Author: Shabbir Kazmi

It goes without saying that remittances by overseas Pakistanis have been the biggest savior. Lately, a declining trend has been observed in the influx of remittances, which can be attributed to the growing use of informal channels. It is regrettable that the Government of Pakistan (GoP) has not been able to offer incentives to the remitters. One of the reasons is that Pakistanis living in the Middle East, particularly Saudi Arabia and the United Arab Emirates (UEA), because of little knowledge are easily lured by Hawala/Hundi operators. It is a common complaint that the banking system operating in rural areas…

Nervousness likely to prevail The political turmoil in the country, along with the continuation of the currency crisis, has led to weakness in the market with a negative stock review for December 2022 during the week ending on December 23, 2022. The KSE-100 index settled at 39,669 points, down 1,632 points or 4%WoW. The index slipped below the 40,000 level since late July 2022. The weakness in the index was accompanied by a meager improvement in participation over the past week, with average daily trading volume at 180.2 million shares during the week, as compared to 161.9 million shares in…

At least 20 oil tankers queuing off Turkey to cross from Russia’s Black Sea ports to the Mediterranean face further delays as operators race to adhere to new Turkish insurance rules added ahead of a G7 price cap on Russian oil, according to Reuters. Turkish maritime authorities issued a notice in November 2022 asking for additional guarantees from insurers that the transit through the Bosphorus would be covered starting from the beginning of December 2022. The new rule was announced before a US$60 per barrel price cap was imposed on Russian seaborne crude. Western insurers are required to retain proof that Russian…

According to an IMF report, global food prices are likely to remain high amid war and high energy costs. Interest rate hikes have eased price pressures, but the weather, war and material costs could keep food prices elevated for longer. Food prices, which reached a record earlier this year, have increased food insecurity and raised social tensions. These have also strained the budgets of governments struggling with rising food import bills and diminished capacity to fund extra social protection for the most vulnerable. Impact on prices A 1 percentage point increase in the Federal Reserve’s main interest rate reduces food…

Market likely to stay range-bound Foreign Exchange Reserves and Cement Sales: A Glimpse into Pakistan’s Economic Landscape Economic uncertainty regarding Pakistan’s ability to make good on its debt payments kept the market under pressure during the week ended December 09, 2022. The benchmark index closed at 41,698 points, posting a decline of 1.07%WoW. State Bank of Pakistan (SBP) confirmed the payment of US$1.08 billion of International Sukuk. This brought down foreign exchange reserves held by the SBP to US$6.7 billion on December 02, 2022. Saudi Arabia provided a much-needed breathing space to Pakistan by announcing the rollover of US$3 billion…

Oil production in the United States rose to nearly 12 million barrels per day (b/d) in August 2022, the highest since the onset of the Covid-19 pandemic; even as shale companies have said they do not see production accelerating in coming months, according to Reuters. US crude prices have hovered around US$85/barrel after surging into triple-digits this year and boosting fuel costs for consumers. President Joe Biden has called on oil companies to boost production to reduce fuel prices. Overall US output peaked at 13 million b/d in late 2019, and has not returned to that level since the pandemic…

The perspective of a situation analysis matters a lot. Just as current Pakistan’s politics overshadow multiple positives. Believing that the KSE-100 index is an indicator of Pakistan’s economy, many investors, particularly those overseas follow it a little religiously. October was being watched specifically, because of the FATF decision. The benchmark index mostly remained on an upward trajectory for most of October, hitting a high of 42,350 points, before politics dragged it to close flat for the month ( up 4% in US$ terms). Imran Khan commenced his march onto Islamabad in a bid to galvanize public support and force early…

Allowing the export of sugar and fixing of sugarcane prices by market forces The sugar industry in Pakistan is the second largest agro-based industry. It has the installed capacity capable of producing an exportable surplus. There is a need to support the demand of the Pakistan Sugar Mills Association (PSMA) to allow the export of surplus sugar. Since the well-being or otherwise of industry impact the rural economy, the government has fixed the price of sugarcane, which ultimately plays the most crucial role in fixing the retail price of refined sugar. The latest demand of the industry is that the…

Robust recovery as political noise eases As the political noise in the country eased off considerably, the benchmark index of Pakistan Stock Exchange (PSX) posted a robust uptick. The index moved up by 1,237 points during the week ended on November 11, 2022 to close at 43,093 points, up 2.95%WoW. The uptick in index was witnessed amid healthy participation with the weekly average daily traded volumes also jumping by 8.8%WoW to settle around 306.4 million shares, as opposed to 281.5 million shares witnessed last week. Stability also returned in the foreign exchange market during the week with PKR holding its…

This year Pakistan is anticipated to face a shortfall of wheat. The estimated shortfall will require the country to import 2.5 million tons of staple food grain. This will cost the country US$1.3 billion, besides handling charges to be paid in local currency. The need to import wheat has once again highlighted the importance of attaining self-sufficiency in the production of wheat and introducing efficient storage facilities and trading systems. In this article, an effort has been made to explore ways to overcome the shortages and contain the outflow of precious foreign exchange. Wheat is an agricultural commodity and its…

In the backdrop of massive damages to agriculture by unprecedented floods caused by historic monsoon rains, the State Bank of Pakistan (SBP) has fixed an indicative annual agriculture credit disbursement target of Rs1,800 billion for the financial institutions for FY23 to cater to the rising agriculture credit demand in the country. Last year, the Rs1,700 billion target was missed primarily due to financial institutions’ cautious lending approach. The current year is under the immense pressure of devastating flash floods across the country. No official data is available about the loss of crops, livestock, and other related valuables in the agriculture…

Trading volume declines 14.4% WoW During the week ended on October 21, 2022, the focus of investors remained on the current account position, besides the upcoming FATF plenary. The benchmark index remained flat and closed at 42,213 points, up 0.6%WoW. The average volume for the index continued downward trajectory, dropping to 228 million shares down 14.4%WoW. Major news flows during the week included: 1) Q1FY23 Current Account deficit down by 37%YoY, 2) Trade deficit shrinks by 30.2%YoY in September, 3) Gas sector circular debt bloats to Rs1.5 trillion, 4) Pakistan receives only US$88 million assistance against US$816 million flash appeal,…

The fourth successive month where the headline inflation rate in Pakistan has topped 20% The CPI for the month of September 2022 clocked in at 23.2%YoY, a significant decline from the previous month’s 27.3%YoY, mainly due to the falling electricity charges. The GOP also slashed the prices of petrol, mainly due to the reduced Petroleum Development Levy (PDL). This is the fourth successive month where the headline inflation has topped 20% and is unlikely to fall below this mark over the next quarter owing to floods. The jump in monthly inflation is largely driven by the hike in prices of…

Pakistan Stock Exchange posts 2.33%WoW gain Pakistan Stock Exchange witnessed mostly an all green week ending on October 07, 2022 after a long break, closing at 42,085 points, up 2.33%WoW.Shrinking trade deficit and appreciating currency improved overall investor sentiment. Further, rumors about rate-cuts in the upcoming monetary policy meeting on October 10, 2022 loomed large. Trade deficit was reported at US$2.9 billion at end September 2022 and US$9.2 billion for1QFY23, down 20%MoM/21%YoY. Also, the new finance minister’s stance made his unfriendly stance clear for financial institutions involved in foreign exchange market volatility and speculation, instilling confidence into markets. Overall, the…

Large areas of Pakistan were inundated in 2010 by heavy floods, resulting in the displacement of millions of people. Experts had termed it one of the worst humanitarian catastrophes the country has suffered. Twelve years later, massive flooding has forced analysts and political leaders alike to search for new adjectives that can describe the devastation caused by monsoon rains, appropriately. It may be recalled that the Metrological department had warned about the intensity of rain and resulting devastation, but it was too late to avert the situation. Now the government has declared a national emergency and has desperately sought urgent aid from…

When Pakistan received a tranche of US$1.2 billion from the International Monetary Fund (IMF), it was anticipated that PKR would find solid ground against the US $. However, against expectations, the currency continued to depreciate. While the country’s borrowing needs for the year are fully met, the outlook beyond FY23 remains uncertain. As per the latest IMF document, Pakistan’s gross borrowing needs over the next 5 years are expected to top US$180 billion, meeting them or even rolling them over will be an uphill task. In the short term, the country’s borrowing needs may increase further as floods have washed away standing crops in Sindh…

Pakistan Stock Exchange benchmark index witnesses 2.5%WoW decline Pakistan Stock Exchange (PSX) remained under pressure during the week ended on September 23, 2022, driven by renewed weakness in the PKR against the USD and concerns regarding the country’s fiscal health. Participation in the market remained lackluster, with average daily traded volumes averaging 166.1 million shares during the week under review as compared to 183.2 million shares a week ago. The benchmark index, KSE-100 Index lost 1,059.28 points during the week, depicting a 2.5%WoW decline. The PKR continued to lose value against the US$, depreciating 1.2% during the week. Furthermore, the…

After the withdrawal of tax exemption, some of the sponsors of Modarabas in Pakistan have started converting these entities in private limited companies. They believe if this incentive is not offered there remains no justification for these entities to exist. They also say that a bad policy decision has made these entities ‘endangered species’. Let us explore, if the government right or rationale of Modaraba sponsors valid? In Islamic finance Modaraba is a financial instrument, but in Pakistan these specialized entities, first of its type, were the pioneers of conversion of country’s financial systems into ‘Shariah compliant’ entities. The objective…

Faysal Bank Ltd will become a full-fledged Islamic bank by the end of 2022 after ring-fencing its residual conventional loan portfolio, said Chief Financial Officer Syed Majid Ali. Speaking at a press briefing at the bank’s head office, Syed said the Bank will surrender its conventional banking mandate once the regulator grants it the licence for Islamic banking. Five Islamic banks and 17 conventional banks with Islamic banking branches currently operate in Pakistan. The share of Islamic banking assets in the overall banking industry is still below 20%, while the share of Sharia-compliant deposits is also below 20%, to be…

Interview Raheel Qamar Ahmed, Chairman, NBFI & Modaraba Association Modaraba companies operating in Pakistan are the unique entities. Around the world, Modaraba is an instrument, but in Pakistan these entities are an improvised shape of close-end funds making investments in diversified businesses from Ijarah to manufacturing to trading. In an exclusive interview with Raheel Qamar Ahmed, Chairman, NBFI & Modaraba Association of Pakistan PAGE discussed performance and outlook of the sector. Following are excerpts: PAGE: How do you review the performance of Modarabas in the post COVID-19 era? Raheel Qamar Ahmed: As you aware that Modarabas are managed by professionals, they…

Market witnessed a volatile week on devastating floods Pakistan Stock Exchange witnessed a volatile week as the country experienced devastating floods triggered by the heaviest monsoon rains in a decade which killed about 1,200 people and submerged one-third of the country. Although, there was respite due to receipt of US$1.1 billion tranche from International Monetary Fund (IMF) and crude oil price falling by US$6/bbl on the back Chinese economic weakness, hawkish FED stance and reemergence of Iranian supply. The index lost 283 points to close at 42,309 on September 02, 2022, last trading day of the week. On the macro…

Progress with IMF likely to push sentiments The market remained jittery during the week ended on August 26, 2022. Political uncertainty was further enhanced after a case was registered against ex-prime minister Imran Khan in the Anti-Terrorism Court. This shadowed positive news regarding foreign exchange inflows and SBP keeping interests rates unchanged. Erosion in Pak rupee value against the dollar continued, with the currency depreciating 2.72% against the greenback over the week, to close at PKR220.66/US$. The benchmark index lost 679 points, down 1.57%WoW. Participation in the market was also lackluster, with average daily traded volume dropping by 52%WoW to…

This year Pakistan is celebrating Independence Day, when the clouds of imminent are getting thicker. While the people have complete faith in the economic resilience, a lot needs to be done on war footings. People are worried about the ballooning confidence deficit. They believe that breaching current account deficit and budget deficit is possible but overcoming confidence deficit may take years. The brighter side of the story is that International Monetary Fund (IMF) is likely to release promised branch of about US$1.2 billion. This will pave way for the inflow of foreign exchange from friendly countries and other multilateral lenders.…

Bulls control likely to linger Bulls finally returned to Pakistan Stock Exchange as the looming threat of a potential default on foreign debt eased off with a couple of friendly countries stepping forward to bail out Pakistan from the crisis situation. The monthly external trade numbers were also announced this past week ended on August 05, 2022. The trade deficit pleasantly surprised consensus estimates owing to larger than anticipated squeeze on imports. Consequently, the KSE-100 gained 4.85% to close at 42,096 points, amid significantly better volumes with average volume for the index recorded around 268.61 million shares up 78.9%WoW, as…

Pakistan Stock Exchange (PSE), concluded FY22 with the benchmark index returning negative 12.3%, while on the back of hefty currency depreciation of 30%YoY during FY22, the dollar adjusted return throughout FY22 came to negative 42.3% making the KSE-100 index one of the worst performing indexes in the region. Amid tough economic outlook, the market participation remained dull throughout FY22, with the average daily traded volume during the year reported around 292.7 million shares as opposed to 527.4 million shares it averaged during FY21. As for the outgoing month, the average trading volume was slightly above the yearly average, clocking around…

Over 300 units closed due to cut in gas supply, says APTMA chief Abdul Rahim Nasir, Chairman, All Pakistan Textile Mills Association (APTMA) claims that over 300 textile units have been closed due to the cut in gas supply. He urged the Government of Pakistan (GoP) to immediately restore gas supply to the textile industry. Explaining gravity of the situation, he said Pakistan has already lost almost US$1 billion of textiles and clothing exports. Accompanied by APTMA, North Zone Chief, Hamid Zaman and Senior Vice-Chairman Kamran Arshad at a press conference, he said the 26 percent upsurge in the export…

Macro, political uncertainty may keep activity sluggish Pakistan Stock Exchange (PSX) witnessed a turbulent week ended on July 22, 2022, on account of political uncertainties mainly on the back of Punjab elections and massive currency depreciation on the back of oil payments. The index dropped by 1,968 points or 4.75%WoW to close at 40,077 points, while activity remained subdued as compared to last week. On the macro front, PKR/US$ depreciation was a shocker, as the domestic currency fell by 8.3% to PKR228 for a US$. Furthermore, PTI’s victory in the by-election of Punjab caused further uncertainty, prompting international credit raters…

In recent years, financial inclusion has been one of the most discussed issues in Pakistan. Growing awareness and availability of IT facilities has resulted in easy accessibility to banking services. Now the brick and mortar concept of bank branch has been replaced by click. Now the use of mobile banking and in particular, payments by mean of smartphones has tremendously increased across the country. In today’s world, smartphones are one of the most important media for communication and also a medium or channel for financial inclusion as they are easily penetrated in the population and are feasible of interconnecting data…

In order to promote digitalization and encourage eco-friendly practices, the State Bank of Pakistan (SBP) has developed online portal called SBP Regulatory Approval System (RAS) to enable regulated entities (Banks, Electronic Money Institutions, Payment System Operators and Payment Service Providers etc.) to submit cases/proposals and receive regulatory decisions digitally. Previously, SBP implemented RAS for its various functions aimed at end-to-end digitalization, whereby banks were enabled to electronically submit cases related to Banking Policy & Regulations and Exchange Policy. With the launch of RAS, Banks, Development Finance Institutions (DFIs) and Microfinance Banks (MFBs) started submitting their request letters/ proposals on a…

PSX Witnessed a dull week amid uncertainties regarding IMF Program Pakistan Stock Exchange (PSX) witnessed a dull week ending on July 07, 2022 on account of uncertainties regarding IMF program, expectation of further monetary tightening and political turmoil. The benchmark index declined 286 points or 0.69% to close at 41,344 points. During the week, SPI print witnessed an uptick of 363% due to higher food and energy prices. Country’s trade deficit for the year was reported at US$48.25, up by 55%. Oil prices witnessed significant decline during the period and fell by 11.5%, due to fears of global recession. Similarly,…

As oil demand unwinds in the wake of falling global growth, natural gas/LNG markets continue to remain tight in this ongoing energy crisis. Pakistan too has imported its two most expensive LNG shipments in the months of May and June 2022. The country’s LNG import bill climbed up to US$762/US$724mn in May/June as compared to the Jan-April average of US$370mn/month. Moreover, Pakistan LNG Limited (PLL) recently invited spot bids for July shipments after failing to procure them in the previous two weeks. The country’s one of only two LNG importers received a single bid to buy four cargoes for July…

Geopolitical conflicts have imposed certain restriction on the outflow of Russian oil and gas. This has spiked energy cost and initiated a quest for other fuels. Under the prevailing conditions two of the largest energy consuming countries, China and India are fast reverting back to coal. Pakistan, enjoying the treasure of Thar coal can cap its energy import bill. Speaking at the Bloomberg Qatar Economic Forum in Doha recently, Exxon-Mobil CEO Darren Woods said he does not see oil prices cooling down over the next few years. Woods said that it would take some time for the volatility in the energy market to end.…

SMIDGEN gains witness; stocks may likely go up Announcement of Federal Budget FY23 by the Government of Pakistan (GoP) brought some stability to the local stock market. There is overwhelming perception that the Budget has been prepared keeping in view the conditionalities of the International Monetary Fund (IMF). The benchmark index of Pakistan Stock Exchange posted a nominal increase of 0.3%WoW for the week ended on Friday, June 17, 2022. It recovered sharply after shedding 1,135 points on the first trading session of the week. The market participation picked up slightly where the average daily turnover increased 2.6%WoW to 174.2…

In the last few weeks, the government has significantly reduced fuel subsidies, while passing legislation to reform state-owned entities and set up an Export-Import Bank to take over the SBP’s refinance facilities. Efforts to recapitalize two private sector banks have also accelerated. These measures are part of the structural benchmarks agreed upon with the IMF in February. The FY23 Budget is part of the same chain. Some aspects will be challenging, for instance meeting the large target for petroleum levy will likely be politically difficult, but it is heartening to note the finance minister stated in his speech that the…

Contrary to market expectations, measures announced in Federal Budget FY23 are being termed ‘Neutral to Positive’ for the stock market. With IMF program in sight, there was a general expectation that there may be very tough measures across all sectors. However, the government has announced a mix of positive and negative measures for listed sectors. Some of the key measures announced in budget relating to stock market and sectors include: Tax on all persons including companies and AOPs where the income exceeds Rs300 million are now subject to an additional tax at the rate of 2% of such income. This…

Uncertainty still prevails The week ended on June 03, 2022 witnessed sluggish movement in the first three days and the market took a hit on Thursday and Friday. The benchmark index, KSE-100 lost 3.6%WoW to close at 41,315 points. Economic uncertainty along with rising interest rates and bond yields kept the sentiments subdued. Average daily trading volume for the Index declined to 10 million shares, posting 25.3%WoW decline. Major news flows during the week were: 1) GoP increases prices of POL products, 2) Pakistan agrees terms for rollover of US$2.3 billion debt from China, 3) Moody’s changes the outlook for…

The growing population of smartphones and introduction of newer applications have contributed a lot towards financial inclusion. Over the years, one of the biggest handicaps of commercial banking has been a limited number of bank accounts, particularly in the low-income groups and remote areas. Banks have been reluctant to establish brick and mortar branches in these areas. To address this important problem, Easypaisa can rightly take pride in having led the fintech revolution in Pakistan as soon as it came into existence. Easypaisa was launched in Pakistan in 2009 as a peer-to-peer money transfer service. However, its biggest contribution is…

In its meeting on May 23, 2022, the Monetary Policy Committee (MPC) decided to raise the policy rate by 150 basis points to 13.75%. This action, together with much needed fiscal consolidation, should help moderate demand to a more sustainable pace while keeping inflation expectations anchored and containing risks to external stability. Since the last MPC meeting, provisional estimates suggest that growth in FY22 has been much stronger than expected. Meanwhile, external pressures remain elevated and the inflation outlook has deteriorated due to both home-grown and international factors. Domestically, an expansionary fiscal stance this year, exacerbated by the recent energy…

Choppiness prevails; investors may turn cautious Week ended on May 20, 2022 started on a bad note with the benchmark index declining by 1.9% on the first trading day as lack of economic direction weighed heavily. Even though the market recovered in later trading sessions, but overall performance remained choppy, lacking clear direction throughout the week. Finally, the market closed the week at 43,101 points, down 0.89%WoW. Average daily trading volume also slipped to 220.8 million shares, from 274.04 million for the earlier week. Overall, political uncertainty and indecisiveness over prerequisites for IMF program resumption put Pakistan’s economic situation into…

Cement dispatches for the month of April were reported at 3.54 million tons, down 30%MoM, mainly due to shortened working hours and slowdown in construction activity during the month of Ramadan coupled with rising construction cost amid inflation, and cut in public sector development expenditure restricting growth in demand. Accordingly, local dispatches were registered at 3.37 million tons, down 29%MoM, while exports were reported at 0.16 million tons, down 47%MoM mainly due to: 1) all-time high freight costs and 2) low retentions in the export markets restricting exporters. Therefore, cement the manufacturers preferred to sell domestically where they enjoy greater…

Little recovery seen after a positive development with IMF Following a 1,049 points decline a week ago, the market recovered 520 points on the first trading session of the week ended on April 28, 2022 on the back positive development with International Monetary Fund (IMF). According to their spoke person, the IMF delegation is expected to visit Pakistan in May. In addition to this, the length of the program is also expected to increase till June 2023 with additional US$2 billion financing arrangement, taking the total program size to US$8 billion. The upward movement, however, was short lived as the…

During March 2022, Pakistan received a total of US$2.8 billion of inflows under workers’ remittances. During the month under review the remittances increased by 28.3%MoM and 3.2%YoY. This is the highest ever monthly level for workers’ remittances. A point worth noting is that the remittances have continued their unprecedented run and remained above US$2 billion since June 2020. Cumulatively during first nine months of the current financial total remittances received recorded at US$ 23.0 billion, posting a growth of 7.1% as compared to the same period of the last year. Remittances inflows during March 2022 mainly originated from Saudi Arabia…

Positive motion likely to persists amid result season The momentum gathered in the last trading session of earlier week, fueled further on the first trading session of the week ended on April 15, 2022. The investors across the board welcomed newly formed government; set up of coalition parties (PML-N, PPP, JUI-F and MQM-P) led by Shehbaz Sharif as newly elected Prime Minister. Filled with exuberance, the benchmark KSE-100 index registered 1,700 points gain on Monday – the largest single day return of 3.83%DoD to close the index at 46,145 points. The rally continued throughout the week, keeping KSE-100 index above…

Gains witnessed; long-term positions in focus Momentum gained in the earlier week continued into the week ended on April 01, 2022. The benchmark index gained 3.7% WoW, the strongest weekly return since April 2022 to close at 45,152 points. Participation also improved during the week, with average daily trading volume rising to a little above 310 million shares – the highest in 11 weeks, with side scrips garnering investor attention. Major news flows during the week were: 1) No-trust resolution against PM Imran Khan tabled in the National Assembly, 2) Punjab Chief Minister tendered his resignation to make space for…

Banks approve on spot conditional housing loans amounting to Rs7.4 billion In an overwhelming response to the first ever Mera Pakistan Mera Ghar (MPMG) Mela organized by State Bank of Pakistan in Faisalabad, banks logged in applications of Rs18 billion from applicants. In the two-days Mela, held on March 19-20 more than 30,000 people visited to obtain information about the MPMG and apply for loans through banks’ one-window facilitation. Against the applications logged in, banks provided conditional approvals of around Rs7.4 billion loans. At the inauguration ceremony of the Mela, Dr. Reza Baqir, Governor State Bank in his keynote address…

Political instability may keep market down The benchmark index of Pakistan Stock Exchange KSE-100 Index shed 623 points during the week ended on March 18, 2022, mainly during the last 2 sessions. This led to 1.43%WoW decline in total market capitalization of the Index. The daily trading volumes also dried up to 174 million shares as compared to 214 million shares a week ago, posting 18.6%WoW decline. The market’s downward drift has been due to further escalation in country’s political uncertainty as we approach close to 28th March, the day when no-confidence vote is due. Similarly, the uncertainty in global…

Cement is the most important component of the construction industry. Any hike in coal price contributes towards hike in cement price. At times, manufactures are able to pass on the increase in cost of cement to buyers, but at times, which sales are lean, passing on the cost may not be possible. Anticipating the hike in construction cost is important not only for the construction companies, but also for the financial institutions in the business of mortgage finance. If the actual hike beats, the estimates, construction face the doubled-edged soward, on one hand pace of work slows down due to…

IMF talks may lead sentiments; major stocks to shine During the week ended on March 11, 2022 global commodity prices reach unparalleled highs, affecting the market, KSE-100 losing 2.0%WoW to close at 43,653 points. Local political uncertainty along with central bank’s hint of potential further tightening (as a result of commodities super cycle) also negatively contributed to market sentiments. However, average daily trading volume was up 0.3% to 213 million shares this week. Other major news flows during the week were: 1) FATF retaining Pakistan on the grey list, 2) GoP pursuing financial support of about US$21.7 billion from China…

SBP wins another award for promoting Islamic finance Islamic Finance News (IFN), an arm of REDmoney Group, Malaysia, has announced State Bank of Pakistan (SBP) as the best Central Bank of 2021 across the world in promoting Islamic finance. The result was based on global voting. IFN Best Banks Poll is regarded as one of the prestigious accolades in the global Islamic finance space. Bank Negara Malaysia stood second while the Saudi Central Bank secured third position. The category of the Best Central Bank in promoting Islamic Finance is one of the closest contested among regulators around the globe for…

Newfound system helps facilitate P2P transactions Imran Khan, Prime Minister of Pakistan launched the second phase of Raast, called Person-to-Person instant payment system in a ceremony in Islamabad. Raast, a flagship initiative of the State Bank of Pakistan (SBP) is a payment system platform that enables various types of transactions among different stakeholders such as organizations, businesses and persons. The objective of this initiative is to promote digitization and financial inclusion in the country. In the first phase of Raast, launched in January 2021, transactions from organizations to persons, generally referred to as Bulk Payments, were enabled. The second phase…

Negative sentiments prevail; value stocks may shine During the week ended on February 25, 2022, negative sentiments engulfed the market following the escalation in Russia -Ukraine conflict where President Putin gave green signal to invade Ukraine. Following this news, the benchmark KSE-100 index slipped 3% alone on Thursday, plunging the index down to 43,984 points by the end of week. During the week, Brent Oil flirted with US$100/bbl level, while other global commodities such as Natural Gas/Wheat/Coal rallied 24/16/4% on supply concerns. The average daily trading volume increased 20%WoW to 228.5 million shares as investors made their way to dispose…

The Ministers of the OPEC plus, who met via video conference, rubberstamped in just 16 minutes the monthly production hike by 400,000 bpd. In the shortest meeting so far in its history, OPEC+ decided to increase the collective production by 400,000 barrels per day (bpd) in March 2002. This left production plan unchanged and pushed Brent price above US$90/barrel. Some analysts, and traders, had expected a higher production increase, considering the recent rally that has frustrated major oil-consuming nations, including the United States. Earlier this week, Goldman Sachs had expressed the view that OPEC plus might decide to announce a larger production increase for…

Market set to maintain bull run After gaining 1.8%MoM during January 2022, the positive momentum continued during the first week of February with index gaining 1.85%WoW in anticipation of normalization of relations with the IMF. Average daily trading volumes increased by 54%WoW to 289.1 million from 187.4 million shares a week ago. During the week, activity shifted slightly to small-cap stocks from mainboard items. Major news flows during the week included: 1) GoP and IMF finally reaching an agreement to revive US$6 billion program, with IMF likely to disburse US$1.0 billion immediately, 2) Pakistan raising another US$1.0 billion through issue…

A point to be noted is that local urea manufacturers have an installed capacity of 7 million tons per annum as against estimated offtake of around 6 million tons. This clearly indicates that the industry can earn substantial foreign exchange by operating plants at optimum capacity utilization. However, to achieve this uninterrupted supply of gas has to be guaranteed. This requires dedication of Mari field to the fertilizer industry. Although, this decision was made in Fertilizer Policy 2001, some power plants are still getting gas from this field. FFBL: A bumper year Fauji Fertilizer Bin Qasim (FFBL) is expected to…

Index falls; IMF program  may likely set tone Putting an end to 6-week streak of positive returns, on Friday January 21, 2022 the KSE-100 index closed at 45,018 points, down 1.63%WoW. The fall was attributed to a sharp increase in oil prices due to geopolitical risks in the Middle East and widening Credit Default Spread (CDS) on Government of Pakistan (GoP) bonds denting investors’ sentiments amid lack of triggers Average daily trading volumes dried up, falling to 201.2 million shares, falling from 355.6 million shares a week ago. During the week, activity shifted slightly to small-cap stocks from mainboard scrips. Stock…

Lack of consensus among urea producers, policy planners A tug of war has been going on between the elements adamant at importing urea and its local manufacturers. With regular intervals the need for importing urea is raised, whereas the industry experts have a contrary view. There prevails a consensus among urea manufactures that they are capable of exporting up to one million tons urea per annum, if the right impetuses are provided: uninterrupted gas supply and control over smuggling of urea to the neighboring countries. It may be recalled that lately Imran Ahmed, CFO, Engro Fertilizers in an interview highlighted…

Upcoming monetary policy may define direction During the first week of the New Year, ended on January 07, 2022, the benchmark index of Pakistan Stock Exchange (PSX) closed at 45,346 points. Average daily trading volume rose to 318 million shares, from 218 million shares a week ago. Major gainers were: STJT, HUBC, ISL, GATI and UNITY, while top laggards included: TRG, HMM, MUREB, PMPK and KTML. Tabling of Finance Amendment Bill and State Bank of Pakistan Amendment Bill during the latter part of the week indeed provided confidence to investors on the eventual resumption of IMF program. Other important news…

After an unexpected increase in cut-off yields in last T-Bill auction on December0 1, 2021, money market yields have been on a rising trend recently. Bond yields are up 136-144bps since SBP increased the policy rate by 150bps on November 19, 2021. Since the last PIB auction on November 29, 2021, bond yields on 3-5 year PIBs are up around 50bps to 11.89% and 11.91%, respectively. In 2021 to date, bond yields on 3-5 years bonds are up 362bps and 266bps, respectively. This is on expectations of further rate hike going forward on the back of rising inflationary pressures and…

The Monetary Policy Committee (MPC) of State Bank of Pakistan (SBP) decided to raise the policy rate by 100 basis points to 9.75%. The goal of this decision is to counter inflationary pressures and ensure sustainable growth. Since the last meeting on November 19, 2021, indicators of activity have remained robust, while inflation and the trade deficit have risen further due to both high global prices and domestic economic growth. In November, headline inflation increased to 11.5%YoY. Core inflation in urban and rural areas also rose to 7.6 and 8.2 percent, respectively, reflecting domestic demand growth. On the external side,…

Performance may range-bound; mini budget in focus Stock Market remained flat throughout the week ended on December 24, 2021 posting a nominal increase of 0.5%WoW to close in at 44,118 points level. This took the cumulative performance throughout CY21 to 0.8% whereas USD adjusted return currently stands at negative 9%. Volumes dried up significantly on WoW bases and average daily traded volume was recorded at 215 million shares as opposed to 265 million shares, down 18.7%WoW. Top performers of the market included: BNWM, HCAR, TRG, PSX and ABOT. The laggards were: ARPL, SFL, GATI, COLG, and JDWS. The performance during…

Decline in trade deficit a sigh of relief; monetary policy eyed After taking a heavy beating during earlier week on the back of high trade deficit for November 2021, the market took a breather on the first trading session of the week. In the second session the news of assistance from Saudi Arabia provided some relief and the market rallied 1.3% during the session. However, towards later part of the week, market set its sight on the upcoming monetary policy meeting and remained under pressure on the expectations of an increase in interest rate and depreciating PKR. Overall, the benchmark…

Overseas Pakistanis have sent the highest-ever US$8 billion remittances during the first quarter of the current fiscal year, registering an increase of 12.5% over the same period last year. The State Bank of Pakistan (SBP) reported that with inflows of US$2.7 billion in September, workers’ remittances continued their strong momentum and have remained above US$2 billion since June 2020. “This is the 7th consecutive month when inflows recorded around US$2.7 billion on average,” said the SBP. In terms of growth, remittances increased 17% in September as compared to the same period last year, while comparing with August inflows it was…

There is no denying to the fact that Pakistan has to boost its exports to contain ever-growing trade deficit. Pakistani exporters have to get acquainted with Harmonized System numbers —known as HS codes. It is anticipated that changes will take effect to the official nomenclature for hundreds of product groups used to classify imports and exports. There exists more than 5,000 product categories developed by the World Customs Organization, an inter-governmental group in Brussels, which are updated every five years or so. In 2022, the biggest changes are coming for electrical machinery and parts, wood, textiles, fish and organic chemicals. The…

Trade has historically been a powerful driver of economic growth and poverty alleviation in Asia. While tariff barriers to trade in Asia are low overall, a new measure of non-tariff barriers suggests those remain high in many Asian emerging markets and developing economies. Unlike tariffs, these barriers include policies that introduce frictions such as licensing requirements or restrictions on trade, payments and exchange foreign currencies. Reducing trade barriers can reignite growth engine. Concerted efforts have to be made to liberalize trade, invigorate sustainable growth and minimize post pandemic scarring. According to a recent research, as detailed in the International Monetary…

Index falls despite IMF staff level agreement news Despite the positive news-flow regarding the IMF staff level agreement, the benchmark index of Pakistan Stock Exchange (PSX) trimmed the last week’s gains on account of unexpected hike of 150bps in policy rate by SBP. In addition to this, the Current Account Deficit (CAD) widened by US$1.66 billion in October 2021 and rose to 4.7% of the GDP from 4.1%, beyond the target of 2-3% for the entire financial year. With negative news-flows engulfing the investors, the confidence remained jittery. At the same time, PKR remained on downward trajectory against US$, hitting…

It is a phenomenon rarely seen in commodity markets, natural gas prices are skyrocketing across the world, Europe and Asia and consumers are paying up to nearly six times more for natural gas as compared to the US consumers. This is being attributed to a lack of the US liquefaction capacity. On Tuesday in New York, front month contracts for Henry Hub gas futures closed above US$5.88 per million BTUs, more than doubling in the year to date. The fuel topped US$6.46 on October 6, marking the highest level since 2014. On top of climbing air conditioning demand in the…

Engro Energy Limited (EEL) signed a Memorandum of Understanding (MoU) with the Sindh Transmission and Dispatch Company (STDC) and the Directorate of Alternate Energy (DAE) to establish a renewable energy park at Jhimpir that will provide electricity to industry at Port-Qasim and Dhabeji. Under the terms of the MoU, Engro will be responsible to build the first hybrid solar PV and wind park in the country whereas STDC and DAE will be responsible for laying the transmission network and facilitate the provision of required land for the project, respectively. The MoU jointly spearheaded by the Government of Sindh was witnessed…

Index to keep rallying on IMF review outcome Extending rally for the fourth consecutive week, the benchmark index closed the week ended on November 06, 2021 at 47,296 points, up 2.33%WoW. It was the highest weekly gain since May 2021 as investors turned optimistic on a possible breakthrough in much awaited IMF review and the incumbent government possibly regaining political capital through Rs120 billion subsidies on key food commodities. Trading volumes also improved with daily average turnover rising to 429.7 million shares during the week as compared to 219.1 million shares a week ago, it was the highest in last…

In Europe, the high nutrient prices have farmers questioning whether to curb plantings. Canadian authorities cautioned that growers may cut back on usage, while in corn powerhouse Brazil, there’s a risk that soaring fertilizer costs and less supply will limit crop yields. The global fertilizer market had already been tightening before plants were forced to cut production on the back of the recent spike in the cost of gas, a key feedstock. That’s sent prices of nutrients crucial for growing staples soaring — to a record in some cases — risking smaller harvests or even more expensive food down the line. Fertilizer plant shutdowns in the UK highlighted how critical the situation is, because it…

Use of phosphate fertilizer is on the rise but its raw material is depleting fast The world faces an imminent crisis in the supply of phosphate, a critical fertilizer that underpins the world’s food supply. Phosphate is an essential mineral for all life on earth and is added to farmers’ fields in huge quantities. But rock phosphate is a finite resource and the biggest supplies are mined in politically unstable places, posing risks to the many countries that have little or no reserves. Phosphate use has quadrupled in the last 50 years as the global population has grown and the…

Interview with Mr Nasib Ahmed Saifi – an exporter of Halal meat [box type=”shadow” align=”” class=”” width=””]Profile: CEO: Anis Associates (Pvt) Ltd. Chairman: Saifigroup of Companies (U.A.E., Pakistan, Thailand, Bahrain & K.S.A.) Chairman: Standing Committee on Halal Food Import & Export – LCCI Chairman: FPCCI (Central) Standing committee on “Halal Meat Import & Export” Chairman: All Pakistan Meat Exporters & Processors Association Former Member: Executive Committee Member – LCCI Patron: The Lahore General Hospital – Lahore[/box] Pakistan has an overwhelming majority of Muslim population as well as enjoys enormous population of livestock. However, country’s share in global Halal meat has…

Index may stimulate on important IMF talks In a shorter than usual week, market remained volatile. The start of the week witnessed across the board selling as investors became jittery on the news that IMF talks remained inconclusive. However, once a clarification was published that negotiations were still going on; market took a sigh of relief on second day of the week and gained 1.9% in a day. The same momentum was carried into third trading day. However, on the fourth day, news flow regarding IMF discussions again caused jitters and a sell-off was witnessed. The benchmark index closed the…

Pakistan and the International Monetary Fund (IMF) are still talking about raising taxes and electricity tariff at the last leg of technical-level discussions to put US$6 billion Extended Fund Facility (EFF) back on track. The virtual talks between the two sides on Friday were extended at the last moment for 8-10 hours as they struggled to narrow down their hard positions to a level that Finance Minister Shaukat Tarin could strike a deal during policy-level talks with the IMF management and mission chief next week. The IMF staff had termed Pakistan’s revenue growth ‘unsustainable’ as it could reverse as soon…

Meteorologists are predicting a cold winter, and it could send international energy prices even higher. Record high natural gas prices have forced some utilities to switch to oil, boosting demand for crude. It is feared that oil prices may witness further rise, though not likely to stay there for long. The spike in oil prices to the highest in years came after OPEC plus decided not to add more barrels than the initially agreed 400,000 bpd monthly. Analysts say that prices could witness further increase. Now, some forecast price may rise to US$100/barrel. The good news is that even if…

Bears rule, results and other news focus of attention Reeling from the previous week’s dejected performance; Pakistan Stock Exchange (PSX) witnessed bearish sentiments throughout the week. The week ended on October 08, 2021, closed the benchmark index at 44,477 points, posting a decline of 395 points or 0.9%. An upsurge in global commodity prices (Coal hit US$238/ton and Brent hit US$83.1/barrel), widening trade deficit and higher inflation kept the investors’ sentiments subdued. In addition to these, the upcoming IMF review and political uncertainties also dampened investors’ sentiments. Cement sector was among the top laggards for the week, losing 5.6%WoW as…

Benchmark lending rate hikes to 16-month high Cut-off yields on Treasury Bills (T-Bills) spiked by up to 49 basis points (bps) in the auction held on Wednesday. It is the first increase of this magnitude during the last 15 months. Most of the bids received by State Bank of Pakistan (SBP) were for three-month tenor. The auction target was Rs800 billion, total bid received amounted to Rs1.171 trillion, but the central bank accepted bid worth Rs731 billion. The increase in cut-off yields was warmly welcomed mainly be the banks evident from the amount offered to buy the papers. Bids of…

Stocks continue gloom-ridden venture Moving along the trend set in motion in previous week, Pakistan Stock Exchange posted negative performance throughout the week. On last trading day of the week ended on 24th September 2021, bench mark index closed at 45,073 points, touching a low of 44,788 points. Over the outgoing week, the index cumulatively lost 1,562 points or 3.4%. A 25bps hike in interest rates by the central bank suggests further hikes in future. Other major news flows during the week included: 1) the central bank tightening regulations on consumer financing and mandating banks to share 5-day import payments…

I am delighted to share these lines from an article by Matthew Boyle. I quote, “Any company that says they fully understand their supply chain is lying,” says Goentzel, who believes that supply-chain practitioners should be certified just like accountants. “It’s time for the profession to wake up. The 20th century was about finance. The 21st century should be about supply chains.” On can recall that just-in-time inventory system embraced by many businesses led to empty shelves and costly bottlenecks. Some of the headlines were never seen before. These included: Stores with no toilet paper, colossal cargo ships run aground in the…

It is heartening to note that the cargo handling activities at the two ports located in Karachi – Port Bin Qasim and Karachi Port have recorded an impressive growth of 25% and 13.72% in FY21. This increase can be attributed to 18% in exports and 26pc rise in the country’s exports and imports, respectively. Reportedly, exports in FY21 rose to US$25.3 billion from US$22 billion in FY20. Imports rose to US$56 billion from US$44.5 billion during this period. This kept goods movement at twin ports alive amid issues like lockdown, port congestion, higher freight charges etc. all over the world.…

Interview Hasan Faraz, Manager, Pakistan Area Customer Experience, Maersk PAGE: What does Customer Experience mean to Maersk? Hasan Faraz: Customer experience for us at Maersk essentially means the holistic perception of what our brand and business stand for. We are keeping our customers at the heart of every decision we take and therefore customer experience revolves around customer-centric mindset, where the end-result is to constantly improve our customers’ satisfaction and resulting in their ever-growing loyalty towards Maersk. Customer Experience is an integral part of all our offerings allowing us to differentiate ourselves in the industry from others. Our Customer Experience teams…

PSX remain under pressure due to high trade deficit coupled with depreciating Rupee Pakistan stock market started the week ended on 10th September 2021 under pressure. Investors awaited MSCI’s decision of downgrading Pakistan to Frontier market status from Emerging Market, resulting in selling in some index heavy stocks. Additional pressure was evident on the market due to high trade deficit for August 2021 coupled with depreciating Rupee. However, on fourth and fifth trading day of the week, market rebounded, led by technology sector and recovered almost all the losses for the week. The benchmark index closed at 47,198 level, up…

The benchmark index of Pakistan Stock Exchange, KSE-100 Index is celebrating its 30 years of existence. The Index is total return market capitalization based, which was created in 1991 with a base value of 1,000 points. Following international best practices the benchmark Index calculation methodology was changed from full market capitalization to free float market capitalization in October 2012. Some other indices have been created since 1991 i.e. KSE-30 All Share and KMI-30, but KSE-100 Index still remains most followed and most reported indicator of stock price movements in Pakistan. The Index comprises of 100 companies selected on the basis…

PSX remains under pressure as of weak market sentiments Pakistan Stock Exchange (PSX) remained under pressure during the week ended 27th August 2021, apart from Monday, where the benchmark index crossed the much anticipated barrier of 48,000 points to close at 48,112. The weak market sentiments, coupled with Rupee depreciation, geopolitical tensions in the region and uncertainty over talks with IMF continued to dampen investors’ confidence during the rest of the week. The index could not sustain the massive selling during week and cumulatively lost 463 points, down 0.97%WoW, to close at 47,137 points. Despite receiving US$2.7 billion inflow under…

Heavy rains and floods in China and Europe have recently dominated headlines around the globe. Most-affected was China’s Henan province, home to one-tenth of country’s total agriculture output and 36% of China’s total primary Lead capacity (used in batteries) and 15% of recycled Lead capacity. Western Europe (Germany, Belgium and the Netherlands) embraced highest rainfall in decades, causing transportation and production disruption in the Rhine valley – a major shipping route for commodities in Northern Europe. Moreover, Rhineland-Palatinate and North Rhine-Westphalia region (areas most hit in Germany) are home to manufacturing facilities of top steel producers. Disruptions in steel supply…

Index regains momentum, covid 4th wave may worry sentiment Pakistan Stock Exchange (PSX) remained range bound during the week ended 13th August 2021 and closed at 47,170 points, down 0.67%WoW. The geopolitical uncertainty kept the investors at bay, evident from 37.8%WoW decline in average daily turnover to 306 million shares. Key data points released during the week included: 1) trade deficit for July 2021 rising to US$3.1 billion, up 85.5%YoY on increase in global crude oil price and 2) remittances remaining stable at US$2.71 billion. The auto numbers released showed PSMC/INDU recording highest ever monthly sales with 15,181/6,715 units, on…

Telecommunication companies and commercial banks have been converging for years. According to some sector experts, banks are witnessing greater competition from telecom operators, which are aggressively entering into financial services, especially in transactional lines of business. Therefore, there is a need to explore the opportunities for complementing each other to attain greater synergy. Retail banks have been eager to push digital channels, such as fixed and mobile, as an important part of their operations, since they started offering services to their clients through the web almost 20 years ago. Today, all banks are facing the digital age with a broad…

The State Bank of Pakistan (SBP) has issued its flagship annual publication, the Financial Stability Review (FSR) for CY20. The Review presents performance and risk assessment of various stakeholders in the financial sector including banks, non-banking financial institutions, financial markets, non-financial corporates and financial market infrastructures. The FSR highlights that CY20 was a challenging year for the financial sector as COVID-19 pandemic triggered deepest global recession since the Great Depression. Besides enormous loss of lives worldwide due to this health crisis of epic proportions, economic activities were severely disrupted. To mitigate the adverse implications, national authorities and central banks around…

As the data centre landscape continues to, the industry is expected to grow exponentially. With growing reliance on digital connectivity, evolve demand is likely to ramp up further due to the imminent rollout of 5G, IoT-linked devices, data localization and cloud adoption. The 5G, the next big thing in Pakistan telecom, is not just about communications. If 4G was for data, 5G would be for device connectivity. The superfast 5G network is expected to create a network of connected devices, enabling millions of applications capable of transforming every sector and every minute event happening across the country. Time is changing…

Stocks end flat, results season in limelight Pakistan Stock Exchange closed almost flat during the week ended on 16th July 2021 at 47,834 points, up 0.6%WoW. The investors preferred to remain on sidelines eyeing Eidul Azha holidays. Average daily trading volumes contracted 4.0%WoW to 467 million shares. Major activity continued to be in the main boards items. Similar muted performance was recorded across all sectors with exceptions being Modarabas (up 57.3%WoW), and Textile Weaving (up 9.1%WoW). Major news flows of the week included: 1) LUCK locking-in contract for setting-up plant for manufacturing of Samsung mobiles in Pakistan, 2) Covid positivity…

Engro story began in 1957 when Pak Stanvac – an Esso/Mobil joint venture – stumbled upon vast deposits of natural gas in Mari while pursuing viable oil exploration in Sindh. Pak Stanvac’s focus was exclusively on oil exploration; however, the discovery shifted the impetus to Esso, which decided to invest in the massive industrial potential of Mari gas field. Esso proposed the establishment of a giant urea plant in Daharki, about ten miles from the Mari gas fields, which would use natural gas produced as its primary raw material to churn out urea fertilizer. Talks with the Government of Pakistan…