particularly geopolitics. I have no reason to doubt that the situation has not improved, but the quantum is too low and the pace is dismal. As the first quarter will be over in a few days, the efforts should be aimed at…

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Interview with Mr Aslam Hayat — Acting Chief Executive Officer, Telenor Microfinance Bank Agriculture is the backbone of Pakistan’s economy. Analysts have the consensus that production of major crops can be doubled without bringing additional area under cultivation. The major impediments identified are lack deployment of modern technologies, failure in balanced use of nutrients and huge post harvest losses. All these problems cannot be overcome without boosting lending to farmers for the purchase of inputs, deployment of technology and appropriate use of nutrients and water. For boosting lending to farmers outreach of financial institutions have to be increased. Telenor Microfinance…

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Successive peak witnessed as earnings, corporate news keep investors’ confidence firm Wildly fluctuating on the back of external factors (attacks on Saudi oil facility and likely disruption in global crude supplies) and expectations of a peaking monetary cycle, the benchmark index of Pakistan Stock Exchange closed at 32,111 points; up 2.1%WoW for the week ended 20th September 2019. A slew of major earnings announcements accompanied by corporate actions played a large part in the firming up of investors’ confidence. Key news flows driving sentiments included: 1) current account deficit for 2MFY20 declining to US$1.29 billion from US$2.85 billion for 2MFY18,…

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The State Bank of Pakistan (SBP) is scheduled to announce its Monetary Policy for next two months on 16th September 2019. There are two opposite opinions: 1) the central bank will cut the policy rate and 2) policy rate will be increased as per the IMF recipe. However, analysts are of the opinion that probability of reduction in policy rate is higher as against the probability of increase. Analysts believe that the SBP will use the most fragile argument of reduction in inflation rate, based on new methodology. However, a stronger argument is the decline in cutoff yields in the…

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Global commodity prices plunged 5.3% on a monthly basis in August, as against 1.5% increase in July. During the month under review global commodity prices dropped in 4 of the last 10 months. The poor performance reflected a sharp drop in energy prices, mostly led by plummeting oil and oil-derivative prices. Agricultural prices logged the steepest decline since March 2017, while base metal prices posted its fourth decline in the last five months. Overall, the price for the three commodity groups was negatively affected by escalating trade tensions between China and the United States and a dismal global economic outlook.…

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Stocks on the mending as upcoming imf meetings and monetary policy may sustain bulls The week ended on 13th September 2019 was reduced to three trading days due to Ashura holidays. Coming-off from holidays, the benchmark index of Pakistan Stock Exchange (PSX) continued with the trend of earlier week and gained 3.3%WoW to close at 31,481 points. T-Bill Auction (where 12M yield declined by 31bps) seeded market expectations of a cut in discount rate, providing critical catalyst for market performance. Other news providing the impetus included: 1) positive news flows from ongoing meeting of APG, an associate of FATF, and…

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Pakistan Stock Exchange closed in red for the seventh consecutive month and lost 6.8% during August 2019, which was also a worst monthly decline in this year. Market remained highly volatile due to various reasons that included: 1) spike in Pakistan-India tensions at Line of Control after India revoked article 370, defining the disputed state of Kashmir, 2) uncertainty in global markets due to Sino-United States trade war and 3) volatility in global oil prices. The outgoing month also witnessed many surprises in financial results of the companies. HASCOL posted loss of Rs56.09/share for the half year ended 30th June…

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Since 2013 the Government of Pakistan (GoP) has been working on introducing warehouse receipt financing for key food crops. Ideally, wheat being the largest staple food crop and having an annual output of 25 million tons, should have been the first crop. However, due to restriction of its intercity and interprovincial movement, the target could not be achieved. Rice is the second largest crop, which also fetches huge foreign exchange, also failed in convincing the key stakeholders to opt for warehouse receipt financing, mainly due to the lack of modern storage facilities. It has been observed that the consumers of…

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Engro Corporation (ENGRO) posted 2QCY19 earnings of Rs2.87 billion (EPS: Rs4.97), up 37%YoY but down 29%QoQ. This takes the 1HCY19 profit after tax to Rs6.87 billion (EPS: Rs11.92), up 3%YoY. The sequential decline in earnings can be attributed to: 1) a 191%QoQ higher operating expenses – EPCL recorded 673%QoQ higher operating expense due to IFRS 16 implementation and exchange losses, 2) a 107%QoQ higher financial cost amid 200bps interest rate hike, and 3) higher effective tax rate of 50% during the quarter as against 31% for 1QCY19 (EFERT reversed tax credit recorded in 2QCY18). ENGRO also announced second interim cash…

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Investors do not seem keen in buying euro because they are worried about the political situation in Italy, the possibility of a recession in Germany, the prospect of aggressive easing from the European Central Bank and the ongoing risk of more tariffs from the US on Chinese goods. This week, Italy’s Prime Minister Conte resigned, turning crisis into chaos for the eurozone’s third largest economy. Of all the euro troubles, Italian politics has the most limited impact on the currency. Europe is no stranger to Italian political uncertainty (they just had elections in 2018 and who can forget Berlusconi’s countless…

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BEATS brings in quality education at the doorstep, ardent for education network expansion Interview with Vice Admiral Shah Sohail Masood (Retd) HI (M) – MD Bahria Foundation [box type=”shadow” align=”” class=”” width=””]About the organization? Bahria Foundation was established by Pakistan Navy in January 1982 by the Government of Pakistan as a Charitable Trust under the Endowment Act 1890. The Committee of Administration (CoA) of Bahria Foundation is headed by Chief of the Naval Staff, Admiral Zafar Mahmood Abbasi NI(M), as its Chairman. Committee of Administration acts as the supreme governing body of the Bahria Foundation. The Managing Director being the…

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Index scores strong recovery; corporate results support but geopolitical tense weigh After recording heavy losses in the earlier week due to heightened tensions on geopolitical front, Pakistan Stock Exchange (PSX) posted a strong recovery during the week ended 23rd August 2019 as tensions eased slightly eased. The rebound can be termed a dead cat bounce after the market posted a decline of 46% from its peak of 53,000. The benchmark index closed the week at 31,350 points, up 9.0%WoW. With the strong rally, activity in the market the average traded volume also rose to 174.42 million shares. Foreigners remained net…

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The benchmark index of Pakistan Stock Exchange (PSX) is on persistent decline for the last two years. The recent hike in policy rate by 100bps has further accelerated the decline rate. It seems that the ship (PSX) has been abandoned by the captain (regulator), its engine has stopped working (daily trading volume has reduced to historic low) and passengers (investors) have been left at the mercy of hide tides (pressure of the IMF). Before making further deliberations, one point must be made clear that the prime purpose of the stock exchange is ‘capital formation’ and not revenue generation. The most…

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Listless market after growing unrest in held Kashmir and mounting macro risks During the week ended 9th August 2019, the benchmark Index of Pakistan Stock Exchange (PSX) fell more than 7.1% WoW to close at 29,429 points. It breached the psychological barrier of 30,000 after five years. This un-ceremonial fall was caused by mounting macro risks and growing unrest in Indian occupied Kashmir. Key news flows during the week included: 1) the Government of Pakistan (GoP) minimized furnace oil and coal based power generation to facilitate maximum intake of RLNG to avoid US$30 million penalty under Take-or-Pay mechanism and reduce…

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At a recently held seminar at the Sustainable Development Policy Institute (SDPI), Teresa Daban Sanchez, Resident Representative, International Monetary Fund (IMF) to Pakistan said, “The Fund’s program faces significant risk from a failure to build political consensus around its key components”. Added to this is the threat of failure to get off the ‘grey list’ of the Financial Action Task Force (FATF) that could complicate access to private financing from global markets. She also insisted that Pakistan has to get out of the grey list. She minced no words and said that the biggest risk faced by Pakistan is political…

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Losing streak continues as investors’ sentiments dampen; result announcements eyed Pakistan Stock Exchange (PSX) extended its 4th week of losing streak. Investors’ sentiments were dampened by high inflation rate and poor corporate results, as they overlooked numerous positives. The positives included government backed Sadiq Sanjrani’s surprise win in the Senate vote and resumption of military sales from the United States. The benchmark index lost 437 points or 1.36%WoW to close the week ended 2nd August at 31,666 points. Based on NCCPL data, foreigners remained net buyers amounting to US$3.4 million, as against this Mutual Funds emerged net seller of US$4.8…

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At the recent monetary policy briefing, Dr. Reza Baqir, Governor, State Bank of Pakistan (SBP) defended persistent hike in policy rate as a measure to contain inflation in the country. One wonders how hike in policy rate can help the country’s suffering from cost pushed inflation. According to analysts, the three factors responsible for high inflation in Pakistan are: 1) rising interest rate, 2) eroding value of rupee and 3) spiking electricity and gas tariffs. As food and other consumable items are becoming expensive, savings rate is on the decline. In search of safe havens not only small investors are…

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The benchmark index of Pakistan Stock Exchange (PSX) is on persistent decline for the last two years. The recent hike in policy rate by 100bps has further accelerated the decline rate. It seems that the ship (PSX) has been abandoned by the captain (regulator), its engine has stopped working (daily trading volume has reduced to historic low) and passengers (investors) have been left at the mercy of hide tides (pressure of the IMF). Before making further deliberations, one point must be made clear that the prime purpose of the stock exchange is ‘capital formation’ and not revenue generation. The most…

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Bulls rule short-lived; instability persists, investors may take longer term view During the week ended 26th July 2019, the benchmark index of Pakistan Stock Exchange (PSX) remained under pressure and registered a decline of 356 points to close at 32,103 levels. The week started on a positive trajectory as first two sessions cumulatively added 257 points to index, on the back of trip of Prime Minister Imran Khan to the United States, but subsequently sentiments turned bearish on weak macro indicators. The key sectors adding to the erosion in the Index were Power & Distribution Companies followed by Food &…

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Pakistan is among the top producers of cotton, sugarcane and food grains, i.e. wheat, rice and maize. However, significantly large quantities of food grains stale before reaching the market. This on one hand deprives growers of their rightful return and on the other hand does not allow the country to earn foreign exchange from export of surplus quantities. State Bank of Pakistan (SBP) embarked upon Warehouse Receipt Financing (WRF) program and issued the framework nearly six years ago. The central bank considers that development of WRF is inevitable for achieving food security, improving return to farmers and above all saving…

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An exclusive interview with Hakeem Muhammad Usman, CEO, Marhaba Laboratories [box type=”shadow” align=”” class=”” width=””]Marhaba Laboratories (Pvt.) Limited is the brainchild of Hakeem Muhammad Usman. Its inception goes back to the days when he himself was a student at Tibbia College Lahore. Greatly inspired by the rich past of Oriental pharmacy and worried over its contemporary downfall, Hakeem Usman contemplated on evolving this noble profession of service to the mankind once again. It was never too late to accomplish his dreams, and due to his pervasive work into making this profession a credible one, Hakeem Usman finally succeeded in transforming…

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Market remains dull, but may springs back on improving economic indicators During the week ended 19th July 2019, Pakistan Stock Exchange (PSX) remained under extreme pressure. The benchmark index lost 1,214 points, or plunged by 3.60%WoW to close at 32,459 level. Market remained under pressure during the first two sessions of the week owing to expected hike in policy rate and finally the central bank raised policy rate by 100bps, taking the rate to 13.25%, the highest in last 8 years. Continuous Monetary tightening by central bank has resulted in lack of fresh participation as investors’ interest is shifting towards…

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Pakistani newspapers and magazines are full of praises for the Government of Pakistan (GoP) and State Bank of Pakistan (SBP) for ushering double digit growth of Islamic banking in the country. However, the performance over slightly less than two decades looks miniscule keeping the fact in mind that overwhelming majority of the population of the country is Muslim and the name of the country is Islamic Republic of Pakistan. The Constitution promises that all the laws and rules of the country will be promulgated in the light of Shariah, but the government itself remains the biggest borrower under Riba regime.…

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The Government of Pakistan (GoP) has launched ‘Prime Minister’s Kamyab Jawan SME Lending Program’ aimed at providing self-employment opportunities to unemployed youth. Under the scheme, the GoP will provide mark-up and credit loss subsidy on small business loans up to Rs5 million disbursed by banks to youth. According to the scheme procedure announced by State Bank of Pakistan (SBP), all men/women holding CNIC, aged between 21 and 45 years with entrepreneurial potential are eligible for this scheme. For IT/e-commerce related businesses, the age limit will be 18 years. Under the scheme some 25 percent of the loans will go to…

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Market volume posts a 7-year plunge; news of interest rates keep investors nervy During the week ended 12th July 2019, the benchmark index of Pakistan Stock Exchange (PSX) lost 518 points and closed at 33,672 points, down 1.5%WoW. Trading activity remained immensely dull as average volumes during the week fell to around 51 million shares. It is pertinent to note that the volumes in the outgoing week were lowest in the last 7 years (last reported lowest number was 28 million in January 2012). Investors preferred to remain on sidelines primarily due to uncertainty about the market support fund due…

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The recently announced Rs309 billion agriculture package, with emphasis on improving crop yields, livestock development and import substitution can be termed a right step in the right direction. Reportedly, the share of Federal government will be Rs85 billion, Provincial governments will contribute Rs175 billion and share of farmers will be Rs50 billion. Even assuming a haircut, this could still imply double the agricultural spending than in last 9 years at an average. Out of the allocated funds, 7% is planned to be targeted towards increasing the average yield of wheat and sugarcane. The aforementioned developments, if materialized, could result in…

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Pakistan stock market witnessed a substantial decline of 12% in Rupee terms and 23% in US$ terms during 4QFY19 amidst macro-economic uncertainties. Major decline was posted in the second half (Jan-Jun 2019 with a fall of 9% in Rupee terms and 21% in US$ terms). During the outgoing fiscal year, the benchmark index of Pakistan Stock Exchange (PSX) plunged by 19% and 39% respectively for the second consecutive year. The aggregate fall for the last two fiscal years was to the extent of 27% and 52% respectively. Market capitalization plunged by 53% in the last 2 fiscal years, from US$91…

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Smidgen gain witnessed; new SECP rules may short-term hit to the sentiments The benchmark Index of Pakistan Stock Exchange (PSX) closed at 34,190 points, up 0.9%WoW the first week of FY20 ended 5th July 2019. The nose dive in daily trading volume by almost 41%WoW to average 86.6 million shares was particularly indicative of lack of investors’ interest. With approval from the IMF executive board for the proposed US$6 billion under EFF for the next three years (accompanied by release of US$ one billion), investor sentiment see-sawed as regulatory action to curb un-registered transactions, including SECP’s recently approved Search And…

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Analysts seem to have the reasons to believe that new Governor of State Bank of Pakistan, Reza Baqir, has not understood the intricacies of Pakistan’s economy. This perception gets credence if one just looks at the depreciation of Rupee on Wednesday, 26th June 2019. The day witnessed a decline of 3.8% in Rupee value in a single day. The substantial fall in the value of Rupee took place after Governor central bank declared that the exchange rate would be market-based and the free float was not suitable for the country’s economy. Rupee has lost about 35% value since May 2018.…

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Interview with Mr Mukhtar Khan HI (M) Rear Admiral (retired) – Director General, Bahria University Karachi Campus PAGE: Kindly describe role of Bahria University in promotion of higher education in Sindh and rest of the country? Mukhtar Khan: At the outset, let me acknowledge the efforts of Pakistan & Gulf Economist to promote this noble cause. Like other leading varsities, Bahria University has incorporated advance teaching methodologies to promote multi-faceted education, exchange visits of students beyond their normal text book education and knowledge. Bahria University is playing an important role as leaders in teaching and learning, in education, research and technology.…

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Under mood of pessimism index weakens further; cautiousness advised Continuing the trend witnessed in the earlier week, the benchmark Index of Pakistan Stock Exchange (PSX) lost another 3.5%WoW to close at 33,902 points for the week ended 28th June 2019. Apart from the regulatory tightening that has been the dominant factor impacting market performance negatively other factors included: 1) fiscal year-end phenomena, where historically market remains under pressure in June, 2) exchange rate volatility taking exchange rate to new high of Rs163.5 before closing at Rs159.5 and 3) government increasing in gas tariffs up to 191%. Concerns over tail risks…

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Finally, Pakistan managed to garner much-needed support from three-member states of the Financial Action Task Force (FATF) to avoid being placed on its blacklist, but the threats still lingers on. The country has been on the global money laundering watchdog’s radar since June 2018, when it was placed on the grey list for terrorist financing and money laundering risks after an assessment of the country’s financial system and security mechanism. This is certainly a positive development that there is no imminent threat of blacklisting by the FATF due to crucial support from Turkey, China and Malaysia, but Pakistan had to…

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Govt should pay special attention to hotel industry in promoting tourism An exclusive interview with Akhtar Riaz — General Manager, Hotel Mehran [box type=”shadow” align=”” class=”” width=””]Akhtar Riaz is currently working as General Manager at Hotel Mehran Karachi. Prior to that he was General Manager at Ramada Plaza Karachi and has also worked as Acting General Manager. He has over 25 years of hospitality and mall management experience. He has worked in Pakistan, UAE and Malaysia. He achieved key milestones while working for Hotel Wilayah in Malaysia as well as for Hashoo Group and Avari Hotels International. This involved working…

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Market remains choppy, budget opposition and FATF meeting may keep investors nervy The market performance during the week ended 21st June 2019 remained choppy and the benchmark KSE-100 Index of Pakistan Stock Exchange (PSX) closed at 35,125 points, down 1.26%WoW. The week opened on a weak note, as rupee continued to depreciate. Governor, State Bank of Pakistan, Reza Baqir, held a press briefing on Monday to guide on economic outlook particularly about 1) adoption of market determined exchange rate regime and 2) continued monetary tightening. Proposals regarding power and gas tariffs hike also surfaced during the week, furthering market fears…

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Three weeks ago I wrote an article ‘Brewing turmoil in Pakistan’s backyard’ and the concluding remarks were, “The fact remains that none of the country (United States or Iran) wants to get the blame for initiating a conflict, but it doesn’t mean that the threat of eminent war is not there. There is a fear that miscalculation or misunderstanding can trigger confrontation and an outbreak of war. As the US expands its military presence in the region, the risk of beginning an accidental war rises further.” The apprehension came true last Thursday when two oil tankers were attacked and left…

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Market likely to find foothold in the coming sessions on budget perceptive The week ended on 14th June 2019 commenced on a negative note, with the benchmark Index of Pakistan Stock Exchange (PSX) falling by about 1,000 points on broad expectations of a negative budget. However, the market pared losses in the remaining sessions on the expectations of formation of market support fund. Resultantly, the Index closed at 35,573 points, almost flat WoW. Average daily volume remained on the lower side at 136.4 million shares, down 13.0%WoW. Contrary to broader expectations Budget’19 was headline equities positive despite GoP’s efforts remaining…

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Farmers must not allow cultivation of genetically modified maize and other crops All the major stakeholders of agriculture sector including farmers, food processors, national seed companies and agribusiness experts, etc. vehemently oppose cultivation of genetically modified (GM) maize in Pakistan. The unprecedented near-consensus against GM is amazing. However, the proponents of GM seeds are still trying desperately to get the government approval by openly criticizing Ministry of National Food Security and Research for the delay in granting the permission of cultivation of GM maize in Pakistan. It is on record that the 1st consultative meeting on commercial cultivation of GM…

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Sort of Rs20bn fund should exist at all times for stock market Also there is a right time to accumulate under the falling stock sectors An Exclusive interview with Nazim Abdul Muttalib – Executive Vice President and Head of Broking, Ismail Iqbal Securities [box type=”shadow” align=”” class=”” width=””]Nazim Abdul Muttalib has over fourteen years of experience in Pakistan’s financial sector including Capital Markets, Banking and Asset Management. He is currently working at Ismail Iqbal Securities (Pvt) Limited as Executive Vice President, Head of Broking. Nazim has been working closely with foreign investors, broker dealers and local fund managers to give…

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Index jumping for joy after support fund launched After a jubilant week, the benchmark index of Pakistan Stock Exchange (PSX) started the week ended on 30th May 2019 in the red on emerging concerns. While details of the upcoming budget weren’t very supportive, the government seemed desperate regarding meeting the revenue target of Rs5.5 trillion for next financial year. Towards middle of the week, euphoria on the back of Stock Market Support Fund was witnessed again after confirmation from Finance Adviser, helping the Index to close the week at 35,975 points, up 0.8%WoW. News of price increase by local cement…

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During this past week the benchmark index of Pakistan Stock Exchange (PSX) posted one of the largest weekly gains of 7.65% or 2,537 points. The last highest gain of 9.1% was posted in first week of April 2009. All sessions of the week closed on positive note, depicting restored optimism of investors on the back of market support fund and deferred oil facility by Saudi Arabia. Another important point worth mentioning is that foreigners remained net seller of US$3.44 million and they were joined by mutual funds and insurance companies, with US$5.4 million and US$2.8 million respectively, as against these…

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Since Donald Trump administration refused to extend waivers for Iranian oil exports, the United States and Iran have been giving threats and counter threats. In response to the US decision to tighten oil sanctions and push Iranian oil exports to zero, Iran has expressed its determination to resist the US pressure and retaliate, if deemed necessary. Iranian Foreign Minister Javad Zarif on a visit to New York in late April told the audience at the Asia Society that his country would continue to sell its oil despite the US sanctions and warned that the US should remain ready to face…

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Reportedly the Government of Pakistan (GoP) is getting ready to issue ‘Energy Sukuk II’ amounting to Rs200 billion before end May 2019. It is anticipated that around 30 percent of the amount will be to be routed towards independent power producers (IPPs), implying 40 percent settlement of cumulative IPPs’ receivables by June 2019. According to the details for Kot Add Power Company (KAPCO), this may help in resuming payouts in 4QFY19, as payable to Pakistan State Oil Company (PSO) has already halved to Rs24 billion at end March 2019. Deleveraging does not seem to be a priority this time, as…

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The good news is that the International Monetary Fund (IMF) has succeeded in convincing the Government of Pakistan (GoP) to agree on stringent conditions to pave way for the approval of US$6 billion under Extended Fund Facility (EFF). The bad news is that there will be further increase in policy rate, hikes in electricity and gas tariffs and reduction in subsidies. It may not be wrong to say that despite release of paltry tranches of US$2 billion per annum, Pakistan is likely to plunge deeper into debt trap, unless appropriate policies are implemented to restore competitiveness of Pakistani exporters in…

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