Author: Shabbir Kazmi

Monetary policy, budget measures and news of kekra well likely killjoy bears Fully cognizant of the unease prevailing at equity market, delegation of leading businessmen and brokers comprising of Bashir Jan Mohammad, Arif Habib, Aqeel Karim Dhedhi, Ali Jamil and Sulaiman Mehdi, Chairman Pakistan Stock Exchange (PSX) met Dr. Abdul Hafeez Sheikh, adviser to Prime Minister on Finance in Karachi. Others also present on the occasion were Chairman FBR, Syed Shabbar Zaidi and Dr. Khaqan Najeeb. They discussed the overall macro-economic situation of the country and its impact on the capital markets. Keeping in view the present depressed market sentiment,…

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Keeping in view the ongoing discussions with the International Monetary Fund (IMF) team and the recent changes in key government positions, there are hopes that Pakistan may enter into IMF program during June 2019. It is also anticipated that Federal Budget for next financial year (FY20) will be prepared in the light of impending IMF conditionalities. This impression develops because announcement of next budget has been deferred for nearly a month. Soon after appointment, Dr. Hafeez Shaikh, Adviser to Prime Minister on Finance, has made clear that the focus of the new financial team will be on containing current account…

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Market beleaguered by negotiations with IMF, review by MSCI and facets of fy20 budget During the week ended 10th May 2019, trading at Pakistan Stock Exchange (PSX) remained under pressure due to uncertainties emanating from negotiations with International Monetary Fund, forthcoming MSCI review and federal budget for next financial year (FY20). The benchmark index posted a decline of 3.9%WoW and closed at 34,717 points. With the commencement of Ramadan, average traded volumes for the week plunged to 73.5 million shares, posting a whopping fall of 30%WoW. Volume leaders included: KEL, MLCF, SNGP and BOP. Leading gainers were: ENGRO, BAFL, HBL…

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Ever before Imran Khan came into power, Pakistan’s economy has been going through tough times. As per the norm the country delayed approaching International Monetary Fund (IMF). According to the latest reports, technical teams of the IMF and Pakistan are locked in negotiations for a bailout package and hope to strike a deal by 10th May 2019. Adviser to Prime Minister on Finance, Dr Abdul Hafeez Shaikh has expressed hopes that the talks on bailout package with the Fund would turn out to be successful. However, he didn’t mince his words and said that the upcoming budget would focus on…

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In the recent past, Pakistan stock market has plunged in an unprecedented manner. Some analysts say, ‘it is reflection of the overall state of country’s economy’. Others term it the outcome of geopolitical strangulations. Whatever may be reasons, policy makers have to find the solution and the top item on agenda should be ‘overcoming confidence deficit’. Once faith of people in the incumbent government and Pakistan is established, other problems will be resolved in due course of time. Ever since, Imran Khan became Prime Minister of Pakistan, expectations of people have been marred by wrong priorities, bad decisions and on…

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Deal with IMF amongst top rationale keeps equities falling During the week ended 3rd May 2019, the benchmark index of Pakistan Stock Exchange (PSX) closed at 36,123 points, down 2.7%WoW due to a number of reasons. On top of the list was inordinate delay in signing a package with the lender of last resort, International Monetary Fund (IMF). Key news flow impacting equities market, during the week included: 1) ongoing negotiations with IMF for US$6.5 billion funding, IMF team pushing for power sector reforms including resolution of circular debt though 25% hike in consumer power tariff and gas prices, 2)…

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Many analysts believe that the decision of US President, Donald Trump to end the exemptions regarding buying Iranian crude oil is a double-edged sword. On one hand, he doesn’t want oil prices to go up and on the other hand he is adamant at pushing Iran out of oil market. It appears that like past; this time too, the US would succeed in luring Saudi Arabia to exploit the situation to its benefit. It is also believed that stringent sanctions on Iran can take both Saudi Arabia and the oil market into the unchartered waters. A question comes to minds, is Saudi Arabia capable of filling…

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Recovery witnessed; results, amnesty report may keep investors optimistic The market ended the week on 26th April on a negative note, losing 888 points or 2.4% in the first two trading sessions. Stocks later rallied in the remaining three trading sessions on earnings upbeat, recouping some of the earlier losses. The benchmark index declined 0.4%WoW to close the week at 37,130 points. Trading activity remained weak and skewed towards main board items. Average daily trading volumes declined 30%WoW to 122.45 million shares. Key news flows impacting the market during the week were: 1) new economic team of government deciding to…

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Pakistan is rich in natural gas but deficient in fossil oil. At present bulk of the gas demand is met through local production, which offers enormous saving of foreign exchange as well as cleaner environment. The added benefit is that Pakistan could buy gas from its next door neighbor Iran as well as a not too far located friendly country Qatar. While analysts have the consensus on boosting indigenous gas production, they consider import of LNG as the second best option. Around the world, experts have the consensus on a point that natural gas is the cleanest fossil fuel. Its…

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In the aftermath of growing criticism, Prime Minister, Imran Khan has found some scapegoats and reshuffled his cabinet. The induction of minister previously associated with rival political parties has attracted criticism as well discontent among PTI lovers. Selection of ex-ministers of rival political parties raises two perceptions: 1) PTI suffers from dearth of competent people and 2) non-state actors still control reins of the ruling junta. Some experts even go to the extent of saying that if Nawaz Sharif governments could be toppled; can Imran Khan also face the same fate? While Imran Khan may have done many good things,…

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Index springs back on economic optimism; IMF plan and result season promising On last day of the week ended on 19th April 2019, Pakistan Stock Exchange (PSX) witnessed a rebound due to renewed optimism on economic front driven by cabinet reshuffle and some changes in investors’ sentiments. The benchmark index closed almost flat at 37,292 levels. Average daily trading volume surged to 175.7 million shares as compared to 148.36 million shares a week ago. Positive news flow of expected signing of agreement with IMF in late April/early May with policy level agreement between authorities and IMF failed to reinvigorate interest…

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Stocks underperform on in the course of crucial financial decisions The market during the week ended 12th April 2019 remained under pressure, where a benchmark index of Pakistan Stock Exchange (PSX) touched 36,579 points mid-week, lowest level since PTI’s government came to power. The rumour of a potential price war in cement sector led to a further drag on the market performance. Meanwhile, a delegation led by Finance Minister Asad Umar reached Washington for crucial discussions with the IMF. The discussions are expected to last till 15th April, which will be followed by official announcement of amnesty scheme. The government,…

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Edotco Group Sdn Bhd, the leading end-to-end integrated telecommunications infrastructure services company, reinforced its commitment to Pakistan and building its digital future with a broad range of new service offerings to accelerate the country’s connectivity infrastructure development. Witnessed by Tun Dr Mahathir Mohamad, Prime Minister of Malaysia and Imran Khan, Prime Minister of Pakistan, edotco signed agreements with three of the country’s major Mobile Network Operators (MNOs), Jazz, Telenor and Zong 4G. These agreements are aimed at boosting connectivity capabilities in the country via shared telecommunication towers, and more efficient operations and energy management. Signing of these agreements is part…

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Interview with Mr Sultan Hamdani – Partner, MaisonConsulting.com [box type=”shadow” align=”” class=”” width=””]Profile: MaisonConsulting.com was founded with the theme of owned and run by professionals and soon it became a synonym of a seasoned group of experts working on modern business utensils such as ERP, CRM and Security. With strong team of professionals having vast experience in fields of Information Systems locally and abroad, the Company is set to give consultancy and implement mission critical information projects for local organization. Over the years we have developed our repute as an On-Time and In-Budget Goal Achievers. With contracts in the local…

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Index posts 16-week highest loss as investors stay gloomy over slow economic progress During the week ended 5th April 2019, the benchmark index of Pakistan Stock Exchange (PSX) posted 16-week highest loss, losing 2.92% WoW to close at 37,522 level, with four sessions closing in red and one in green. Investors’ sentiments remained under pressure throughout the week owing to slow growth of economy and weak macro indicators due to 5-year high inflation and fiscal deficit. The hike in policy rate also encouraged investors to make their way to fixed income securities like National Saving Certificates and other government securities…

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Reportedly, postharvest losses range from 10 to 20% for different crops in Pakistan. To achieve food security, containing such colossal losses should be the top priority of the Government of Pakistan (GoP). Analysts have the consensus that if such losses are contained, twin benefits can be achieved: 1) increasing income of farmers and 2) boosting exports from the country. Pakistan is among the top producers of various staple food grains that include rice, wheat and maize. The country exports substantial quantity of its top quality Basmati and other varieties of rice. Lately, the country has been producing around 25 million tons wheat per annum and…

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Descon Oxychem is a part of Descon’s Chemicals line of business. The Company offers the largest and the most complete product line of Hydrogen Peroxide products. Its products offer top of the line, world class range that meet all international safety, quality and sustainability standards. It is operated the Descon way, driving business and being responsible. This implies sustainable chemistry, respecting the people and the environment, acting as a responsible player, taking into account and meeting sustainable challenges faced by our stakeholders. With an unyielding commitment to hygiene, safety, environment and sustainable development at its core, backed by an experienced team, the…

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The new models are coming up with the scale of the network Additional services in insurance, capital markets, savings, access to credit & real estate areas are required An exclusive interview with SYED HAMZA MATIN – CEO, EDP Services North America, Inc [box type=”shadow” align=”” class=”” width=””]Profile: Syed Hamza Matin has worked with large network of clients in Banking, Mutual Funds, Asset Management, Investment Banks, & Insurance. He has implemented over 500 projects for 100+ clients in 20 years in FinTech/FinServ with Fortune Clients in Pakistan, Middle East, North America, Singapore and Africa. Mr. Hamza has deep knowledge of Automation, Software…

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Equities remain volatile in Jan-Mar 2019 quarter on news of IMF, FATF, Pak rupee and MSCI frontiers Pakistan equities remained volatile during the outgoing quarter (Jan-Mar 2019). The benchmark index of Pakistan Stock Exchange (PSX) KSE-100 gained 4.3% QoQ. The highest (one day) gain during the quarter was 2.70% posted on 2nd January due to positive investor sentiments after securing a US$3 billion support package from UAE, at the beginning of quarter. The sharpest single day decline of 2% was observed on 26th February due to Indo-Pak conflict, though subsequently the market recovered on the intervention of global powers. During…

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It was opening up of a new chapter in the history of Tharparkar when Engro Powergen Thar (Private) Limited (EPTL), fed electricity from its first unit into the national grid. It was realization of the nation’s dream of producing electricity from Thar coal. EPTL – the majority owned company of Engro Energy Limited, tested and energized the first unit of 330MW of the combined 660MW power plant located in TharBlock II. EPTL operates as a subsidiary of Engro Energy along with other sponsors that include Habib Bank; Liberty and China Machinery Engineering Corporation. The successful synchronization happened amidst presence of…

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Index remains under pressure as confusion mounting over economy slowdown The benchmark index of Pakistan Stock Exchange (PSX) mostly remained under pressure as confusion is mounting amongst investors over slowdown of economy. Despite expectations of IMF negotiations to conclude soon, investors fear IMF demands including flexible exchange rate and reform agenda implementation would bring further inflationary pressure and demand slowdown. Invest record remained cautious in short run as risk of further monetary tightening and inflationary pressure would keep upside in check. The remaining in limelight were Banks on interest rate hike increase, E&Ps on attractive valuations, Textiles on likely benefit…

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Prime Minister Imran Khan faces a number of impediments, which are marring policy formation of his government. While there are no reasons to doubt his integrity and love for Pakistan and Pakistanis, two factors just do not allow him and his team to come up with home grown plan. These are: 1) his speeches spread over more than two decades, as opposition leader and 2) lack of capacity of his team. Ironically, he has offended opposition parties to an extent that these are not even ready to support him on policies necessary for nation building and putting the country on…

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A delegation of Canada Pakistan Business Council (CPBC) visited Pakistan Stock Exchange (PSX) to open the trading session with the gong ceremony. CPBC, a non-profit organization based in Canada promotes trade between Canada and Pakistan. The Council has organized several trade missions to and from Canada, which have resulted in investments in various sectors of the economy. CPBC also promotes other activities that include establishing scholarships and adopting schools in Pakistan, helping establish the South Asian Art Gallery at the Royal Ontario Museum, and supporting cultural exchanges between Canada and Pakistan. The Canadian delegation was led by Samir Dossal, President…

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Equities keep downward slide on uncertain economic scenario Pakistan equities continued their downward slide for the sixth consecutive week and lost 643 points to close at 38,307 level for the week ended 15th March 2019, this was the lowest index level in 48 trading sessions. Simultaneously, volumes also remained subdued, with average daily traded volume for the week declining to 93 million, down 18% WoW. Commercial banks sector was the worst performing, followed by exploration and production and cement sectors. During the first four trading sessions of the week, foreigners emerged net sellers with US$17.7 million as against net selling…

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At present Pakistan faces two contentious problems, depreciating currency and rising inflations. Both the issues are badly intertwined and cannot be separated. The hike in the international prices of energy and food products also erodes foreign exchange reserves of the country. It is must that policy planners keep an eye on the movement of commodity prices to minimize the adverse impact of the hike. There are many tradeoffs available, but only timely decisions can help. Rising crude oil Major crude benchmarks witnessed up swings, but prices are still hovering near/below levels seen last year. Sanctions imposed by the United States…

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HABIB BANK LIMITED (HBL) has posted earnings of Rs1.7/share, down by 63%YoY. Despite Rs3.2 billion reversal in Workers Welfare Fund (WWF) expense, earnings were below market expectations as the Bank booked hefty loss from dealing in foreign currencies as well as higher total provision charge. Despite increase in interest rate, net interest income of the Bank dropped by 3%YoY. This can be attributed to maturing high yielding PIBs as well as lag in re-pricing of assets compared to liabilities. HBL booked total provision reversal of Rs3.3 billion attributable to both worsening of equity market as well as decline in asset quality.…

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Meezan Bank is Pakistan’s largest and full service Islamic bank, enjoying a market share of around 35 percent. Total assets of the bank are reported at Rs938 billion, while total deposits touch Rs785 billion. It enjoys an extensive outreach comprising of a network of 660 branches. Meezan Bank announced a dividend payout of 45% in 2018 (35% cash + 10% bonus issue) as compared to 30% last year. Following are the key takeaways from the latest analysts briefing. Meezan Bank has significantly improved its capital base, where the Tier-I capital has improved to 12.09% compared to 9.94% in the same…

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Geopolitical tensions keep bulls away; mini-budget, IMF package and Sukuk may retake shine The movements at Pakistan Stock Exchange (PSX) during the week ended 1st March 2019 were largely reflective of the prevailing geopolitical tensions between Pakistan and India. The benchmark Index touched a low of 37,323 points, but managed to close the week at 39,539, posting a paltry decline of 477 points or 1.2%WoW. The Index declined by 6.7% mid-week as cross border tensions escalated and panic kicked in leading to an across-the-board sell-off. However, market recovered 1,369 points as investors took positions on dips. The increasing possibility of…

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Providing level playing field can strengthen the sector, says UNISAME Chief According to State Bank of Pakistan lending to small and medium enterprises (SMEs) by banks in Pakistan was for the first time recorded at Rs513 billion for CY18 as compared to Rs450 billion for CY 17, registering growth of 14 percent. The growth was even more prominent in the last six months of CY18, registered at 25 percent. The growth in lending to SMEs becomes more significant because the policy rate witnessed an increase by 425bps during the year under review. Increase in lending to SMEs can be attributed…

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“Stock exchange is not for making money, it is for creating money. This difference has to be understood”, says Hussain Dawood It is worth mentioning that Pakistan Stock Exchange (PSX) has embarked upon an initiative to recognize the efforts and contributions of business icons of the country for playing an important role in the development of Pakistan’s capital market and economy of the country. Hussain Dawood was the first recipient of this honour by PSX. On Wednesday, February 20, 2019 Chairman of the Board of Directors of Dawood Hercules Corporation (DH) and Engro Corporation, Hussain Dawood and his team, visited…

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Index keeps falling; investors poise some political and economic news snag Despite positive news flows at the start of the week, a barrage of weak volumes, mediocre results, skipped payouts by IPPs and lack of concrete development on the passage of the Supplementary Finance Bill by the parliament equity market performance subdued. The benchmark Index of Pakistan Stock Exchange (PSX) declined by 1.16%WoW during the week ended 22nd February 2018 to close at 40,016 level. Key news flows during the week were: 1) Saudi Crown Prince Mohammed bin Salman signed investment agreements worth US$20 billion during his high-profile visit to…

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It is no secret that bulk of Pakistan’s import consists of energy and food products. Lately, the government has allowed export of half a million tons wheat and millers are expected to produce half a million tons refined sugar. It is therefore, imperative that the business community and the policy makers keep a close eye on movement of prices of energy and food products. In January 2019, global commodity prices broke the downward trend observed in the previous two months, rose by half a percent following a fall of 1.6 percent in December 2018. The rebound in global commodity prices…

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Index stays in red, Saudi crown prince visit likely to push positive outcome The benchmark index remained in red during the week ended 15th February 2019 and closed at 40,487 points, down one percent WoW due to poor corporate earnings as well as lack of any positive triggers. Even the hint by Finance Minister of opting for an IMF program could not cheer the investors as they preferred to book profit. Moreover, news about a deadly attack in Indian occupied Kashmir (killed more than 40 soldiers) kept the market range-bound on the last day of the week. Investors eye forthcoming…

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Achieving food and nutritional security has remained one of the core underlying objectives of all the policies, programs and strategies by the successive governments in Pakistan. After the 18th constitutional amendment, the Ministry of Food and Agriculture (MINFA) functions were devolved to provinces. However, in view of the importance of attaining and maintaining national food security and better execution of unevolved functions of MINFA, Ministry of National Food Security and Research (MNFSR) was established by the Government of Pakistan. Pakistan needs a comprehensive policy focusing on enhancing food availability, improving food access, enabling food utilization and ensuring food stability at…

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Historically, Pakistan has suffered from adverse balance of payment, because its exports are not enough to finance imports. The policy makers have been fiddling with different policies, from import substitution to export-led growth, but all in vain. The policy makers have been following the mantra of multilateral financial institutions. The policies of these institutions keep on changing due to the global agenda of super powers, which very cunningly make the third-world countries follow their agenda to keep them subservient. A lot could be said if one carefully analyzes the changing policies of Pakistan. Around the world countries exploit their competitive…

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Index down over lack of IMF talks courage, Saudi prince visit a delight Building on last 5-week momentum, the market started the week on a positive note as the market participants were carried away by the announcement of potential financial assistance of US$2.5 billion from China. However, the KSE-100 Index lost earlier gains in the following three sessions due to the lack of concrete developments on the IMF bailout package. The benchmark Index of Pakistan Stock Exchange (PSX) closed the week at 40,887, down 226 points. Cement scrips remained in the limelight, initially gaining on softening coal prices, but lost…

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In the latest Monetary Policy announcement, contrary to the market expectations, State Bank of Pakistan (SBP) has announced hike in policy rate by 25bps to 10.25 percent. Some analysts were prompt to term this hike as calibrated policy response by the central bank; others term it blind following of International Monetary Fund (IMF) mantra. The rate hike confirms continuation of ongoing monetary tightening on the instructions of IMF. Surprisingly, lack of concrete policy action on the fiscal leaves monetary tightening as the only policy tool to address challenges. As a result of persistent recent hike in policy rate the monthly…

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Economic reform package, budget progress push market’s rally Investors asked to take longer investment horizon and build positions on dip During the week ended February 1, 2019, the benchmark index of Pakistan Stock Exchange (PSX) gained 848 points and closed at a 50-session high of 41,113 level. The rally was supported by the economic reform package, the cash deposit from the UAE and Saudi Arabia of US$ one billion each and continued buying by the foreigners for second consecutive week, net buying of US$12.3 million. Budget development continued to favorably impact the auto sector on withdrawal of ban on non-filers…

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Engro Powergen Qadirpur Incorporated in 2008 as a subsidiary to develop power projects in Pakistan, Engro Powergen Qadirpur Limited is Engro Corporation’s first initiative into the country’s power sector. Its aim is to ease the burden on the nation’s energy sector by developing projects exploring cleaner, more efficient and economically viable sources of power generation including wind, hydro and solar energy. Engro Energy owns and operates Engro Qadirpur, a 217 megawatt power plant and the group’s first initiative in the power sector of Pakistan. Engro Qadirpur was listed at Karachi Stock Exchange (mow Pakistan Stock Exchange) in October 2014, offerings…

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An exclusive interview with Fahd Chinoy — Deputy Chief Executive, Pakistan Cables [box type=”shadow” align=”” class=”” width=””]Profile Fahd Chinoy holds a MBA degree from INSEAD, Fontainebleau, France and a BA in Economics and Political Science from the University of Pennsylvania, USA. Other than Finance and departments that report to the Board of Directors (Internal Audit and Company Secretary), he is in charge of all key departments within the organization. Chinoy has previously served in the banking industry, having worked with TD Securities in New York and Toronto as an Associate in various departments including Loan Syndication and Corporate Banking. Chinoy is…

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Market witnessed positive trend, euphoria of mini budget to continue Stock market opened the week positive in anticipation of a successful visit of Prime Minister Imran Khan to Qatar while the unveiling of much-awaited ‘mini budget’ during the week kept the momentum positive. Investors’ sentiments were reflected in the stock market’s performance as the bourse closed the week ended 25th January 2019 at 40,265 points, up 2.44%WoW. Average daily volume increased by 44%WoW to 168 million shares, while net foreign buying of US$17 million during the week also supported the index. Additional news flows moving the market included: 1) State…

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National Bank of Pakistan (NBP) is a public sector commercial bank of the country that is fully aware of its social obligations. Over the years it has integrated its social welfare and community development initiatives to achieve sustainable growth in the social and economic sectors of Pakistan. The Corporate Social Responsibility (CSR) program was initiated by its former President, Syed Ali Raza in 2009. The bank runs its CSR Program to facilitate the community at large. Additionally, the bank is also active in extending support to a number of recognized charitable institutions for the uplift of underprivileged members of the…

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Pakistan & Gulf Economist in conversation with Dr. Zeeshan Ahmed (Dean, Karachi School for Business and Leadership) discussed about what it takes to run a top-tier business school. [box type=”shadow” align=”” class=”” width=””]Profile: Dr. Zeeshan Ahmed has held eminent positions at top business schools of Pakistan. Currently he is the Dean at renowned graduate management school of the country, Karachi School of Business & Leadership (KSBL). He is passionate about cultivating the strategic mindset and competencies for growth and success in new generation. Dr. Zeeshan believes that if we prioritize education reform then we can solve most of our problems…

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Automobile sales were up nominally in December 2018, as against 17%YoY decline in November 2018, sales were up 11%MoM. This is the first time in 12 years (since December 2005) that sales have increased in December on MoM basis. This brings 1HFY19 sales number to 120,066 units, down by 3%YoY. This is also the first time in 5 years that sales have declined during the first half of a fiscal year since 1HFY13. Despite seemingly better numbers in December, analysts fear significant slowdown in auto sales in near term due to: 1) deteriorating economy, 2) law barring tax non-filers from…

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The Government of Pakistan (GoP) has notified an immediate ban on import of furnace oil (FO) and ordered all the refineries to utilize billions of rupees in annual deemed duty collected on petroleum products to upgrade their refining facilities. The GoP has also ordered immediate reduction in the FO production to a minimum and to enter into commercial agreements with power producers for utilization of their capacity for FO storage. The GoP has imposed ban on import of FO with immediate effect, except for the K-Electric. Previously, in similar situations the GoP has allowed the K-Electric to run their plants…

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Bulls remain in control as FATF liking, uae package boost investor sentiments The benchmark index of Pakistan Stock Exchange (PSX) gained 1,502 points to close at 39,049 points for the week ended 11th January 2019. A US$3.0 billion support package was signed between Pakistan and United Arab Emirates that is likely to help the country overcome its balance of payments crisis. Furthermore, the Financial Action Task Force (FATF) expressed some degree of satisfaction over Pakistan’s efforts and action plan to combat money laundering and terror financing under international obligations and indicated areas where more has to be done before May…

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The quantum of Government of Pakistan (GoP) borrowings from State Bank of Pakistan (SBP) has lately reached 12.6 percent of GDP, the highest since FY06. The limit specified by International Monetary Fund (IMF) is 7.5-8.0 percent of GDP. This necessitates a shift towards banks for borrowings. The latest auction of Pakistan Investment Bonds (PIB) in which yield spread rose to 2.2 percent can be taken as an indication of paradigm shift. A peep into the history indicates that the stock of borrowings from SBP was at 10.0 percent of GDP at the time of entry into the previous IMF program…

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In the recent months Pak rupee has depreciated significantly. This has on one hand increased debt servicing and on the other hand pushed inflation rate in the country. Depreciation of rupee is adding to the cost of imported goods and eroding competitiveness of the locally produced goods. The United State, European Union member countries are major trading partners of Pakistan. Therefore, any movement in the value of these currencies as well as parity with local currency has to be closely watched. 2018 was a phenomenal year for the US dollar. Currencies of the emerging market were hit the hardest by…

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New year triggers investors’ interest as index climbs on report of China, Saudi Arabia lending Pakistan Stock Exchange (PSX) started the first week of 2019 on a positive note. The benchmark 100 Index posted a gain of 481 points (up 1.3%), snapping its two consecutive-week losing streak and closed at 37,548 level on 4th January 2019. Positive sentiments this week were driven by reports that China has pledged to lend US$2 billion to Pakistan to shore up its foreign exchange reserves. Furthermore, Finance Minister Asad Umar’s recent statements that the biggest investment in Pakistan’s history from Saudi Arabia will be…

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Pakistan capital market is likely to remain volatile and reactive to the news flows. Exchange rate parity will be the key driver, any bout of currency depreciation, either under the International Monetary Fund (IMF) program or otherwise, may result in market witnessing bearish spells. Finalizing an IMF program may be received well by the market at first, but stringent conditions placed by the Fund may hamper growth prospects of the country. It is feared that an IMF program would become a reality after achieving the harsh prerequisites proposed by the lender of last resort. On the contrary, failure to receive…

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Political subjectivity, weak macro indicators keep investors tense; short-term rally likely The benchmark index of Pakistan Stock Exchange (PSX) continued its downward trend during the week ended 28th December 2018, posted a decline of 2.83% to close at 37,167 level. Investors were left dejected due to several factors this week, including a US$591 million decline in the SBP’s foreign exchange reserves, strong political noise in the country and weak macro indicators. Sector-wise the worst performers were Commercial Banks, Oil & Gas Exploration companies, Cements and Fertilizers. Selling by foreigners declined to US$1.1 million as compared to US$12.2 million a week…

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A deterioration of fundamental business dynamics is expected to adversely affect the dividend payment capacity of the listed companies over the medium term. Declining profitability is expected to deplete the capacity of companies to disburse monetary payouts, where downside to dividends are expected, particularly from rising finance costs and debt servicing outflows. This convergence of ‘bottom-up’ negatives accompanied by slowing volumes and general decline in market activity, could relegate companies to augment non-cash payouts when faced with cash flow pressures, particularly in the form of bonuses shares. Already, CY18 todate total stocks issuing bonus shares has climbed to 43 from…

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Uneasiness persists as IMF facility and bilateral assistance will keep market range bound The week ended 21st December 2018 witnessed volatility coupled with muddled short term sentiments, despite inflow of US$ from ‘friendly countries’ and progress on negotiations with the IMF. The benchmark Index of Pakistan Stock Exchange (PSX) closed the week at 38,251 points, down 0.15%WoW. Increased clarity on points of contention between the IMF and Pakistan’s negotiations over an additional facility with FX support in the form of previously pledged US$ one billion from Saudi Arabia and financing facility worth US$3billion from the UAE failed to raise participation,…

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Crude oil refineries are the most important segment of the energy chain in Pakistan. They not only save billions of dollars every year, but also add value, provide employment and make substantial contribution to the national exchequer. However, it will not be wrong to say that refining units receives little support from the government and is often attract undue criticism due to sub-optimal capacity utilization and higher cost of production. This shakes the confidence of the sector’s participants, who have already invested billions of dollars in the country and could impede the energy industry’s growth. Some critics allege that the…

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The recent gas crisis in Karachi, provincial capital of Sindh is the most glaring example of incompetency of the incumbent government. The city faced indefinite closure of CNG stations and suspension of gas supply to captive power plants maintained by the industries. Though, in power for more than 100 days, the economic team of Prime Minister, Imran Khan seems to have no plan to manage the key sectors of Pakistan, particularly the energy chain. There is a constant effort to find escape goats, rather than capacity building to identify emerging problems and take immediate remedial steps. It was announced that…

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Index grows marginally, lackluster activity likely to take over The benchmark index of Pakistan Stock Exchange (PSX) managed to close marginally high at 38,586 pointed for the week ended 14th December 2018. The week began with market continuing with last Friday’s performance where sentiments improved further after Prime Minister and Finance Minister gave assurances on Tax/Regulatory concessions for the equity market and positive outcome of the OPEC meeting (OPEC members and Russia agreed to a cut output by 1.2 million bpd effective January 2019). However, the rally did not last long with bears taking hold of the market as economic…

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Sugar cartel has refused to commence cane crushing on the pretext that sugarcane price fixed by the government is high and also demanded some incentives to facilitate them in competing in the global markets. The delay is likely to adversely affect sugarcane growers, who are already suffering due to delay in payment by the millers. Let one point be kept in mind that millers owe billions of rupees to farmers and delay in commencement of crushing will damage the standing crop. Effort should be made to commence crushing as early as possible. First of all effort should be made to…

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Markets to perform choppy; cements and banks in the limelight The week ended 7th December 2018 was another difficult one as the benchmark Index of Pakistan Stock Exchange (PSX) closed at 38,562 points, down 4.8%WoW. Unexpected interest rate hike of 150bps to 10.0% by the central bank caught investors off guard and coupled with Rupee depreciation triggered across the board selling. Oil prices receded 2.4%WoW in the run-up to the OPEC’s meeting as non-OPEC producers expand production, with pressure being exerted by OPEC’s decision to delay a final decision on output cuts, awaiting support from non-OPEC heavyweight Russia. Consequently, Oil…

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The grand ceremony held in Islamabad to mark completion of 100 days of Prime Minister Imran Khan’s government may have been illustrious, but certainly fall short in proving that much has been achieved. During election campaign and soon after attaining majority to form the government, Pakistan Tehreek-e-Insaf (PTI) leader Imran Khan painted a canvas that was too large, faced hostile domestic opposition and unfriendly attitude of United States and India, keen in establishing their hegemony in the region. Sole surviving super power and over-ambitious regional super power seem adamant at derailing Khan’s plan because of the attention Pakistan has started…

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Both Pakistan and India are nuclear power, have fought various wars and constantly live in state of war ever since they got independence from British Raj in 1947. Economists are of the consensus that had the two countries live like peaceful neighbors, abstained from spending billions of dollars annually on procurement of lethal arsenal and invested money on the development; these would have been the most prosperous economies of the world. It would not be wrong to say that the British Raj left a thorn, Kashmir, which has been constantly exploited by the United States. Let the readers keep one…

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Bears rule and market will be range-bound on ambiguity of external funding The benchmark index of Pakistan Stock Exchange (PSX) lost another 373 points during the week ended 30th November 2018 to close at 40,496, down 0.91%WoW. Lack of clarity on external funding amidst foreign selling post MSCI rebalancing kept the market under pressure. Market activity remained lackluster with average daily turnover declining to about 152 million shares, down 3.1% WoW. Key news flows impacting the market during the week included: 1) rupee losing another 2.5% against dollar, with PKR/US$ parity settling at Rs136.75 after touching intra-day high of Rs143,…

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Faced with an immediate balance of payment (BoP) crisis, the incumbent government headed by Imran Khan is working on a multi-pronged strategy, simultaneously approaching both friendly countries and International Monetary Fund (IMF) for BoP support. While initially sparking a wave of uncertainty due to lack of clarity, the Government of Pakistan’s strategy has worked well so far, considering the assurance of support from two friendly countries, Saudi Arabia and China. In this regard, Saudi- Arabia has committed US$6 billion package, with deposits of US$3 billion for BoP and deferred oil facility up to US$3 billion, while China has also assured…

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Historically, textiles and clothing sector of Pakistan has been the biggest foreign exchange earner as the successive governments have been offering it incentives. While it may be true that the sector is the largest earner of foreign exchange, it is also a fact that the sector has not learnt to live without the crutches of government support. This could be best understood from a fact that Pakistan is among the top five largest cotton countries of the world, but its share in global textile trade has not gone beyond 3 percent. The prevailing situation demands complete refurbishing of obsolete/outdated plants…

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Inconclusive IMF talks have extended market uncertainty, but a lack of definitive bearish movement indicates money managers are paying due attention to eventual money inflows from different avenues, Saudi Arabia, China and International Monetary Fund (IMF).The timing of fund flows is crucial and holds the key to market direction where negative narrative on fund flow is being countered by positive narrative on eventuality of the same as well as economic benefit of current low oil price. Historical average returns post an IMF program have been slight positive in the 60 and 90 days prior to entry. Current economic situation somewhat…

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Sentiment leans to favor bears over delay in IMF talks and funding from ‘friendly countries’ Pakistan equity market remained under pressure due to inconclusive meeting with International Monetary Fund (IMF) and delay in funds transfer from Saudi Arabia. The benchmark index of Pakistan Stock Exchange declined by almost 2.00%WoW for the week ended 23rd November 2018 at 40,869 points. With the first round of negotiations between the IMF and Pakistani authorities being inconclusive over fundamental differences on measures to address fiscal imbalances, and Government of Pakistan (GoP) expectations of funding from ‘friendly countries’ failing to materialize, sentiment leaned to favor…

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The benchmark index of Pakistan Stock Exchange (PSX) posted 1.6%MoM gain during October 2018 and closed at nearly 41,650 points, after posting decline for two consecutive months. This reversal, though of a smaller magnitude can be attributed to the successful diplomacy of Prime Minister, Imran Khan in Saudi Arabia that resulted in Saudis approving US$6billion package and expectation of packages from China and United Arab Emirates (UAE). During near term performance will depend on actual transfer of funds, and signing of a package with International Monetary Fund (IMF). Though, prospects of Pakistan’s entry into an IMF program are bright, imposition…

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Commercial banks are the core providers of liquidity to the private sector and the biggest investors in government securities (Treasury Bills, Pakistan Investment Bonds and Sovereign Sukuk). These are also the biggest investors in the shares of public limited companies (through investment portfolio and fully owned asset management companies). For considerably long time experts have been saying that banks have to redefine their business model. A review of the third quarter of CY18 performance of banks is likely to prompt the investors to reduce their exposures in banks. Two out of big five banks were imposed huge penalties in the…

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Healthy volume witnessed, support packages from China and UAE in spotlight For the week ended 2nd November 2018, the benchmark Index of Pakistan Stock Exchange (PSX) closed above 42,000 points, up 3.57%WoW. Investors awaited details of support packages from China and UAE, while closely watching the on-going country-wide protests. Moreover, healthy volumes were witnessed at the bourse with average daily trading volume rising by 7.07%WoW to 322.32 million. Volume leaders included: BOP, KEL, PAEL, LOTCHEM and PIBTL. The key news flows impacting the market sentiments included: 1) Advisor to Prime Minister on Commerce asking cement manufacturers to be ready for…

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Reportedly, Saudi Arabia has finally agreed to offer Pakistan a US$6 billion support package to overcome its prevailing precarious current account deficit crisis. According to the details the Kingdom will transfer US$3 billion directly to Pakistan, while another one-year deferred payment facility of up to US$3 billion for oil import will be made available. This arrangement will be in place for three years, which will be reviewed thereafter. During the election campaign and even after taking oath as Prime Minister of Pakistan, Imran Khan has been expressing reluctance in approaching International Monetary Fund (IMF). Ever since coming to power, Khan…

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Bulls back in the ring as stocks likely to maintain positive atmosphere During the week ended 26th October 2018 the benchmark Index of Pakistan Stock Exchange (PSX) closed at 40,556 points, up 5.5%WoW. The reversal in trend was prompted by the promise by Saudi Arabia to extend a bailout package for Pakistan, estimated around US$6 billion. It is likely to pave way for additional bilateral assistance from other friendly countries and ease pressure while negotiating a facility with the International Monetary Fund (IMF). Key news flows moving the market included: 1) second visit of Prime Minister, Imran Khan to Saudi…

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The manufacturing sector in Pakistan suffers from some contentious issues. It was expected that the incumbent government would be able to address some of the contentious issue. However, many of the U-turns have added to the concerns rather than providing sustainable solutions. PTI government received the embrace for bringing the change for the good, but ground realities show the contrary. Let the story begin with approaching International Monetary Fund (IMF). Even while the election campaign was at its peak and political parties were making all sorts of absurd promises, PTI also failed in having a complete comprehension of the ground…

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Meeting external woes brings back normalcy; investors see corrective measures During the week ended 19th October 2018, the benchmark index of Pakistan Stock Exchange (PSX) posted modest recovery, gained 912 points to close at 38,430 level, up 2.4%WoW. The average daily trading volume rose to 199 million shares, up 6%WoW. Investors gained confidence amid government’s efforts to address the external woes. The government’s intention to rationalize the taxation regime for the capital market has been greeted with a great optimism. Key news flows impacting the market included: 1) Finance Minister announcing that the IMF team would visit Pakistan during first…

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The critics of Prime Minister Imran Khan are firing all sorts of shots at him. The biggest blame is that the person who didn’t want to approach International Monetary Fund (IMF) has conveniently bowed down rather than making an effort to live without the crutched of lender of last resort. Khan has been critical of borrowing during his election campaign, might be that he failed in understanding the gravity of situation. Let everyone try to find a logical reply to the basic question, will abstaining from borrowing from IMF save Pakistan from committing default? The immediate and logical reply is…

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Fragile economic view keeps market under pressure as index down 1,700 points Due to likely harsh conditions emanating from entering into yet another program with International Monetary Fund (IMF), the benchmark index of Pakistan Stock Exchange (PSX) lost about 1,700 points (down 4.36%WoW) during the week ended 12th October 2018. In the earlier week the index had lost 1,772 point due to the fragile economic outlook and the ongoing foreign sell-off. This made investors jittery and plunged the index to 37,518 points (119-week low). The selloff was driven by: 1) fragile economic outlook and rising interest rates as investors look…

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Market lacks direction, index performance to remain under pressure During the week ended 5th October 2018, the benchmark index of Pakistan Stock Exchange (PSX) eroded by 4.32%WoW and closed 39,226 points. Having lost 911 points during the first four trading days, Shahbaz Sharif’s arrest by National Accountability Bureau (NAB) in the Ashiana Housing case on Friday afternoon came as a final nail in the coffin. Deferment of electricity rate hike and lack of direction on potential entry in to the IMF program kept investors on the sidelines, shrinking average trading volume to 113.5 million shares as compared to 124.4 million…

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The economists and analysts seem to be clearly divided into two groups, one demanding immediate negotiations with the lender of last resort and other still living under the illusion that Pakistan can live without the crutched of IMF. While the new Finance Minister is still working hard to negotiate a deal with the IMF, that can give him enough space to carve a home grown plan that could help the ruling coalition in implementation of the political manifesto. To remain a sovereign country, achieving financial stability is a must, offering the right policies to contain fiscal and current account deficit…

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Market ends smidgen lower, sufficient financing policy may lure buyers Lack of coherent policy direction to address the macro-economic woes continued to weigh on stock market performance. During the week ended 28th September 2018, the benchmark index of Pakistan Stock Exchange (PSX) closed at 40,999, about half a percent low as compared to a week ago. NEPRA’s proposal to increase the electricity tariffs, which was later deferred by ECC until next week, dampened the market sentiment. Average daily trading volume declined by whopping 20% to 124 million shares. The volume leaders of the week were: UNITY, DCR, TRG, KEL and…

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In an attempt to usher change in the way economy of Pakistan is managed, the incumbent government headed by Imran Khan has submitted some proposals to make some ‘desirable and people friendly changes in the budget 2018-19’ before the parliament for its formal approval. One must accept with open heart the effort being made by Asad Umar holding the office of Finance Minister to mobilize funds to contain budget and current account deficits. However, it has become imperative for all the political parties and every Pakistani to contribute its share to fine tune the proposals to come up with a…

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Mini budget brings bull rule as index gains 400 points; auto sector in the limelight During the week ended 21st September 2018 trading at Pakistan Stock Exchange (PSX) was reduced to three days, on account of Ashura holiday on Thursday and Friday. During the three days trading, the benchmark Index gained 400 points, up 0.98% WoW. The major contribution in this gain came after the announcement of Mini Budget by the incumbent government; the Index gained 718 points in a single trading session. Much of the Index gain was contributed by automobile assemblers and automobile parts and accessories manufacturers. The…

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Islamic banking was re-launched in Pakistan with the commencement of operations by Meezan Bank, as a full service Islamic bank more than two decades ago. To avoid the fallout of making an attempt to shift to Shariah-compliant banking from Riba-based banking, the State Bank of Pakistan and other market participants agreed to let the conventional as well as Islamic banks operate in parallel in the country. The logic put forward by the proponents of conventional banking was, “we want to give customers a chance to make a selection, rather than forcing them to shift to Islamic banking”. The result is…

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Market range-bound in hope of economic events; blue-chips in spotlight The benchmark index of Pakistan Stock Exchange (PSX) closed almost flat during the week ended 14th September 2018. Market remained range-bound in anticipation of the key economic measures to be taken by the incumbent government. At the start of the week, market came under pressure on the news of likely increase in gas price. Oil & Gas Exploration Companies and Fertilizer manufacturers remained in limelight due to increase in international oil prices and the government deciding not to increase price of gas being supplied to fertilizer sector. Commercial banks came…

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It is believed that the Economic Advisory Committee (EAC) constituted by Prime Minister Imran Khan has been signing a mantra that some unpopular decisions have to be made by the incumbent government to put the economy of the country back on track. Reportedly, Prime Minister has given a go-ahead for increasing natural gas rates by an average of 46 percent as determined by the Oil and Gas Regulatory Authority (Ogra) in June and ordered steps to control annual gas theft of Rs50 billion. While one does not doubt the sincerity of Khan, it may be said without mincing the words…

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Index keep falling; upcoming policy decisions may snare bulls With a modest recovery in the first couple of days, the benchmark Index of Pakistan Stock Exchange (PSX), lost most of the gains posted recently. The week ended 7th September closed at 40,855 points, down 2.1%WoW. Showcasing all the tell-tale signs of a highly volatile, illiquid (average weekly daily trading volume shrinking 22%WoW) and dampened near term outlook, investors remained cautious. The news impacting the market included: 1) a number of crucial and time sensitive decisions for the new government where clarity is awaited and 2) growing risk of a cyclical…

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The newly installed government in Pakistan faces a mammoth task of reinvigorating capital market of the country. This should be among the top five most important items of the economic agenda. The fiscal consolidation requires some other unpopular measures that include: 1) improving tax collection to bridge budget deficit, 2) containing extravaganzas for spending more on development, 3) boosting exports by making Pakistani manufacturers/exporters competitive in the global markets and 4) privatizing state own enterprises to save one trillion rupees, which these units swallow annually.Since the role of the government is to facilitate the business community in making fresh investment…

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Amongst the key challenges facing the newly formed government headed by Imran Khan the two most important are: 1) declining foreign exchange reserves and 2) mounting fiscal deficit. His government has embarked upon austerity drive, but curtailing expenses is not an easy job because of presence of groups having vested interest in the parliament and bureaucracy. Those used to lavish spending and following the IMF recipe are advising boosting revenue collection through introduction of new taxes and/or increasing tax rates. The two unavoidable or inevitable expenses are debt servicing and defense spending. Fiscal deficit has already surpassed the record high…

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Investment in the listed companies a focal point of the agenda PSX assures to provide conducive investment environment to the potential investors A Chinese delegation representing Beijing Investment Group in association with AKD Securities and He Nan LvRui Jin Niu Energy Private Limited visited the Pakistan Stock Exchange (PSX) last week. This visit was part of their schedule whereby they are meeting with the Exchange and Corporate Sector mainstream players to explore business opportunities within the private sector of Pakistan. The PSX Management team extended a warm welcome to the Chinese delegates, AKD Securities representatives and the delegation hosts who…

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Benchmark index descends, upcoming positive news may enhance investors’ confidence The benchmark Index of Pakistan Stock Exchange declined by 1.99%WoW for the week ended 31st August 2018 and closed at 41,742 points. Fearing gas price hike and its spillover effects on industries, investors’ sentiments turned negative even before the ECC meeting. An inconclusive outcome of the meeting with regards to fertilizer inventories, circular debt clearance and postponement of gas price hike led to further selling in the mainboard scrips. However, average daily trading volume increased by almost 20%WoW to 177.48 million shares. The volume leaders included EPCL, NRSL, AGL, STPL…

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On 18th August 2018, Imran Khan, Chairman, Pakistan Tehreek-i-Insaf (PTI) has formally taken oath of Pakistan’s 22nd Prime Minister. On Friday he was chosen Prime Minister by the National Assembly by securing 176 votes, while his opponent, PML-N President Shahbaz Sharif managed to get 96 votes. The protests by PML-N leaders continued nearly all the way through the session despite the repeated attempts by the speaker to restore order in the House. Against this Chairman, PPP, Bilawal Bhutto Zardari, much younger as compared to Shahbaz Sharif delivered a very articulated speech. Concurrently the names to head finance, foreign affairs and…

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During August newly elected government led by Imran Khan’s Pakistan Tehreek-i-Insaf (PTI) will get the control on the formation and implementation of economic policies of Pakistan. Its two top priorities should be boosting foreign exchange reserves for sustainable debt servicing and containing trade deficit by restoring competitiveness of the local manufacturers. Both these priorities hinges on facilitating farmers and industrialists in boosting production and productivity. Since Pakistan imports huge quantities of energy products and nearly 65 percent of its exports comprise of textile and clothing, keeping an eye on the movement of prices of crude oil, cotton and fertilizer is…

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