Author: Shabbir Kazmi

PSX posts marginal decline, assemblies transition and Imran’s takeover to improve investor’s faith During the week ended 17th August 2018, Pakistan Stock Exchange (PSX) remained volatile and the benchmark index lost 881 pointed during first three sessions. However, the market posted decent recovery on the last trading day of the week to close at 42,447 points, registering a marginal decline of 0.92%WoW. Fitch Ratings highlighted concerns about Pakistan’s economic woes and IMF program. Adding to the miseries was the news regarding legal actions against cement companies and Mansha group, weighing on overall investors’ sentiment. Average daily traded volumes at bourse…

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Today, with over 85 years of winning the customers’ trust, EFU General Insurance Limited is Pakistan’s largest and the oldest general insurer, always ready to go an extra mile to serve better. The Company has been providing the full range of insurance services to fulfill the needs of all of its customers, whether they are commercial or individual. EFU has built a diversified customer base, enhanced its expertise and stood by its promises always. EFU has been rated by both the credit rating agencies, JCR-VIS and PACRA, who have assigned AA+ rating to the Company that denotes stable outlook. EFU…

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According to the details released by State Bank of Pakistan (SBP), during 2017-18 financial institutions have disbursed Rs972.6 billion as compared to disbursements of Rs704.5 billion during 2016-17, up nearly 38 percent. As a consequence, the outstanding portfolio to agriculture increased to Rs469.4 billion at end June, 2018 as compared to Rs405.8 billion at end June 2017, registering a growth of 15.7%. Similarly, the agricultural credit outreach increased to 3.72 million farmers from 3.27 million farmers during the period under review, recording a growth of 13.8%. The central bank said achieving target of credit disbursement to farmers was a challenging…

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Lackluster persists, imminent Govt and Eid-Ul Azha can guide investors During the week ended 10th August 2018, trading at Pakistan Stock Exchange (PSX) remained lackluster and the benchmark Index closed at 42,842 points, up 0.7%WoW. Daily trading volume remained largely inconsistent with mid-earnings season activity receding 26.6%WoW to slightly more than 208 million. Key news flow driving market sentiments included: 1) Pakistan expressed plan to borrow more than US$4 billion from the Saudi-backed Islamic Development Bank (IDB) as part of its attempts to boost foreign exchange reserves, 2) caretaker prime minister Justice Nasir-ul-Mulk formally recommended 13th August 2018 (Monday) for…

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The new elected government will get the reign in control in less than a month. Pakistan Tahreek-e-Insaf (PTI) has contest the election to bring change in Pakistan and masses have given the party a big nod. While some of the analysts may not agree with the narrative that Pakistan’s biggest problem is not the inadequacy of energy products, but the real issue is prevailing gross mismanagement at the regulatory as well as players’ level. Policy planners completely fail in understanding the issues and in turn fail in coming up with appropriate policy. While five year term may not be enough…

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Markets stay under pressure; imf bailout warning impairs confidence During the week ended 3rd August 2018, the benchmark Index of Pakistan Stock Exchange (PSX) mostly remained under pressure. The domestic post-election positivity was overshadowed by a statement of US State Secretary Mike Pompeo raising concerns regarding IMF program. Further bearish spell was caused by dismal banking sector results and market closed at 42,505 points, down 0.7%WoW. Average daily traded volume during the week increased to 283.7million shares, up almost 21%WoW. The top volume leaders included: DSIL, EPCL, WTL, PIBTL and PAEL. The news impacting the market during the week included:…

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By the time you get an opportunity to read this article the situation would have become much clear as regards naming the next prime minister of Pakistan. Even at this time the most probable name appears to be that of Imran Khan. His agenda has already become somewhat evident from the speech he gave. He also mentioned his priorities but achieving those targets in a specified time may not be as easy as being portrayed by more loyal than the king. Khan pronounced the following priorities: All policies for ordinary citizens Safeguard tax revenue Decrease government expenses Strengthen institutions Across-the-board…

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PSE index springs back sharply on election outcome; investors will keep wait and see policy Bouncing back from a tumultuous pre-election run-up, the benchmark Index of Pakistan Stock Exchange (PSX) rebounded sharply. During the week ended 27th July, 2018 the Index rose to 42,786 points, up 3.8%WoW. Election proceedings dominated investors’ sentiment, guiding stock price escalations as polling formalities were completed with limited violence and sporadic occurrences of documented discrepancies. Average traded volumes during the week surged more than 7% WoW to about 235 million shares/day. The volume leaders were: PIOC, BOP, KEL, PIBTL and LOTCHEM. Major news that influenced…

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Cement scrips have historically remained darling of the day traders as well as short-term investors. Long term investors also invest in selected cement manufacturing companies, having credible dividend payout history. Lately, cement manufactures have made massive investment due to two key factors: 1) capacity utilization hovering around 95% and 2) mega infrastructure project constructed under China Pakistan Economic Corridor (CPEC). Many equity analysts have been presenting a rosy outlook for the industry. However, a few have been raising caution marks to avoid the fallout of herd mentality. One of the latest reports of AKD Securities highlights the adverse impact of…

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Banks, fertilizer help index gains 951 points; political euphoria likely to dominate The benchmark index of Pakistan Stock Exchange (PSX), gained 951 points during the week and closed the week ended 22nd July 2018 at 41,222 level. Gains seen during the week was mainly on the back of attractive valuations with interest in Banking and Fertilizer stocks. Banking stocks continued the rally from end of last week and contributed 279 points to the Index since the latest MPS. Similarly, increase in the prices of cement and urea scrips during the week also helped push Cement and Fertilizer sector prices higher.…

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As the State Bank of Pakistan (SBP) is scheduled to announce Monetary Policy on Saturday, this week, it is anticipated that the central bank is obliged under the external pressure of multilateral donors to increase the policy rate by 25bps. It is also anticipated at each future announcement; rate will be increase to take it to 10% before 31st December 2018. The SBP raised the policy rate by 50 basis points to 6.5 percent in the last monetary policy announced in May. The central bank pushed up its policy rate by a cumulative 75 basis points since January 2018. While…

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Stocks ends above 40,000 mark amid political, economic woes The benchmark Index of Pakistan Stock Exchange (PSX) managed to close the week on higher note as it ended at 40,271 level on July 13, 2018. Despite starting the week with an approximately 1,000 points decline on first day of the week, the market closed positive in last 4 days of the week, with Index closing above 40,000 level. Although, attractive valuation kept the market participants interested, yet the political noise and economic woes, dampened sentiments, evident from average daily trading volume declining to 131 million shares and average daily traded…

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The elected government of PML-N completed its term, an interim setup put in place and general elections are scheduled for 25th July 2018. The interim government is not likely to take any strategic decision on the economic front because PML-N announced FY19 budget prior to its exit. The next elected government also may not be in a position to bring in any structural changes. While one can’t change the history, it does offer an opportunity to learn from past mistakes and take corrective steps. At times the wounds are very deep and may take months and years to heal, provided…

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Market ends week down, but post nab verdict will likely bring relief rally On Friday, the last day of the weekend 6th July 2018, the accountability court announced its verdict imposing severe punishments and hefty fines on Nawaz Sharif (elected prime minister of Pakistan for the third time) and his family members. Due to high political uncertainty, investors preferred to remain on the sideline. This was evident from average trading volume plunging by more than 39%WoW to less than 111 million shares. The benchmark Index of Pakistan Stock Exchange (PSX) closed the week at 40,284 points, down 3.88% WoW. Concentrated…

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Reportedly Pakistan’s name has been added to the Financial Action Task Force (FATF) ‘grey-list’. The overwhelming reaction to this move is being termed ‘arm-twisting’ to add to the woes of the country already suffering from serious balance of payment crisis. A point worth exploring is that there is no official FATF terminology segregating countries into grey or black lists, Pakistan has never been identified as a potential risk to the international financial system, even after 9/11 and often being accused of supporting the various militant groups. I am being inclined to refer to a report by Pakistan’s leading brokerage house,…

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Smidgen Recovery Witnessed, Investors Cling To Hope Of FATF Outcome With the commencement of its plenary meeting, Financial Action Task Force (FATF) episode once again came into play with news flow setting market direction. The benchmark Index of Pakistan Stock Exchange (PSX) lost 659 points on Monday (first day of the week) ahead of the meeting but staged some recovery on emerging clarity over Pakistan’s status. For the week ended 29th June 2018, the Index closed at 41,911pts, up 0.66% WoW. Trading activity at the bourse improved marginally during the week, with average daily turnover increasing close to 182 million…

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The total liquid foreign exchange reserves of Pakistan increased to US$16,798 million on 14th June 2018. The positive surprise was that the reserves held by State Bank of Pakistan (SBP) increased by US$198 million to US$10,264 million, due to official inflows. The break-up of the reserves was:-foreign reserves held by SBP were reported at US$10,264.3 million, while reserves held by commercial banks amounted to US$6,533.7 million. This may be a good omen but two questions continue to haunt the analysts: 1) can the country bank on borrowed US$ and for how long the country will keep on borrowing to pay…

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PSX Records Lowest Level Of 2018; Volatile Trend To Persists Continuing its volatile trend, Pakistan Stock Exchange (PSX) remained under extreme pressure during the week ended 22nd June 2018. The benchmark Index lost another 2,044 points and closed the week at 41,637 level, posting a decline of 4.68%WoW. This was also the lowest level of the calendar year 2018. Enhanced geopolitical uncertainty arising from fears of trade war between US and China dampened global growth outlook. On top of that the latest downgrading of Pakistan due to dwindling domestic macroeconomic indicators were the top reasons behind the overall poor performance…

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The general perception is that Islamic banking in Pakistan is making progress in leaps and bounds. The supporting arguments are number of branches offering this facility, percentage of deposits held by Islamic financial institutions (Islamic banks and designated Islamic banking branches of conventional banks and Islamic banking attaining the status of first choice. However, some of the critics and even diehard followers of Islamic banking believe the pace of growth is not as robust as it should have been; keeping in view the fact that overwhelming majority of the population is Muslim in Pakistan. It may be very easy to…

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Bulls Keep Control As Investor Interest Spreads Across The Board During the week ended 8th June 2018, the benchmark index of Pakistan Stock Exchange (PSX) continued its bull run into the second week post announcement of caretaker setup and closed at 43,948 points, up 2.41%WoW. Investor interest was spread across the sectors, with Banks, Oil & Gas and Cements in limelight. More specifically, both the gas utilities (SNGP & SSGC) gained 12.3/6.9%WoW as OGRA announced revised tariff regime (applicable from FY19). Under the revised formula, return on assets is now linked to a market based WACC calculation (resulting in 17.43%…

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PMN-Nawaz government completed its five-year term on 31st May 2018. During its entire regime it has been boosting about putting economy of the country on fast moving trajectory. Its key mantras were overcoming energy crisis, boosting GDP growth rate and initiating infrastructure projects and completing these on faster pace. However, it completely overlooked fast deteriorating balance of payment situation, avoided approaching International Monetary Fund (IMF), the lender of last resort. The point of real concern is that PML-N didn’t approach IMF, but borrowed US$9.6 billion from other external sources during 10MFY18, of which US$1.6 billion were acquired during the month…

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Positivity returns but may short-lived over new political outcome Despite prevailing political uncertainties, the benchmark Index of Pakistan Stock Exchange (PSX) managed to close in positive zone at 42,913 points, up 1.9%WoW. The impact of positive news was partially offset by the delay in the announcement of interim setup and rising concerns if the general elections would be held on time and which party would gain majority. There are growing fears that no single party would be able to form the government alone. Another serious concern is mounting current account deficit. During the week ending 25th May 2018, foreign exchange…

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Interview with Dr. Izhar Hussain, Director for IBA-CEE [box type=”shadow” align=”” class=”” width=””]Dr. Izhar Hussain is currently Director, Center for Executive Education (CEE), Institute of Business Administration (IBA), Karachi. Before rejuvenating the CEE, he spent more than 25 years at senior management positions in various multinational companies (MNCs). His last engagement prior to joining IBA was with Abbott Laboratories where he served as a director in various regional roles including Marketing Services, Supply Chain and Business Excellence and Development covering multiple regions, i.e. GCC, South Asia, Far East, Asia Pacific, Africa and East Europe. Earlier, he has been associated with…

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Upcoming political events may further pressure confused market confidence Investor’s confidence remained muddled over indecisiveness exhibited on the political front (appointment of caretaker prime minister) during the week ended 25th May 2018. The benchmark index of Pakistan Stock Exchange witnessed an increase of 450 points at 42,074 level, up 1.1%WoW. The failure of Sindh, Punjab and Balochistan governments to introduce any noteworthy schemes or development outlays for FY19, and the failure of the Khyber Pakhtunkhwa (KPK) government to propose any bill, kept sentiment subdued. Key news flows impacting the market during the week were: 1) current account deficit for 10MFY18…

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An exclusive interview with Mr. Fayyaz-ur-Rehman Khan – General Manager, Ihsan Trust [box type=”shadow” align=”” class=”” width=””]Ihsan Trust was established as an Independent Trust (Waqf) in 2010 with the vision to create a poverty free society on the principles of equality and compassion. Their missions is to reach out and help the poor and needy according to the principles of Islam and take care/look after the wellbeing of poor and needy and to encourage the socio economic uplift of the low income community in order to increase the economic prosperity of the society, ultimately contributing towards the betterment of Pakistan…

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Sentiments remain down; caretaker govt and poll announcements may guide The political noise increased once again after a controversial statement by former prime minister Nawaz Sharif coupled with looming macro instability dampening investors’ sentiments. For the week ended 18th May, the benchmark Index of Pakistan Stock Exchange (PXS) closed at 41,624 points, down by 4.52%WoW. Average daily traded volumes also shrunk by 31.34%WoW to 114.91 million shares. The volume leaders were FCCL, BOP, KEL, PAEL and TRG. Key news flows impacting the market during the week were: 1) Brent oil prices rose above US$80/bbl for the first time since November…

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The recent decision of the US President Donald John Trump to pull its country out of the nuclear deal signed by six super powers of the world with Iran has serious implications for the world in general and Pakistan in particular. Contrary to policy recommendations, President Donald Trump’s decision to pull-out from the P5+1 Joint Comprehensive Plan of Action has already hiked crude oil prices to three-year high. Since Pakistan and Iran enjoy common border, the geopolitical tension in its backyard must be handled with extreme care as policy decisions of the country are influenced by its relationship with the…

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Gloomy conditions exist; MSCI semi-annual index review in spotlight During the week ended 11th May 2018 Pakistan Stock Exchange (PSX) witnessed volatility. During the first three days, the benchmark Index lost 741 points, marginally recovered in the fourth session but failed in sustaining the recovering. The outgoing week closed on a negative note, losing 942 points to close at 43,595 level. The average daily trading volume remained on lower side, at 167.37 million shares. Volume leaders were: FDIBL, UNITY, SSGC, FCCL and BOP. Major news flows impacting the market included: 1) US announced to pull out from the landmark Iran…

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Interview Mohammad Shoaib, CEO, Al Meezan Investment [box type=”shadow” align=”” class=”” width=””]Mohammad Shoaib, CFA is Chief Executive Officer of Al Meezan Investment Management Limited, the largest Shariah compliant asset management company in Pakistan. He has over 28 years’ experience of managing investment portfolio. Al Meezan Investments currently manages equivalent of US$ one billion under 14 mutual/pension funds and discretionary client portfolios. It has got a complete range of investment products in the risk return spectrum from very low risk products like Sovereign Fund, Cash Fund to high risk Equity Funds. It is one of the largest asset management companies in…

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Sentiments remain lackluster over weak gdp outlook, political uncertainty Despite announcement of populist budgetary measures and persistent increase in international oil prices, sentiments at Pakistan Stock Exchange (PSX) remained lackluster during the week ended 4th May 2018. The benchmark index shed 1,006 points and closed at 44,537points, down 2.21%WoW. Political uncertainty and weak outlook for Pakistan’s GDP growth along with highlighting of macroeconomic vulnerabilities by IMF kept the market under pressure during the week. Keep Average daily traded volume at bourse declined by 1.56%WoW to a little less than 166 million shares with volume leaders being BOP, LOTCHEM, UNITY, STCL…

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Interview with Mohammed Sohail — CEO, Topline Securities Limited [box type=”shadow” align=”” class=”” width=””]Mohammed Sohail has over two decade experience of working Pakistan’s capital markets. He was awarded ‘Best Analyst’ for two consecutive years (2003 and 2004) by the CFA Association. He was the first analyst from Pakistan to get this award. For the first time in Pakistan, Asiamoney awarded Mohammed Sohail the title of Best Salesperson in Pakistan in its Brokers Poll for sixth consecutive year (2011-2016). He is a Certified Director of Pakistan Institute of Corporate Governance (PICG). Sohail has been elected Director of Pakistan Stock Exchange (PSX),…

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Proposals in new budget will likely favor the Pakistan Stocks Exchange Interview with Mr Humayum Javed — CEO, WE Financial Services Limited [box type=”shadow” align=”” class=”” width=””]Profile: Humayun Javed, Chief Executive Officer, WE Financial Services Limited is a seasoned capital markets expert and portfolio manager with a wealth of over 25 years of experience in banking and corporate finance, financial and stock markets of Pakistan. Humayun graduated with BBA (Honours) from Michigan, USA in 1993. He joined Deutsche Bank AG-Pakistan in 1993 and moved on to lead WE Financial Services Limited, a TREC Holder of Pakistan Stock Exchange (PSX)…

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Bulls lead; removal of gidc and support of oil marketing sector catch the eyes Investors conducting transactions at Pakistan Stock Exchange (PSX) eagerly awaited for positive development ahead of the Federal Budget announcement on Friday, the last trading day of the week ended on 27th April 2018. GIDC removal/reduction beneficiaries again gained attention of investors where Fauji Fertilizer Company (FFC) gained 4% on last day of the week, followed by Fauji Fertilizer Bin Qasim (FFBL) +4%, and Lotte Chemicals (LOTCHEM) +2%. The benchmark index gained 255 points to close at 45,543 points. Oil marketing sector stocks cumulatively contributed 123 points…

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Fertilizer industry remained under considerable pressure during 2017 due to huge inventory. The pressure was eased after the Government of Pakistan (GoP) allowed export of nearly half a million tons urea. While the manufacturers succeeded in exporting urea at whatever price they could get, the GoP didn’t pay the promised subsidy to urea manufacturers/exporter. Despite all odds the manufacturers got two immediate benefits: 1) reduction in supply glut and 2) earn extra foreign exchange for the country. A look at the earnings of two top manufacturers may help in understanding the prevailing industry dynamics and coming up with a comprehensive…

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Agriculture sector is the prime mover of Pakistan’s economy. It contributes 20% share to country’s total GDP, employs 42% of labor force and provides livelihood to 66% of the population. Pakistan has lately joined club of wheat exporting country. The country is among the top five cotton producing countries and a major exporter of rice. Nearly 65% of country’s export proceeds come from cotton textiles and clothing export. This is despite that in Pakistan yields of many crops are below the regional average. The country enjoys the potential todouble production of major crops without increasing area under cultivation. It only…

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Sentiments down; budget plans and results of large-cap firms eyed During the week ended 20th April 2018, sentiments at Pakistan Stock Exchange (PSX) remained subdued and the benchmark index closed at 45,259.34 points, down 1.76%WoW. The prime concern was seesawing budgetary expectations as the tenure of incumbent government ends in May 2018. Average daily traded volume shrunk by more than 37%WoW to around 155 shares. The volume leaders were: EPCL, LOTCHEM, UNITY, KEL and FCCL. Key news flows impacting the market during the week included: 1) current account deficit exceeding US$12 billion, up 51%YoY for 9MFY18 reflecting mounting pressure on…

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It is often said that in Pakistan economic policies are dictate by elites of the elites enjoying majority in the Senate, national and provincial governments. While Pakistan Steel Mills has reduced to junk due to nepotism, embezzlements and corruptions, those at the helm of affairs have failed in establishing another steel mill in the country. At the best, steel industry in Pakistan comprises of remitting furnaces and the biggest name is Ittefaq Group, owned by Nawaz Sharif and his family. Despite ruling Punjab (where more than 65% population of the country lives) for nearly four decades and forming government at…

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Anxiety prevails; result season, budget proposals may attract investors During the week ended 13th April, Pakistan Stock Exchange (PSX) remained under pressure and lost 566 points to close at 46,072 levels, down 1.21%WoW. Even hike in international crude oil prices and much awaited tax amnesty scheme could not lend support to the market. Investors’ concerns remained high due to: 1) FATF/IMF expressing concerns over the amnesty scheme aimed at bringing offshore assets back to Pakistan, 2) ADB becoming skeptical over Pakistan’s growth outlook for FY19 due to the Balance of Payment crisis and 3) the apex court ordering silicosis centers…

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One of the themes of a recently organized conference by IBA-CIEF was ‘Making Pakistan Hub of Islamic Finance by 2025. Some of the critics termed this too ambitious; keeping in view less than 15 percent share of Islamic banking in total commercial banking in the country. Professionals associated with Islamic banking believe very strongly that if right impetuses are offered and a conducive environment is provided the growth rate can be enhanced. In this regard a Standing Committee has been established at Federation of Pakistan Chambers of Commerce and Industry (FPCCI). This Committee promptly prepared its recommendation that were submitted…

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Amnesty, ITFC lending rejoice will be short lived; investors eye budget proposals Pakistan seems to be inching towards serious balance of payment crisis. The ruling junta has failed in containing import of luxury goods (most of the members of Senate, National and Provincial Assemblies are feudal lords and business tycoons) and has hardly any realization of the level of gravity. Despite indiscriminate borrowing, foreign reserves of the country are on the decline. Bad policies have rendered exporters uncompetitive in the global markets. Remittances are also proving paltry because of dismal exports. According to the data released by State Bank of…

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Those who have access to power corridors and also the capacity to influence government are clearly divided into two groups; 1) those consider devaluation of Pak Rupee the only option to boost exports and 2) those who term devaluation bad omen for the country. Without mincing words it may be said that first group has a very myopic view and it also fails in understanding economy. Second group view economy with wide-angle lens but being in minority they are often not liked by those having vested interest. Pak Rupee value eroded by another 4.4% against US dollar on 20th March…

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Bulls take lead, SBP’s steady rate policy likely to follow positive impact The trading on the last day at the Pakistan Stocks Exchange (PSX) delighted after the news of State Bank Monetary policy statement and rupee depreciation since the start of the week, which anticipated as a healthy sign for the confidence boost for the investors. KSE-100 Index, which led with gain of 70.68 points closed the week at 45,560.30 level. Moreover due to day earlier trade after foreigners turned buyers bought stock worth $9.36m. This led into a jubilant mood in the trading and supported the Index to gain…

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On the inaugural day of conference Dr. Miftah Ismail Adviser to the Prime Minister on Finance and Economic Affairs said the Ministry of Finance would soon set up a separate division for the promotion of Islamic banking in Pakistan. He was the Chief Guest at a two-day World Islamic Finance Forum (WIFF-2018). The international forum was organized by Institute of Business Administration’s Centre for Excellence in Islamic Finance IBA-CIEF in collaboration with key partners. The theme was “Expanding the Footprint of Islamic Finance: Innovation, Fintech and Regulations.” In his visionary note, Shaikh Muhammad Taqi Usmani Chairman, Shariah Board of Accounting…

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Interview with Mr Rizwan Hussain – Managing Director, Takaful Pakistan Limited [box type=”shadow” align=”” class=”” width=””]Profile: Rizwan Hussain is currently Managing Director of Takaful Pakistan Limited. He recently acquired majority stake in the Company. Prior to this acquisition, Rizwan has served at key positions at EFU General Insurance Limited. He managed several functions at EFU, both insurance and Takaful sales with major areas of interest being marketing, strategy formulation, corporate account management, risk underwriting and claims management. He has more than 30 years of experience as a seasoned professional in risk mitigation. He was promoted to the position of Executive…

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Market springs back, fresh foreign flows can induce another short term rally The benchmark index of Pakistan Stock Exchange (PSX) for the week ended 22nd March 2018, posted an increase of 3.84%YoY to close the short trading week at 45,030 points. The rise has been attributed to erosion in Rupee value and improvement in international prices of crude oil. An erosion of 4.3% in Rupee value since December 2017 seems to have led foreigners to come back to Pakistan resulting in buying by them equities worth US$9.77million in the last trading session alone. Banks, E&Ps, Power and Textiles companies emerged…

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In real life every individual and corporate entity faces certain risks. It may be true that such risk may become eventuality, but the adverse impact can be certainly minimized through risk mitigation. Insurance companies, both conventional and Takaful operators help individuals and corporates in risk mitigation. Pakistan faces one of the lowest insurance penetrations. Those who were able to evade conventional insurance in the past are left with no reason to reject Takaful. To achieve greater penetration of insurance there is a need to change the mind set of policy planners, regulators as well as individuals. The sector that needs…

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Dull activities persist; budgetary proposals, major results key direction During the week ended 16th March 2018, activities at Pakistan Stock Exchange remained lackluster amid lack of positive triggers, continued political noise and flattish international oil prices. The benchmark index closed at 43,363, up 0.82%WoW. Average daily traded volumes improved by 15%WoW to 174.86million shares, but trading activity remained skewed towards second tier stocks. The top volume leaders of the week were LOTCHEM, NRSL, PAEL, FFL and ANL. Key news flow impacting the market included: 1) the country’s exports during February 2018 growing by 16% YoY to US$1.9billion, while imports inching…

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It is becoming a serious cause of concern for Pakistanis that the incumbent government is borrowing foreign exchange at far higher interest rates as compared to the rate charged by the International Monetary Fund (IMF). While the ruling junta continues to say that the country can live without the crutches of IMF, independent observers are of the consensus that avoiding the ‘lender of last resort’ is plunging the country deeper into the balance of payment crisis. The incumbent government knows very well that IMF will certainly offer a bailout program, which will not be free from certain stringent conditions. Therefore,…

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Politics and senate chairman election Mar index performance, range bound to persist The bizarre politics and developments surrounding Senate Chairman Election marred performance of Pakistan Stock Exchange (PSX) during the week ended 9th March 2018. Statements of key international lenders (International Monetary Fund and Standard Chartered Bank) raising concerns over macroeconomic stability of the country, further dampened investors’ sentiments. The market closed at 43,011 points, posting a decline of 1.67%WoW. Trading activity at the bourse remained weak as daily average trading volume plunged to around 152 million shares, down 16.07%WoW). Key news flow impacting the market during the week included:…

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The automotive industry of Pakistan often attracts a lot of criticism for operating as a cartel and charging high price. There is an urgent need to bring down cost of production, boosting sale through soft-term financing and improving quality of roads for minimizing wear and tear. Indigenization is a positive policy but the objective just can’t be achieved without the focus of the government shifting to facilitator from tax collector. While assemblers enjoy access to power corridors, manufacturers of components suffers from neglect by the government. Developing a robust vendor industry can only help in progressive manufacturing, else the industry…

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INDEX GAINS 473 POINTS AMID ANTICIPATION OF IMPROVED EXTERNAL OUTLOOK Despite uncertainty emanating from international developments over FATF inclusion, sector-specific developments and legal impediments during the week ended March 2, 2018, the benchmark index of Pakistan Stock Exchange (PSX) gained 473 points to close the week at 43,740 points. Cement sector remained in the limelight, with major activity witnessed in the sector on the back of industry-wide price hike, enhancing profitability of domestic players. Volume leaders during the week were: DSL, AGL, TRG, ANL and PAEL. Key news flows impacting the market during the week included: 1) Foreign office confirming…

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There are two wide-spread perceptions prevailing in the market: 1) exploration and production companies (E&P) declare high dividend to facilitate the government in meeting the budget deficit, rather than investing in exploration and production activities and 2) the successive governments have failed in offering incentives for downstream oil companies. The get a clear picture an attempt has been made to review the performance of two companies one from E&P and other from downstream. Pakistan oilfields With an asset base comprising of 12 leases and possessing 9 exploration licenses, Pakistan Oilfields Limited (POL) has lagged behind its peers in terms of…

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Buyers shun trade over increase in political, economic uncertainty The rising political uncertainty with news flows suggesting Pakistan to be added on terrorist financing watch list further dampened investors’ confidence. The benchmark index of Pakistan Stock Exchange (PSX) lost 360 points and closed the week ended 23rd February at 43,267 points. Increasing international oil price along with higher than expected reserves size for Jhandail field kept index heavy Oil & Gas sector in limelight. However, concerns about Senate elections allayed fears of postponement of the general elections. Key news flows impacting the market during the week included: 1) current account…

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China’s investment set to see increased demand and success for all Pakistan sectors Interview with Mian Muhammad Kashif Ashfaq – Chief Executive Officer of ChenOne PAGE: What inspired you to open a lifestyle store? Muhammad Kashif Ashfaq: I have always been interested in complex structures and a lifestyle store is one of the most expansive concepts in retail. I drew the inspiration for ChenOne from high end boutiques, festivals and malls, which bring together diverse product lines to cater to the complete customer. ChenOne has been open since 1997 and we have been going from strength to strength. It was…

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Stocks remain cool as political uncertainty likely to persist Political uncertainty, along with unabated foreign selling (US$28 million so far during February) dampened investors’ confidence. During the week ended 16th February 2018, the benchmark index of Pakistan Stock Exchange (PSX) lost 182 points or 0.41%WoW to close at 43,627 points. Average daily traded volume dropped by 18.8%WoW to 198.77 million shares. The volume leaders of the week were: ANL, TRG, LOTCHEM, FFL and KEL. Sector wise, commercial banks gained 2.5%WoW, while pharmaceutical sector lost 4.1%WoW on account of Supreme Court taking notice of Sindh High Court’s stay order. Other key…

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Since Pakistan got independence it has been a key beneficiary of multilateral financial institutions. The World Bank, Asian Development Bank and Islamic Development have been offering grants and soft-term loans. International Finance Corporation (IFC) has been actively providing loans to the private sector and also contributing equity in the mega size private sector projects. The International Monetary Fund (IMF) has been actively playing the role of ‘lender of the last resort’. Despite all these favors, Pakistan’s GDP size and growth rate have remained dismal, exports are proving paltry for financing imports and the country is still exporting commodities, raw materials…

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Stocks under pressure after global rout, buyers set sight on volatility ease During the week ended 9th February 2018, Pakistan Stock Exchange benchmark Index remained under the shadow of global equities market and closed at 43,809 points, posting 1.11% WoW decline. Overall traded volumes went down by more than 4%WoW to about 245 million shares. Key news driving the market were: 1) law makers in the US pushing for further aid suspension to Pakistan citing lack of actions against terrorist groups, 2) the Government of Pakistan (GoP) planning to announce separate amnesty schemes for both foreign and local assets, 3)…

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As the Government of Pakistan (GoP) remains the biggest borrower that also offers lucrative return on its risk-free securities, the high risk consumer finance pie size remains small. The share of corporate finance remains substantial because of the absence of financial institutions that can offer medium and long term funds. A deeper probe also shows that the key beneficiaries of consumer finance remain high net worth clients and employees of corporate sector. Banking sector experts are of the consensus that there is an urgent need to establish housing finance companies because buying a housing unit at full cash payment has…

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An exclusive interview with Mr Arshad Majeed — Group Head Consumer Finance, Meezan Bank [box type=”shadow” align=”” class=”” width=””]Profile: Arshad Majeed has been part of Meezan Bank before its inception (when Meezan Bank was Al Meezan Investment Bank) and has played an instrumental role in growing Meezan Bank by developing the Operations function. In his current role he is serving as a Group Head Consumer Finance. Majeed’s banking career stretches over 30 years during which he has held various senior positions in local as well as foreign banks such as Deutsche Bank AG, The Chase Manhattan Bank, Muslim Commercial Bank…

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Stocks readying to rally despite ending week on flat note Market seems to be consolidating amidst results announcement, amplified corporate actions and selective investor sentiment following monetary tightening by State Bank of Pakistan (SBP). The benchmark index of Pakistan Stock Exchange (PSX) closed the week ended 2nd February 2018 almost flat at 44,301 points. Key news flows during the week were: 1) Tahirul Qadri announced that his party has shelved its strategy of protests on the Model Town incident, 2) contrary to the market expectations, SBP raised the policy rate by 25bps citing escalating inflationary pressures and tightening stance by…

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The caption may sound a little outrageous to readers, but it is a harsh reality. Over the years the country has failed in exporting value added goods. At presented whatever is clubbed under ‘value added’ items remains a commodity. The textile industry claims to be the biggest earner of foreign exchange, but the products can only be termed ‘low quality, low priced’. Overseas buyers are buying these products from Pakistan, because they have stopped producing these products, after terming these uneconomical. The point becomes clearer after one segregates branded and unbranded products. Before deliberating further it may be pertinent to…

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Pakistan emerged as a sovereign country in 1947 on the world map. The areas which comprise the country now didn’t have a strong industrial base. Over the last seven decades, the policy planners have been experimenting with different policies, which have failed in developing a robust industrial base. Pakistan’s exports have remained mostly confined to cotton textile and paltry to support imports. At the best, the country enjoys the status of ‘supplier of raw material and intermediate goods’. Though, some islands of excellence have emerged, ‘Made in Pakistan’ label has not attained the status it should have. This demands a…

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Market stays in the positive territory; negative outlook, new monetary rates in focus Continuing with its last five week’s positive momentum, the benchmark index of Pakistan Stock Exchange (PSX) gained another 372 points during the week ended 26th January 2017 and closed at 44,551 points, up 0.84%WoW. Rising trend in international oil prices and renewed interest from foreign investors helped the index to post broad-based recovery. The market was however down on the last day of the week after credit rating agency Fitch’s negative outlook cautioned the investors, who took some profit-taking move and of monetary policy mixed expectations. In…

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There are two wide-spread perceptions prevailing in the market: 1) exploration and production companies (E&P) declare high dividend to facilitate the government in meeting the budget deficit, rather than investing in exploration and production activities and 2) the successive governments have failed in offering incentives for downstream oil companies. The get a clear picture an attempt has been made to review the performance of two companies one from E&P and other from downstream. Pakistan oilfields With an asset base comprising of 12 leases and possessing 9 exploration licenses, Pakistan Oilfields (POL) has lagged behind its peers in terms of exploration…

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Interview with Mr Mumtaz Hasan Khan – Chairman, Hascol Petroleum Limited [box type=”shadow” align=”” class=”” width=””]Profile: Mumtaz Hasan Khan, Chairman of Hascol Petroleum has over 54 year experience in the oil industry. He started his professional life in Burmah Shell oil storage and distribution company in May 1963 and worked there till January 1976, where his last assignment was International Sales Manager. From February 1976 to July 1980 he served as Managing Director, Pakistan Services Limited, which was the owning company of four Intercontinental Hotels in Pakistan. In August 1980 he moved to London to start his own oil trading…

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Strong results season, mutual funds pick up help bulls back in the ring During the week ended 19th January 2018, the benchmark index of Pakistan Stock Exchange (PSX) posted an increase of 2.9%WoW and closed at 44,179 points. The Index gain was supported by a strong results season and renewed interest of mutual funds. The key news flows impacting the market were: 1) an export package to be introduced aiming at reducing electricity and gas tariffs for industries, along with other incentives, 2) expected announcement of an amnesty scheme, 3) SECP rationalizing licensing regime for securities brokers and 4) FBR…

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The overwhelming perception in Pakistan is that one should be educated for seeking a good remunerative job. In this endeavor parents sacrifice their wishes by spending bulk of their income on the education of their children. However, it is becoming a norm that the top priority of the children is to get job outside Pakistan and often old parents are left alone. At the best children living abroad send paltry amounts and show their faces in years. It is also common that they call their parents to live with them. While the physical faculties of parents are strong they keep…

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Imparting education is the sole responsibility of the government. Ironically, in Pakistan the successive governments have failed in discharging this responsibility. Education comes very low on priority, which is evident from paltry allocation on education in the annual budget. On top of all it remain who is responsible for education, federal or provincial government. After the 18th Amendment in Pakistan’s Constitution, through devolution of power, many responsibilities have been transfer to the provinces, which has neither the will nor the capacity. The worst embezzlements could be found in education, which includes schools constructed on papers only, ghost teachers, school building…

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Market takes meager progress, textile firms spur may improve participation The week ended 12th January 2018 can be termed relatively better as compared to the earlier weeks. The benchmark index of Pakistan Stock Exchange (PSX) posted a paltry gain of less than one percent to close at 42,934 points. Further impetus was provided by aggressive foreign buying of US$26.41 million with total net inflows reaching US$49.37 million in CY18. The market witnessed erosion of some of the gains towards the end of week. Volumes remained healthy averaging 276.38 million shares, up 16.83%WoW. The volume leaders were: WTL, TRG, ANL, SSGC…

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The cultivable land in Pakistan suffers from an acute shortage of nutrient contents, which is evident from poor yield. In an attempt to improve yield fertilizer manufacturers have been playing an active role. Their endeavors have been supported by the government. However, lately government started diverting gas to power plants, which was in complete violation of Fertilizer Policy 2001. The government policy continues to suffer from some serious contradictions, allowing power plants to use gas and curtailing gas supply of fertilizer plants. The government policy has been tempered by those suffering from myopic vision. As international price of urea plunged…

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According to certain estimates population of Karachi now exceeds 20 million that also enjoys ethnic diversity. As the influx of people from other provinces continues, all sorts of food outlets are mushrooming. While the demand for different food varieties is on the rise, the preferences of locals are also changing fast. Added to this is the demand for ‘ready to eat’ food because of rising number of working women in the metropolis. The acute shortage of cooks and their phenomenal demand for salary, force the residents to eat out, rather than getting the food cooked at home. This on one…

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Exchange of trade and investments in Yuan likely to benefit stocks index The total liquid foreign exchange reserves held by the country for the week ended 29th December 2017 were reported at US$20,154.3 million by State Bank of Pakistan (SBP). The reserves held by SBP decreased by US$26 million to US$14,106.7 million due to payments on account of external debt servicing. Net foreign reserves held by commercial banks were reported at US$6,047.6 million. In an attempt to contain depletion of foreign exchange reserves the SBP has informed that the trade in local currencies between Pakistan and China is already in…

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Once upon a time, Pakistan Muslim League headed by Mian Mohammad Nawaz Sharif raised the slogan of ‘breaking the begging bowl’. However, after creating history and becoming Prime Minister of Pakistan for the third time, his sole objective seems be living in the most luxurious life on borrowed money. During the present term, his focus also shifted away from accelerating GDP growth and keeping the economy on track to following popular policies that can help him become Prime Minister of Pakistan for the fourth time. Those who don’t agree with this narrative must look at three mounting deficits: 1) current…

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One completely fails to understand the reasons behind Government of Pakistan’s reluctance in approaching the lender of last resort International Monetary Fund (IMF). It goes without saying that borrowing from any source, other than IMF, is highly expensive. However, it seems that the incumbent government fears that in the election year approaching the IMF would not allow it to go for various extravaganzas. Analysts have the consensus that remaining under the ambit of IMF certainly forces the borrowing countries to follow certain conditions to avoid imprudent spending. According to a news items, the incumbent government plans to launch another international…

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Window dressing helps benchmark index climb; political noise may push back bulls The window dressing continued during last week of the year 2017. The benchmark index of Pakistan Stock Exchange (PSX) closed the week ended on 29th December 2017 at 40,471 points, up more than 1,000 points or 2.54%WoW. Aggressive buying by the mutual funds with net purchases of US$13.64 million lent support to the market. Overall trading volume also rose more than 55% WoW to 214.52 million. The volume leaders for the week were: WTL, TRG, KEL, PAEL and DSL. Key news flows impacting the market during the week…

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A quick review of the regulatory developments during 2017 suggests that these played a key role in shaping the performance of Pakistan’s economy. The key sectors benefitting from various policy actions taken during the year under review included: 1) Textile — benefiting from export package offering various incentives to the export sector, 2) Fertilizer — gaining strength due to permission to export urea and payment subsidy, 3) Steel manufacturers — coming out of red due to imposition of regulatory duty on imported CRC/billets/re-bars, 4) Oil & Gas Exploration – benefiting from revision in wellhead gas prices and 5) OMCs –…

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Historically Pakistan has remained a net importer of crude oil and petroleum products. The rising trend in international oil prices is likely to erode country’s paltry foreign exchange reserves. The depreciating local currency offers an opportunity to the government to increase petroleum prices, which will also increase collection of levies imposed on energy products. However, the immediate fallout will be increase in cost of production/doing business that could render Pakistani exporters un-competitive in the global markets. Global perspective First, it is important to understand likely movement of crude oil prices in 2018. A closer look at the graph picked up…

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Over the years value of rupee has been eroded by either devaluation or crawling depreciation. The incidents of sudden and massive devaluation are few but persistent depreciation is common. Since the country suffers from adverse balance of payments, there has always been a pressure of multi lenders on Pakistan to boost its exports. The successive governments has been following the advice blindly, rather than coming up with a home grown plan. Some of the countries facing far precarious economic conditions took helps of the Pakistani economists are now far ahead of us. This clearly indicates that the policies advised by…

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If anyone goes through the history of Pakistan, one point is very clear that the country has been living on the crutches of multilateral lenders. My critics may say that there is nothing wrong as many countries also borrow from multilateral financial institutions. I have a narrative, others borrow to accelerate their GDP growth and Pakistan borrows to pay off its debts acquired in the past. The result is that the country is sinking deeper into debt and one finds no hope of coming out of this vicious circle. According to an analyst, “At present Pakistan is not borrowing to…

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Key supreme court rulings and declining forex reserves drag market lower The week ended on 15th December 2017 witnessed the benchmark index of Pakistan Stock Exchange (PSX) declining by 1.11%WoW to close at 38,646 points. Average daily traded volume decreased by 4.39% WoW to 135 million shares. Pak rupee experienced 4.6%WoW erosion in value against greenback, raising concerns about hike in the cost of imported items, particularly POL products and industrial raw materials. Key news flows impacting the market during the week included: 1) Supreme Court ruling in favor of PTI Chairman Imran Khan in a disqualification case, while disqualifying…

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United Arab Emirates (UAE) continues to be major investor and a key trading partner of Pakistan. It also played a key role in supporting Pakistan’s economy after the loss of its eastern wing. The latest investment pledge by UAE has come at a time when the Government of Pakistan is trying to fast-track economic growth. This boost has been facilitated by Sheikh Nahyan bin Mubarak Al Nahyan, the UAE Minister of Culture and Knowledge Development, during his recent visit to the Pakistan Stock Exchange (PSX) in Karachi. UAE continues to make substantial investments in Pakistan helping shape the country’s vibrant…

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Over the years United Arab Emirates has become a wonderland. It is busy in constructing the monuments which people from around the world come to see. Nearly half a century back it was considered a landscape full of sand dunes, but over the years the entire landscape has been changed and now considered one of the most modern place to live, trade with and a tourist attraction. Yas Island Yas Island is one of the most spectacular projects of UAE. Located strategically off the city of Abu Dhabi, the entertainment destination of Yas Island will eventually occupy a total land…

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Wall street gains on robust november. hiring data Wall Street indexes gained on Friday as US employers added more jobs than expected in November, cementing the case for an interest rate hike next week and adding to optimism about the economy heading into 2018. Nonfarm payrolls rose by 228,000 jobs last month amid broad gains in hiring as the distortions from the recent hurricanes faded, Labor Department data showed. At 12:25 p.m. ET (1725 GMT), the Dow Jones Industrial Average was up 92.82 points, or 0.38 percent, at 24,304.3 and the S&P 500 was up 12.91 points, or 0.49 percent,…

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[dropcap]P[/dropcap]akistan got independence from British Raj in 1947 and till early nineties its energy sector remained under state control. The policies were driven on the whims of the governments and support by the multilateral lenders rather than needs of the country, in complete disregard to the cost of doing business and above all facing no competition. The landscape changed drastically with the change in lending policy of the multilateral lenders to private sector from public sector, pressure on the Government of Pakistan to initiate process of liberalization, deregulation and privatization. Since the program was imposed and lacked ownership the economy…

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[dropcap]A[/dropcap]nalysts had termed creations of independent power plants (IPPs) as putting the cart before the horse. It was true that power generation plants were not very efficient, but real losses were due to highly inefficient distribution companies. There was rampant pilferage, reported as high as 40% that was clubbed under transmission and distribution (T&D) losses. Inductions of IPPs and failure to privatize distribution companies became the biggest reason for the creation of circular debt. At an average the government has been dishing out over half a trillion rupees per annum to keep the slate clean. However, the menace continues to…

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MARKET GAINS SOME LOST GROUND, CAN SEE IMPROVE SENTIMENTS The 21-day long sit-in that resulted in the Law Minister’s resignation, kept the market under pressure, breaching 40,000 psychological barrier for the third time, but managed to close the week ended 30th November at 40,010pts, down by about half a percent. Apart from challenges on the political front, investors chose to remain on the sidelines ahead of the MSCI rebalancing on 30th November. Foreigners offloaded US$39.54 million worth of equities during the week as compared to a net outflow of US$6.28 million a week ago. That said, positive news flow on…

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[dropcap]E[/dropcap]ven the cursory look at the performance of Pakistan’ cement industry shows highly erratic performance. Since expansion takes place in cascading manner, industry suffers from surplus capacity and low earnings per share, which improve with the passage of time. The credit for keeping capacity utilization at modest level for all goes to the cartel, which is run by a few groups that control bulk of the installed capacity. The owners continue to thrive, but consumers are forced to pay high price as the regulators are keener in protecting the interest of owners rather than the interest of consumers. The fall…

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[dropcap]I[/dropcap]f anyone examines the below optimum capacity utilization of any industry in the country, the blame could only go the successive governments and policy planners. The most common complaint is high cost of doing business in the country. Some of the industries currently victim of this contentious problem are cement, fertilizer, textiles and clothing, sugar and crude oil refining. The worst affected are consumers and the shareholders of these companies and suppliers of raw material to these industries. Imposition of high taxes on one hand raises cost of finished goods and on the other hand erodes dividend payment to the…

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STOCKS REMAIN UNDER PRESSURE ON STATE OF UNCERTAIN POLITICAL AND FINANCIAL SCENE During the week ended 24th November 2017, the benchmark index of Pakistan Stock Exchange lost another 596 points to close at 40,248 points (down 1.5%WoW). Distressed energy chain, down on abrupt closure of furnace oil based power plants, was the key reason behind lackluster performance of bourse during the week. However, NEPRA’s announcement later during the week regarding KEL’s Multi Year Tariff hearing triggered trading spree in the scrip (up about 12%WoW). Average daily traded volume rose to over 112 million shares with volume leaders being: KEL, TRG,…

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[dropcap]M[/dropcap]ost of the discussions at experts’ level hover around poor savings rate in the country. However, they tend to completely forget that a significant percentage of Pakistan’s population live below subsistence level. If they don’t have money to buy food and other necessities of life and carry huge load of debt they just can’t save any amount. The solution is simple, government should facilitate in the creation of new job opportunities, offer soft term loans for micro and small and medium enterprises (SMEs) and follow policies that can improve competitiveness of the local producers. CREATE NEW JOB OPPORTUNITIES Pakistan suffers…

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