Gold prices edge up on prospects of US fiscal...

January 20, 2020 (MLN): Gold inched higher on Wednesday as the US Dollar remained on the backfoot amid prospects of a hefty fiscal relief package. In the international markets, the gold prices went up by USD 8 and traded at USD 1,853 per ounce while silver was valued at USD 25.43 an ounce.

Gold rates inched higher in the domestic bullion market as the price of 24 karat gold rose by Rs 150 to Rs 113,000 per tola against the price of Rs 112,850 per tola reported in the previous session.

According to the data provided by the All Sindh Saraf Jewellers Association, the price of 10-gram of 24k gold also increased by Rs 130 and was sold for Rs 96,880 at the closing of trade as opposed to Rs 96,750 reported yesterday.

However, silver rates remained unchanged at Rs1,300 per tola. The price of 10 grams of silver also stood the same at Rs1,114.54.

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Petroleum Division responded to the claims made by former...

January 20, 2021 (MLN): The Petroleum Division, Ministry on Energy has responded to the claims being made by the former Minister Mr. Miftah Ismail in his article under the title ‘The LNG Story’, published in a section of the press.

In a series of tweets on Wednesday, the Petroleum Division provided facts about the claims being made by the former Minister regarding LNG terminals and its procurement. In an article, while comparing the spot price with the term price of LNG, Miftah Ismail stated that a 5-year bid for one cargo was used to set the price for the Qatar contract. Anybody who has familiarity with the financial/ commodity markets knows this is wrong since the two price determinants are volume and term. Therefore, the price of a 60-cargo deal over 5 years should not be used for a 900-cargo deal over 15 years. Despite knowing the fact that the LNG market was going to be flooded with new LNG supplies after 2017-2018, the previous government still chose to enter into a 15-year agreement, the division said.

The division said that the former Minister’s claim about merchant LNG terminals is also incorrect. The truth is that private entrants have been trying to set up a private LNG terminal on a merchant model since 2010. ExxonMobil announced to set up a terminal in Feb 2017 and pulled out of the project in October 2017 because unlike the oil business, a sufficient volume of confirmed gas customers is required to underpin the investment which was not forthcoming.

The Division further went on to say that it is also known fact that the previous government set up LNG terminals at fixed payment (take or pay method) at around $0.53 million per day, thereby taking the entire financial risk. Since the previous government had declared LNG as petrol and the price of LNG remained ring-fenced as a consequence, there are quite a few months when spot LNG was not required at all. Ordering LNG without confirmed demand creates huge financial losses.

Moreover, the article accused the current government of not buying cheaper LNG in the summer. Responding to this accusation, Petroleum Division said that without storage, cheaper LNG could not have been stored. The former Minister must know the fact that the longer lead time for procurement of spot cargo does not guarantee a better price. The cheapest cargo ($2.23/mmbtu) ever procured by Pakistan had 39 days between bid opening and cargo delivery, whereas the most expensive cargo ($10.27/mmbtu) ever procured had 71 days between bid opening and cargo delivery. Although there is never a fair comparison between the spot price and long-term price, Pakistan has procured 52 spot cargoes during 2017 to 2020 at an average slope of 11.9063%, whereas the 15-year G2G slope is 13.37%.

Presenting a narrative that India had already purchased all of its spot cargoes well before the winter season is also entirely misleading, the Division said.

The truth is due to Japan’s spree buying of spot cargoes, many Indian buyers have also faced the same situation as Pakistan, as reported by S&P Global on January 13, 2021. Despite these market conditions, the government managed to meet the requirement of LNG in December 2020 and January 2021 at the lowest prices of any winter period in Pakistan, it added.

 Lastly, contrary to the facts, Dr. Miftah stated that this government produced more electricity on furnace oil instead of LNG,  The Division stated that only 3.6% & 5% of power was generated by RFO in 2020 & 2019 respectively, whereas, the former government produced 28% electricity on RFO in 2017.

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Mere registration of a company doesn’t confirm the right...

January 20, 2021: The Securities and Exchange Commission of Pakistan (SECP) has clarified that mere registration of a company with SECP does not authorize acceptance of deposits from general public.

Deposit taking by companies other than banking companies is illegal in terms of section 84 of the Act. Financial services including car financing, leasing, acceptance of deposits, house financing etc. can only be offered by specialized companies holding valid licence and regulatory approvals.

General public is advised in their own interest to be careful, not to deal and invest in illegal schemes offered by such companies.

In this regard, the SECP while exercising its regulatory power to curb the menace of illegal business practices in the country has taken stern actions against “Lasani Oil Traders (Private) Limited” and “New Lassani Chicks & Chicken (Private) Limited”. SECP has promptly initiated legal proceedings for the winding up of these companies in terms of section 301 read with section 304 of the Companies Act, 2017 and disqualification of directors thereof in terms of section 172 of the Act.

SECP has observed that both the companies are using their registration with SECP and FBR to win public confidence and are publicizing unauthorized investment schemes through Facebook groups and posts on social media. In an attempt to block companies’ access to general public, SECP approached PTA to block Facebook/twitter pages, cell phone numbers registered in the name of companies and its directors. The SECP has also made reference of the case to the relevant law enforcement agency.

The SECP has made public a list of 50 companies on its official website, involved in similar un-authorized business activities including illegally collecting deposits from investors by making false promises of exceptionally tantalizing returns.

Press Release

PSX Closing Bell: Harvester of Sorrow

January 20, 2021 (MLN): The KSE-100 index ended the trading session on Wednesday with a 226.29 point or 0.49 percent decline to close at 45,676.94.

The sentiments remained weak owing to the uncertainty regarding the IMF review. While most of the projections provided by the brokerage houses today hinted towards no change in policy rate by the State Bank, investors chose not to inculcate that in their trading activity.

Pessimism prevailed across the board as even a rise in oil prices in international markets, owing to the expectations of a massive stimulus spending by the incoming U.S. administration to boost fuel demand and draw down crude stocks, could not lift the index up.

The Index remained negative throughout the session touching an intraday low of 45,546.15

Of the 93 traded companies in the KSE100 Index 29 closed up 64 closed down, while 0 remained unchanged. Total volume traded for the index was 219.02 million shares.

Sector wise, the index was let down by Oil & Gas Exploration Companies with 64 points, Fertilizer with 49 points, Commercial Banks with 47 points, Cement with 32 points and Technology & Communication with 27 points.

The most points taken off the index was by OGDC which stripped the index of 35 points followed by HUBC with 33 points, ENGRO with 30 points, MCB with 25 points and PPL with 23 points.

Sectors propping up the index were Vanaspati & Allied Industries with 23 points, Miscellaneous with 9 points, Oil & Gas Marketing Companies with 9 points, Chemical with 7 points and Tobacco with 7 points.

The most points added to the index was by HBL which contributed 35 points followed by UNITY with 23 points, MARI with 9 points, SHFA with 9 points and PAKT with 7 points.

All Share Volume decreased by 15.17 Million to 476.62 Million Shares. Market Cap decreased by Rs.24.12 Billion.

Total companies traded were 413 compared to 425 from the previous session. Of the scrips traded 150 closed up, 246 closed down while 17 remained unchanged.

Total trades decreased by 14,723 to 144,683.

Value Traded decreased by 0.80 Billion to Rs.19.13 Billion

CompanyVolume

Top Ten by Volume

Silkbank42,706,000
Unity Foods41,064,248
Hum Network38,635,500
Power Cement28,183,000
TRG Pakistan21,702,000
Lotte Chemical Pakistan21,122,000
K-Electric18,219,000
Pakistan Refinery14,307,000
Fauji Foods11,328,500
Kot Addu Power Company9,563,500

 

SectorVolume

Top Sector by Volume

Technology & Communication89,353,200
Commercial Banks72,867,850
Cement48,343,076
Vanaspati & Allied Industries41,069,148
Power Generation & Distribution36,238,395
Chemical29,940,800
Food & Personal Care Products25,238,040
Refinery21,526,600
Engineering17,707,535
Oil & Gas Marketing Companies13,693,799

 

 

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PKR strengthens by 11 paisa against greenback

January 20, 2021 (MLN): Pakistani rupee (PKR) appreciated by 11 paisa against US Dollar (USD) in today's interbank session as the currency closed the day's trade at PKR 160.5 per USD, against yesterday's closing of PKR 160.61 per USD.

The rupee traded within a very narrow range of 9 paisa per USD showing an intraday high bid of 160.48 and an intraday Low offer of 160.42.

Within the Open Market, PKR was traded at 160.20/160.80 per USD.

Alternatively, the currency lost 1 rupees to the Pound Sterling as the day's closing quote stood at PKR 219.37 per GBP, while the previous session closed at PKR 218.34 per GBP.

Similarly, PKR's value weakened by 17 paisa against EUR which closed at PKR 194.75 at the interbank today.

On another note, within the money market, the overnight repo rate towards close of the session was 7.10/7.20 percent, whereas the 1 week rate was 7.05/7.10 percent.

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K-Electric’s flagship 900 MW power plant BQPS-III progressing on...

January 20, 2021: K-Electric’s flagship 900 MW power plant, BQPS-III is progressing on fast track and the Gas Turbine, Generator and Heat Recovery Boiler for the first unit of 450 MW have arrived at the power utility’s Bin Qasim Power Complex. Steam Turbine and Transformers for the first unit are on the way to the site.

All relevant civil works are progressing swiftly for the installation with the target of ensuring that the first unit is ready to be commissioned by the summer of 2021, and the second unit of 450 MW by the end of the year.

The RLNG-based power plant will go a long way in meeting Karachi’s power demand and ensuring the city and its industries stay energized to play their due role in the national economy.

The addition of the 900 MW RLNG Power Plant will increase the power utility’s generation capacity, efficiency, and reliability. The National Electric Power Regulatory Authority (NEPRA) has also recently approved the modification in the generation license of K-Electric, with the addition of the 900 MW RLNG powered BQPS-III to the power utility’s generation capacity. The power plant is being built as per the power utility’s business plan, approved under the Multi Year Tariff for the control period 2017-2023.

Moonis Alvi, CEO K-Electric said the project is a major private sector investment in the country's power sector. “In addition to bridging the demand for electricity, this plant will also enable us to gradually phase out some units of the aging and less efficient BQPS I plant, which have been in service for more than 30 years. The BQPS-III would result in lower import costs for the government, affordable power for consumers and a much smaller carbon footprint as compared to furnace oil power plants, and K-Electric is committed to commissioning the project as per planned timelines. I am confident that we will continue to have the support of the government and other stakeholders since there is no doubt that the upcoming 900MW RLNG power plant is very crucial for Karachi.”

While the approval of the 900 MW plant is a vital element towards meeting Karachi’s growing power demands, other commitments also need to be fulfilled in a timely manner for this reality to be realized. Heads of Agreement with Pakistan LNG Limited (PLL) for supply of 150 mmcfd of gas for BQPS-III has already been signed, subsequently negotiations on the Gas Sale Agreement (GSA) have reached to the advance stage and any potential hurdles need to be resolved as per past commitments by the Cabinet Committee on Energy (CCoE).

The power utility appreciates the decision of the Oil and Gas Regulatory Authority (OGRA) to approve K-Electric’s application for a license to construct and operate a gas pipeline, that will supply Re-gasified Liquefied Natural Gas (RLNG) for the upcoming RLNG-based 900 MW BQPS-III power plant and supplementing fuel requirement of the power plants located at its Bin Qasim Power Complex. This is a very positive development for KE as the grant of the license by OGRA is a key step in ensuring that the upcoming BQPS III power plant receives the right amount of gas, at the right pressure. This milestone will go a long way in helping bridge the supply-demand gap in Karachi in the years to come.

The 900 MW RLNG based plant and its timely completion is just one step towards keeping Karachi energized. Further, keeping in view surplus of power in national grid, KE would off-take additional supply of 1,400 MW from National Grid to mitigate demand supply gap in future. In this regard, subsequent to CCOE decision in June 2020 for Approval of Supply of Additional Power to KE from National Grid, KE is engaged in negotiations with the CPPA for procurement of this additional 1,400 MW from the National Grid under a long-term Power Purchase Agency Agreement (PPAA). This will be in addition to the existing supply 650 MW from the National Grid. Additional Supply of 1,400 MW will be procured in phases and the first phase will include 450 MW starting from April 2021 after the completion of rehabilitation works on Jamshoro-KDA transmission lines and NKI cross tripping tests. Subsequently in the next phases (2022-2023), completion of Dhabeji and KKI Grid along with transmission lines (Interconnection Facilities) would also be required for complete evacuation of 1,400 MW from the National Grid. NTDC’s support for timely completion of Interconnection Facilities will be of immense importance.

While, K-Electric is fully committed to its future planned investments, sustainable resolution of the government receivables issue which have reached to an unsustainable position and timely approvals by NEPRA for quarterly tariff adjustments and mid-term petition, remain critical to the execution of these planned investments to ensure smooth supply of power to Karachi. K-Electric is confident that all concerned stakeholders will continue to lend support so that KE achieves its vision of bringing Karachi to a power surplus situation by the year 2022.

Press Release

Pakistan receives $5.69 billion foreign aid during 1HFY21

January 20, 2020 (MLN): Pakistan has received $5.69 billion total external inflows during 1HFY21 from bilateral and multilateral development partners, foreign commercial borrowing, and time deposits to restructure its economy and finance its development projects.

This foreign aid provides a wide range of support in the areas of capital formation, employment, health, education, public transport, water reservoir, and more, driving economic growth and helping to promote socio-economic and human development in Pakistan.

According to the data released by the Policy Analysis & Development Wing of EAD, these external inflows from multiple sources is around 46% of the annual budget estimates of $12.23 billion for the entire fiscal year FY21. In the corresponding period of FY20, the external inflows were $5.92 billion i.e. around 46% of the annual budgeted amount of $12.96 billion.

Going into details made available by the Policy Analysis & Development Wing of EAD, out of $5.69 billion, the government received $1.63 billion or 29% in the form of program/budgetary support assistance to restructure Pakistan’s economy, $2.05 billion (36%) as foreign commercial borrowing to repay maturing foreign commercial loans, $754 million (13%) as project assistance to finance its development projects for improving the socio-economic development of the country and for asset creation and $246 million (13%) as commodity financing while $1 billion (18%) received as safe deposits from China.

The disbursement from bilateral and multilateral development partners also maintained a strong trend and is $2.63 billion of foreign economic assistance during 1HFY21 against the budgetary allocation of $5.811 billion for FY21 on concessional terms with a longer maturity. These healthy inflows also helped to improve foreign exchange reserves and exchange rate stability, the monthly bulletin of Foreign Economic Assistance by the Economic Affairs Division (EAD) reported.

Foreign assistance obtained by Pakistan through multilateral sources during July-Dec FY21 totaled $2.37 billion. Amongst the multilateral development partners, Asian Development Bank provided $1.12 billion and World Bank $744 million against the budgetary allocation of $2.257 billion.

The monthly bulletin revealed that the collective disbursement from bilateral donors amounted to $260 million during 1HFY21 wherein Pakistan received $95.4 million from China, followed by the United States with $70.5 million and France with $34.3 million.

Increased level of external inflows from multilateral and bilateral development partners is indicative of their confidence in development priorities and policies of the government including implementation of reforms in the priority areas of fiscal and debt management, energy sector, and ease of doing business.

The strong official inflows during the first six months of the current fiscal year helped the government to discharge its external public debt obligation of $2.924 billion against the annual repayment estimates of $10.36 billion for the entire Fiscal Year. Of which, $2.45 billion (84% of total external public debt servicing) was repaid as principal and $470 million (16%) as interest on the outstanding stock of external public debt.

During July-Nov FY21, the monthly bulletin disclosed that the government settled $1.54 billion worth of foreign commercial loans. Pakistan settled $1.15 billion to multilateral and $102 million worth of external loans to bilateral development partners. Considering foreign exchange constraints, financing of development projects and repayments of these huge external public debts compel the incumbent government to further borrow from multiple sources.

For the period Jul- Nov FY21, net transfers to the government were $1.95 billion. Positive net transfers came mainly due to higher inflows from multilateral Development Partners & due to $1 billion in respect of time safe deposit from China.

Interestingly, the stock of external loans which was obtained on market-based instruments has increased merely by $187 million and the share of concessional external loans with longer maturity increased by $760 million.

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Federal Govt grants tax exemption on Panda Bonds

January 20, 2021 (MLN): In a bid to attract investments in Panda Bonds, the Federal Government has exempted the payment of principal and profits on such bonds from all kinds of tax.

The same incentive was given for Eurobonds and International Sukuk by the Government, during a meeting of the Federal Cabinet on Tuesday i.e. January 19, 2020.

As per media reports, the reasoning behind this decision was to raise around $2 billion in debt through Pakistan’s first Chinese currency-denominated bonds and Eurobonds by making borrowing relatively cheaper.

Moreover, the exemption given on such bonds appears to be justified as without it, the transaction costs would have been much higher, which in turn would have made them less attractive in the international markets. It is interesting to note that similar bonds issued in the past had also been granted the same tax exemption.

While the target is to raise up to $2 billion, including around $250 to $300 million from Chinese capital markets, the exact pricing of debt will depend on investors’ appetite, but authorities believe that the cost may be around 5.5% to 6.5%, depending on the instrument and maturity.

To recall, the Government during its meeting held on December 27, 2018, and July 16, 2019, had approved the issuance of sovereign Panda Bonds in the Chinese market as part of a long-term strategy. In the Long Term Plan of the China-Pakistan Economic Corridor (2017-30), both countries had decided to use renminbi as the second international currency to lessen Pakistan’s reliance on dollar, Express Tribune said in its report.

‘The finance ministry has also selected a consortium of China Development Bank, China International Capital Corporation, Citibank and Habib Bank Limited for floating Eurobonds and Sukuk, according to the ministry. It said that the selection of Multi-term Note programme financial advisers was expected to be formalised soon’, the report added.

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Oil rise on hopes of U.S. stimulus and crude...

January 20, 2021: Oil prices rose on Wednesday, adding to solid gains overnight, on expectations the incoming U.S. administration will go ahead with massive stimulus spending that would boost fuel demand and draw down crude stocks.

U.S. West Texas Intermediate (WTI) crude futures climbed 37 cents, or 0.7%, to $53.35 a barrel at 0427 GMT, building on a 1.2% rise on Tuesday.

Brent crude futures rose 35 cents, or 0.6%, to $56.25 a barrel, adding to a 2.1% gain on Tuesday.

U.S. President-elect Joe Biden's Treasury Secretary nominee Janet Yellen urged lawmakers on Tuesday to "act big" on pandemic relief spending, reinforcing hopes of massive spending to boost growth.

"Certainly the expectation is that will support better growth and better demand in the U.S.," said National Australia Bank's head of commodity research, Lachlan Shaw.

However, the market remains concerned about near-term oil demand as the International Energy Agency cut its outlook for first-quarter oil demand by 580,000 barrels per day, due to tight lockdowns and border closures to stop soaring COVID-19 infections.

China's capital Beijing on Wednesday announced stricter COVID-19 control measures and will shut down a subway station after the city reported its biggest daily jump in new COVID-19 cases in more than three weeks.

The country is experiencing its most severe COVID-19 outbreak since March 2020 ahead of the key Lunar New Year holiday season. More than 20 provincial-level regions have asked people to stay put during the holiday.

Germany on Tuesday extended a lockdown for most shops and schools for another two weeks, to Feb. 14.

Traders will be watching out for U.S. crude and products inventory data due from the American Petroleum Institute on Wednesday and from the Energy Information Administration on Friday.

Six analysts polled by Reuters estimated, on average, that crude stocks fell by 300,000 barrels in the week to Jan. 15, but expect gasoline stockpiles rose by 3.0 million barrels. Distillate inventories, which include diesel, heating oil and jet fuel, were seen up by 800,000 bbl.

Reuters

Govt approves Rs 213 million for DLTL payments of...

January 20, 2021 (MLN): Government has approved Rs. 213 million for Duty Drawback of Local Taxes and Levies (DLTL) payments of the non-Textile sector.

The aforesaid announcement was made by Adviser to PM for Commerce and Investment, Abdul Razak Dawood on his official Twitter handle.

He said, ‘These are now with SBP & will soon be disbursed to the relevant exporters. Our policy is not to put any working capital constraints on our exporters.'

‘I hope that this will facilitate them’, he concluded.

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