January 6, 2020 (MLN): The KSE-100 index has lost nearly 679 points in the intraday session, and is trading at 41,644-level as of now.
The investors’ sentiments took a hit after the US assassination of a top Iranian general last week fanned fears of a major conflict in the Middle East.
So far, Commercial Banks and Fertilizer sector have endured the maximum losses as they have collectively taken away 226 points from the index.
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July 12, 2020: The Union of Small and Medium Enterprises invited the attention of the Prime Minister (PM) Imran Khan to the delay in the announcement of the SME policy 2020 which is ready but in doldrums for reasons best known to the ministry of industries.
President UNISAME Zulfikar Thaver said as a member of the advisory committee of the SME policy he witnessed the enthusiasm and passion of all stakeholders but now he is witnessing the frustration because of the delay which also means delayed implementation as well. UNISAME has urged the PM to announce the SME policy forthwith and also the board of directors of the Small and Medium Enterprises Development Authority (SMEDA).
Thaver said the idea was to replace the SME policy 2007 with an updated version encompassing all aspects of SME promotion and development. The simplest and not expensive way was to revalidate the old policy with few modifications wherever required.
However, he regretted that the policymakers could not comprehend the simple fact that the parameters of the SME definition needed to be widened rather than narrowed.
The valid argument of UNISAME representing the sector was the depreciation of the rupee and this was well supported by the State Bank of Pakistan (SBP).
The actual factual position is that by narrowing the definition of SMEs, the dynamic upper-medium sector will be excluded and will not fit in the definition.
It is pertinent to note that currently, it is this upper-medium sector which is most vibrant and has the resources to set up new import substitution industries. The small and medium are badly affected by the pandemic and the big sector is shy, it is waiting for the economy to get into gear and recover as against the upper-medium is inclined and ready.
The argument which the government experts are giving is that the upper mediùm sector will enjoy the tax benefits as well which are for the SMEs. This matter can easily be resolved by placing a ceiling of assets, turnover or employment strength for the purpose of tax benefits, and for all other purposes, the upper-medium could be defined as SMEs. One thing is clear that they cannot be labeled as large so obviously they come under SMEs. The last definition of SMEs was those whose employment strength was 250, turnover was up to 800 million and productive assets up to 100 million. Considering the depreciation of the rupee it calls for broadening of the definition and narrowing it amounts to being irrational.
Leaving the definition what is most harmful is the delay in the announcement and implementation of the SME policy which is expected to make life easy for SMEs in many ways such as cost of doing business, ease of doing business, transfer of technology, marketing, and financial support for the sector and other facilities, support, encouragement and motivation much needed for the sector.
Thaver said in view of the importance of the SME policy the SMEs, SBP, SMEDA and all stakeholders are looking forward to the SME policy.
Press Release
July 12, 2020 (MLN): The State Bank of Pakistan (SBP) has imposed monetary penalty worth Rs 1.684 billion on fifteen banks that violated SBP’s rules and regulations during March-June 2020.
According to a notice issued by SBP, the penalty was imposed mainly on violations in the area of CDD/KYC/CFT, Asset Quality, FX Operations and Corporate Governance.
Among the banks, the highest penalty of Rs 286.33 million was imposed on Bank of Punjab (BOP). In addition to penal action, the bank has been advised to strengthen its process related to KYC/CDD, Asset Quality, FX Operations and Corporate Governance in order to avoid recurrence of such violations in future.
Another major bank, National Bank of Pakistan (NBP), was fined Rs 269.81 million for the same offense.
Hefty fines of Rs 204.217 million and Rs 158.474 million were imposed on Habib Bank Limited (HBL) and MCB Bank Limited (MCB) for procedural violations in the area of CDD/KYC.
Zarai Taraqiati Bank Limited (ZTBL) was the fifth in terms of penalty with Rs 147.25 million on account of violations in the area of AML/CFT. In addition to penal action, the bank has been advised to conduct an internal inquiry on breaches of regulatory instructions and take disciplinary action against the delinquent officials.
The other banks that faced monetary fine by SBP on account of violating its guidelines include; United Bank Limited (RS 137 million) , Faysal Bank Limited (Rs 96.128 million), Meezan Bank Limited (Rs 81.060 million), Punjab Provincial Cooperative Bank Limited (Rs 81.500 million), JS Bank Limited (Rs 71.417 million), Bank Al Habib Limited (RS 46.802 million), Bank Alfalah Limited (Rs 40.305 million), Askari Bank Limited (Rs 29.814 million), Habib Metropolitan Bank Limited (Rs 22.805 million) and Bank Islami Pakistan Limited (Rs 11.517 million).
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July 12, 2020 (MLN): The highlight of the departed week was the exports number as per which Pakistan left India, Bangladesh behind. Advisor for Commerce, Textile, Industry and Production, and Investment of Pakistan, Abdul Razak Dawood has appreciated exporters for showing good performance during the Fiscal Year 2019-2020 as compared to the regional counterparts.
Apart from this, the other important economic and business events that took place during the last week are in order so as to become acquainted with the recent developments in Pakistan’s economic and public policy.
Events of Importance through the Week:
Taking cognizance of the negative fallout of COVID-19 Pandemic for the economy, SBP curtailed the end-user markup rates on Temporary Economic Refinance Facility (TERF) to 5% from the existing 7% and on Long Term Financing Facility (LTFF) for the non-textile sector to 5% from 6%. In addition to this, SBP also extended the availability of Deferment of Principal Amount of Loans facility till September 2020.
On equity front, The Organic Meat Company Limited (TOMC) closed its Book Building successfully. The company received total participation of Rs. 1,371,162,584 against an issue size of Rs. 720,000,000 at the floor price of Rs. 18 per share. The issue has been oversubscribed by 1.9x.
On the upside, German Fashion House Hugo Boss placed its first order of sportswear to a Pakistani company.
Also, Ambassador of Japan Matsuda Kuninori has shown keen interest in developing mutual agricultural research and importing Basmati rice from Pakistan in order to further strengthen bilateral trade between the two countries.
Moreover, Pakistan’s e-commerce and digital economy has registered a huge boost in sales during the coronavirus pandemic as shoppers’ physical mobility is limited, Arab News report said.
On energy front, Pakistan and China signed an agreement for the construction of the Azad Pattan Hydel Power Project. With an investment of 1.5 billion dollars and 700.7 megawatts of electricity, Azad Pattan will involve no fuel import, enabling the country to move towards cheaper and greener power while generating local job opportunities.
Another breakthrough was witnessed as DG Khan Cement won cement export orders to Philippines.
With regards to matter pertaining to K-Electric, Prime Minister Imran Khan directed Federal Minister Asad Umar, Special Assistant Shehzad Qasim and Governor Sindh to resolve issues of K-Electric at earliest.
Moreover, US IDFC will provide financial support to Pakistan in PPP mode, as per statement issued from CEO of U.S. International Development Finance Corporation (IDFC), Mr. Adam Boehler, “the funds are available through both debt & equity to finance projects in Pakistan and for infrastructure projects in PPP mode.”
Meanwhile, Federal Secretary Ministry of IT & Telecom Shoaib Ahmad Siddiqui chaired a meeting between the Ministry of IT & Telecom and Huawei Technologies on Wednesday to discuss a broad range of initiatives being taken by Huawei Technologies to increase the scope of Information Technology and Telecom in Pakistan.
On the downside, the U.S. Department of Transportation said it has revoked permission for Pakistan International Airlines (PIA) to conduct charter flights to the United States, citing Federal Aviation Administration (FAA) concerns over Pakistani pilot certifications.
Lastly, the International Monetary Fund (IMF) in its recent report under the head of policy tracker which summarizes the key economic responses governments are taking to limit the human and economic impact of the COVID-19 pandemic, said that a gradual recovery in Pakistan is expected in FY 2021 as the economy reopens.
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July 12, 2020 (MLN): The KSE-100 index gained around 1,139 points during the departed week and closed 36,190-mark i.e. nearly 3.25% percent higher than the closing of the previous week.
According to Arif Habib Limited, the market commenced on a positive note due to the flattening of the COVID-19 curve along with the higher recovery rate of patients. Moreover, an increase in SBP’s foreign exchange reserves, reduction in mark-up on Long Term Financing Facility and Temporary Economic Refinance Facility helped in boosting market sentiments.
Commercial Banks emerged as the best performing sector during the week, as it contributed about 494 points to the benchmark index, followed by sectors such as Cement, E&P, and Automobile, which combinedly contributed 427 points to the index.
Company-wise, the scrips of HBL, PPL, UBL, NBP, and INDU were the most desirable ones as they contributed 141, 70, 65, 46, and 43 points, respectively.
Figures released by NCCPL showed that foreign investors dumped USD 9.45 million worth of stocks during the week with foreign corporates doing the bulk of the selling.
On the local front, Insurance Companies picked up USD 4.5 million worth of stocks, followed by USD 2.7 million worth of stocks purchased by Local Companies.
Forex:
PKR, which had ended its 7-week run of depreciation against the dollar last week, resumed losing in value as the inflows received by the SBP failed to provide any reprieve to the struggling currency.
While the Rupee closed just 14 paisa or 0.09 percent lower it had depreciated by 75 pasia or 0.45% in the first two days of trading before recovering some of the losses in the remaining sessions of the week.
The dollar traded in a range of 85 paisa, hitting weekly high (bid) of 167 and a low (offer) of 166.15 before closing at 166.3525.
10 Day volatility declined slightly from 5.61 percent to 4.77 percent.
However, some solace can be taken from the fact that PKR has appreciated by Rs.1.70 or 1 percent since the start of FY21.
Money Market:
In the absence of any auctions, the yields in the secondary market displayed a mixed trend with 6-month yields decreasing by 6 basis points while 3 and 12-month yields came down by 17 bps.
However, longer-term yields for 3, 5, and 10 years increased by 20, 6, and 7 basis points.
There is an MTB and PIB (Floating Rate) auction scheduled for Wednesday, July 15, 2020.
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| Weekly Performance | ||
|---|---|---|
| Jul 10, 2020 | Jul 03, 2020 | |
| PKR InterBank | 166.3525 | 166.211 |
| KSE100 Index | 36,190.40 | 35,051.38 |
| Avg Daily Volume | 348,797,285 | 250,739,223 |
| Gold (Karachi) Rs/10 gm | 93,364 | 89,850 |
| KIBOR 6M | 6.78 | 6.88 |
| 10Y PIB | 8.72 | 8.65 |
| EUR | 1.1299 | 1.1243 |
| GBP | 1.2621 | 1.2484 |
| CHF | 0.9412 | 0.9454 |
| JPY | 106.89 | 107.411 |
| GOLD | 1798.22 | 1774.74 |
| NY Light Crude | 40.57 | 40.58 |
| Open Market Rates | ||
| Jul 10, 2020 | Jul 03, 2020 | |
| USD | 168.00 | 168.00 |
| EUR | 189.97 | 188.61 |
| GBP | 212.21 | 207.44 |
| JPY | 1.5726 | 1.5685 |
| AED | 45.78 | 45.78 |
| SAR | 44.82 | 44.79 |
| SBP Data | ||
| T-Bill Auction Cutoff Yield | Jun 30, 2020 | Jun 17, 2020 |
| 3M | 6.8488 | 7.7999 |
| 6M | 6.6599 | 7.4847 |
| 12M | 6.8500 | 7.3600 |
| PIB Auction Cutoff Yield | Jun 24, 2020 | May 28, 2020 |
| 3Y | 7.9700 | 7.6400 |
| 5Y | 8.4400 | 8.0500 |
| 10Y | 8.9900 | 8.6900 |
| 15Y | 9.9000 | 9.9699 |
| 20Y | 10.5100 | Bids Rejected |
| Interest Rate Corridor | Jun 26, 2020 | May 18, 2020 |
| SBP Policy Rate | 7.00 | 8.00 |
| SBP Reverse Repo Rate | 8.00 | 9.00 |
| SBP Repo Rate | 6.00 | 7.00 |
| Weekly Indicators | ||
| Jul 03, 2020 | Jun 26, 2020 | |
| SBP FX Reserves * | 12,041.60 | 11,231.00 |
| Bank FX Reseves * | 6,748.50 | 6,740.00 |
| Total FX Reserves * | 18,790.10 | 17,971.00 |
| Jul 09, 2020 | Jul 02, 2020 | |
| SPI (Combined Group) ** | 133.62 | 132.32 |
| Change - WoW (pct) | 0.98 | 2.29 |
| Change - YOY (pct) | 11.02 | 9.77 |
| Monthly Indicators | ||
| June | May | |
| Consumer Price Index (Base 2015-16) | 132.08 | 131.01 |
| Change - MOM (pct) | 0.82 | 0.32 |
| Change - YOY (pct) | 8.59 | 8.22 |
| WholeSale Price Index (Base 2015-16) | 135.80 | 136.23 |
| Change - MOM (pct) | -0.32 | -2.08 |
| Change - YOY (pct) | 0.93 | 1.50 |
| Sensitive Price Indicator (Base 2015-16) | 128.46 | 127.76 |
| Change - MOM (pct) | 0.55 | 1.70 |
| Change - YOY (pct) | 9.33 | 9.58 |
| June | May | |
| Exports * | 1,592.00 | 1,396.00 |
| Imports * | 3,715.00 | 2,863.00 |
| Trade Balance * | -2,123.00 | -1,467.00 |
| May | April | |
| Home Remittances * | 1,872.86 | 1,790.03 |
| May | April | |
| Total Foreign Investment * | 9.44 | -511.54 |
| Quarterly Indicators | ||
| Mar 31, 2020 | Dec 31, 2019 | |
| Pakistan's External Debt * | 109,948.92 | 110,719.33 |
| Annual Indicators | ||
| FY20 | FY19 | |
| GDP Growth Rate | -0.38 | 1.91 |
| Agriculture | 2.67 | 0.58 |
| Manufacturing | -0.27 | 5.43 |
| Commodity Sector | -0.05 | -0.90 |
| Services Sector | -0.59 | 3.75 |
| Trade Balance * (July - June) | -23,183.00 | -31,805.00 |
| Worker Remittances * (July - May) | 20,654.48 | 20,103.03 |
| Foreign Investment * (July - May) | 1,873.58 | -132.61 |
| Annual Inflation Rate % (July - June) | 10.74 | 6.80 |
| * Amount in USD Million | ||
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