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Prospect of earlier Fed rate hike sends Asia markets...

June 17, 2021: Asian markets mostly fell Thursday and the dollar held strong gains after the Federal Reserve brought forward its forecasts for hiking interest rates as it looks to prevent overheating in the US economy, which is enjoying a blockbuster recovery.

After a much-anticipated meeting, top bank officials maintained their ultra-easy monetary policy and repeated their belief that the sharp spikes in inflation were expected as businesses reopen and people return to their daily lives.

Officials have for months pledged not to budge from their highly accommodative measures and will stay the course until unemployment is tamed and prices are rising excessively for a long period of time.

However, with the rebound looking well established, they have lately edged closer towards

The closely watched "dot plot" of policymakers' forecasts for interest rates showed 11 of the 18 committee members now expected at least two hikes in 2023.

As recently as March, estimates showed only seven officials seeing a liftoff in 2023. Now there are seven who see next year as a target.

After the meeting, Fed boss Jerome Powell said the projections "do not represent a committee decision or plan" but that the bank was ready to alter policy if it sees signs inflation moved "materially and persistently beyond levels consistent with our goal" of two percent.

Inflation has surpassed that for the past three consecutive months and in May hit a 13-year high.

Powell also said the board had started talking about when to wind in its bond-buying scheme, which along with low rates and vast government stimulus has been crucial to driving a more than year-long rebound in equities from their April 2020 lows.

He said the Fed would give plenty of notice before making any major changes, and will "do what we can to avoid a market reaction".

While many markets have hit record or multi-year highs in recent months, traders have been worried that the era of record low borrowing costs could be nearing an end soon.

Michelle Girard of Natwest Markets told Bloomberg TV: "The move in the dot plot raised concerns that maybe even though the Fed now believes they are not going to be raising rates anytime soon that the timetable might be tightened up, might be moved forward.

"We've gotten to a point that has everyone feeling slightly less comfortable in assuming that the Fed is going to be able to be as patient for as long as they would like."

- Dollar on the rise -

All three main Wall Street indexes ended in the red but off their earlier lows as investors warmed to the idea that the bank will take it slow and steady.

Asian markets were mostly down but also paring initial steep losses as traders see the tightening measures are being debated owing to the positive economic outlook.

Tokyo, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Jakarta were all in the red, though Hong Kong was flat and Shanghai edged up.

The prospect of higher US rates sent the dollar surging against the yen, pound and euro, and maintained its strength in Asia, while rallying across the board against other units.

 It was up more than one percent against the South Korean won, Australian dollar, Mexican peso and South African rand, while the Indonesian rupiah, Thai baht and Canadian dollar were also under pressure.

The greenback's rise also weighed on dollar-priced oil, with both main contracts retreating around one percent from their multi-year highs. Still, observers said they considered the black gold would enjoy further upside owing to an expected pick-up in demand as the world recovers from the pandemic.

Investors were also keeping tabs on metals markets after China on Wednesday said it would release state stockpiles -- including copper, aluminium and zinc -- to manufacturers as it looks to tone down prices, which have surged, with demand rocketing as economies rev back up.

Officials in the world's top metals consumer have grown increasingly worried about surging costs -copper hit a record high last month -- while they have also warned against speculation, which has added to the rally.

In a sign of the impact the issue is having, factory gate inflation surged nine percent in May, its highest rate since 2008.

"We haven't seen the country release state reserves for years," Jia Zheng, at Shanghai Dongwu Jiuying Investment Management, said. "This will boost short-term supply, sending a bearish signal to the market."


Coca Cola Pakistan announces $50mn investment for 7th Production...

June 17, 2021: A delegation of Coca-Cola Beverages Pakistan Limited (CCI Pakistan), GM Ahmet Kursad Ertin met with the Prime Minister of Pakistan and announced an investment of USD 50 million for a Greenfield project the company plans to set up in the Haripur District, Khyber Pakhtunkhwa (KP).

This will be CCI’s 7th production facility in the country. The construction of this new state-of-the-art plant site is scheduled for completion by the first quarter of 2022. It will mainly cater to the beverage needs of northern Pakistan.

During the meeting, Mr. Ahmet Kursad Ertin presented the company as a leading member of the Pakistan-Turkey Business Council and one of the largest private Turkish investors in Pakistan, which is paving the way for other Turkish investors. According to the delegation, the proposed project will not only bring major investment to the region but also create direct and indirect employment opportunities and revenue generation for the Government as well as for third-party suppliers, vendors & distributors.

A report on the socio-economic impact of CCI’s business was also presented to the Prime Minister. The report reveals that CCI Pakistan’s value chain adds a staggering PKR 865 billion income to the country’s GDP annually – which is about 1.95% percent of the national GDP. Further, CCI’s Corporate Social Responsibility (CSR) projects were also highlighted, which include the Paani Project (Water Filtration Plants) across Pakistan, COVID-19 Relief of USD 1 million, and recently signed MoU of planting 50,000 trees across Pakistan.

The ambassador of Turkey to Pakistan, H.E. Ihsan Mustafa Yurdakul accompanied the CCI Pakistan delegation. Other delegation members included Syed Omar, Director of Public Affairs and Communications, and Mr. Basit Pirzada, Public Affairs Manager. Government officials present at the meeting included Federal Minister Industries and Production, Advisor Commerce and Investment, Federal Secretary Board of Investment, and Chairman Federal Board of Revenue (FBR).

CCI, mainly owned by Anadolu Group - one of Turkey’s leading industrial conglomerates -is a multinational beverage company operating in 10 countries with 26 plants. CCI Pakistan, a subsidiary of CCI, produces, distributes, and sells sparkling and still beverages of The Coca-Cola Company in Pakistan. It currently serves a consumer base of 208 million with 6 production plants and a workforce of 2,500 employees across Pakistan.

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NBP issues Foreign Exchange Rate

June 17, 2021: Treasury Management Division of the National Bank of Pakistan (NBP) on...

Budget FY22: Many things to cheer for Capital Market

June 14, 2021 (MLN): Staying true to their pre-budget promises, the PTI government on Friday presented its 3rd budget in National Assembly, with a theme of sustainable and inclusive growth to be achieved through a bottom-up approach.

Certainly, it has been received positively by the public and private sectors as there was no additional tax burden announced due to the ongoing Covid-19 emergency and some significant relief majors for some sectors.

For the capital market, it has emerged as an astonishing supporter, as an array of tax concessions, duty drawbacks, and pro-growth policies were announced.

While the PSX has recovered handsomely from its Covid-19 inflicted lows in March 2020, it seems that the government is aiming to elevate people’s wealth and savings ahead of the next general elections in 2023.

After a long outstanding demand from the investor fraternity, the government gave a major incentive to the Pakistan Stock Exchange (PSX) by reducing the Capital Gain Tax (CGT) rate on the disposal of securities to 12.5% from 15%. This will encourage investment in Pakistan Stock Exchange (PSX), resulting in higher tax collection from the disposal of securities. The government also guided that CGT may progressively decline in the coming years. Simultaneously, the Budget also proposes an increase in CGT on real estate investment beyond certain thresholds, this also likely to improve the outlook for liquidity on the PSX.

Another significant demand from the capital market was the reduction of Withholding Tax (WHT) on income from margin financing transactions. Keeping this request at hand, the government proposed to delete WHT of 10% on NCCPL Margin Financing. This is also a positive sign for the stock market as this will likely increase the use of leveraged products at PSX. An upward shift in the level of margin financing can be expected which currently stands at Rs11.45bn, down from its 1-yr high of Rs14.03bn recorded in Feb’21.

At the same time, the government has removed WHT on members of the stock exchange. In addition, the turnover tax for non-energy companies has been reduced from 1.5% to 1.25%, and for refineries, from 0.75% to 0.5%. The rate for OMCs and gas utilities remained at 0.75%. The rate was last revised up by 0.25ppt in the FY20 Budget. Both the measures are positive for the stock market as they will likely boost trading activity at PSX and also enhance the investor base in the country.

On the downside, tax credit on new listings at PSX has been abolished. Previously new companies listed on PSX could avail of 20% tax credit for the first two years and 10% for the subsequent two years. This change could dissuade new entities from getting listed on PSX. New listings have remained persistently low at PSX historically due to multiple reasons. This adjustment could further slow down IPO activity in the country.

The stock market, which generally reacts well to the growth budgets, has been displaying disappointing performance post-budget announcement, where the benchmark KSE-100 index has gained only 174 pts as of today and settled at 48,481 points level. Nevertheless, a growth-oriented budget would strengthen investors sentiments going forward as they foresee a rise in corporate earnings. Moreover, AKD Research in its report also highlighted that keeping sectoral development aside, CGT development alone can potentially propel the market above 50k level.

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Citi Pharma IPO oversubscribed by 2x

June 16, 2021: The book-building process of Citi Pharma’s Initial Public Offer (IPO) has concluded with an oversubscription of 2 times, according to Topline Securities, advisor and book-runner of the issue.

“The IPO received an overwhelming response from institutional investors and high-net-worth individuals as the strike price clocked in at Rs 32/share, 14.3% higher than the floor price of Rs28,” the leading API Manufacturer of the country said in a statement.

Citi Pharma has raised Rs 2.32 billion in total, making it the second Pharma sector IPO in 23 years and the single largest IPO of 2021 till date. 

 “The response to the book building was far better than our expectations,” said Mohammed Sohail of Topline Securities. In the last IPO (Organic Meat) managed by Topline investors have made a gain of close to 90% in a year

 Several brokerages had issued almost unanimous calls to ‘subscribe,’ which resulted in investor demand amounting to Rs 4 billion against the IPO’s book-building size of Rs 2 billion. Investors who bid at PKR 32 will get approx. 10% of their bid quantity.

 The general public will subscribe to the remaining 18.1 million shares (25 percent of the total offer size) on June 23/24 at the strike price of Rs 32” the company said. 

Rizwan Ahmed, CEO of Citi Pharma, in his message thanked investors for their overwhelming response and vowed to ensure the growth of their shareholders’ equity.

Omar Salah Ahmed - Head of Corporate Finance & Advisory at Topline added "Citi Pharma is one of the most unique companies in Pakistan's pharma sector and this expansion will bring in a new phase for the Company. We wish them all the best for the future as well as the investors - who will no doubt be a part of a great growth story. Investors have responded to the future growth."

 Citi Pharma plans to become the first fully-integrated listed pharmaceutical company in Pakistan, serving from raw material consumers to end medicine consumers.

Citi Pharma has achieved revenue growth from PKR 1,016 million in FY16 to PKR 3,528 million in FY20. Showcasing 36.2% CAGR in 5 years. The company recorded PKR 4,015 million in sales during 9MFY21 already surpassing last year’s sales. 

The company is planning to expand its existing capacity of 3,600 tonnes per annum of paracetamol to 6,000 tonnes per annum. In addition, the company says it plans to add new APIs as well as a pharmaceutical formulation, or final products, to its existing product line.

Citi Pharma also wants to build three manufacturing facilities, taking its total capacity to 200,000 vials/injectables per day, dry powder/suspension to 60,000 bottles per day, capsules to 4.2 million per day, and tablets to 4.5 million per day. These include dedicated manufacturing lines for penicillin, cephalosporin, and psychotropic and narcotics drugs.

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