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CCP achieves major milestones, approves 59 mergers, 43 exemptions...

July 2, 2020: The Competition Commission of Pakistan (CCP), in the fiscal year 2019-20, has processed and granted approval to 59 Merger & Acquisition applications against the annual target of 50, showing the CCP’s promising performance to facilitate the local and foreign investors despite the limitations caused by COVID-19 pandemic.

Out of the total 59 approvals, 51 were Acquisitions, 5 Mergers and 3 Joint Ventures applications. The major sectors where these mergers and acquisitions took place include automotive, household products, food, sugar, oil, power, freight, LNG, insurance, agriculture, coal mining, logistics, pharmaceutical, chemicals, petroleum, healthcare, leasing, plastic, textile, hospitality, financial services, digital payments, mobile phone, investment, IT – Hardware, wind power, and microfinance banking.

Moreover, the CCP also processed and granted Exemptions to 43 undertakings under the Section 5 of Competition Act, 2010. CCP grants exemptions to notified agreements between companies from the prohibition of Section 4 of the Competition Act, on the basis of an individual assessment. Restrictive agreements qualify for exemption if their benefits to general welfare (product improvement, technical or economic progress, benefits to consumer) outweigh their restrictive effects on competition.

During the outgoing fiscal year, the CCP complete 14 enquiries, issued 78 Show cause notices, and passed 15 orders. An important enquiry was concluded In the matter of alleged bid rigging in the tenders issued by Power Distribution companies for the procurement of Line Hardware material. Similarly, the CCP issued hearing notices to 39 sugar mills in the matter of show cause notices issued to the Pakistan Sugar Mills Association and its member sugar mills in 2009 for cartelization. These sugar mills had not challenged the CCP’s show cause notices, but legal action had not been started against them in the past.

Even in the challenging time of COVID-19 pandemic, the CCP ensured its smooth functioning by extending facilitation to the stakeholders. An Online Merger and Acquisition Application filing system was launched to facilitate the local and foreign investors in filing merger applications online. Furthermore, to ensure health and safety of the respondents amid COVID-19, the parties have been allowed to respond to the show-cause notices issued to them in the hearings using video conferencing and other online tools. An online application for granting exemptions has also been prepared and will be launched soon.

The CCP issued a Policy Note to the Securities & Exchange Commission of Pakistan (SECP) asking for an immediate reinstatement of the cost audit of companies (particularly, Cement, Sugar, Vegetable Ghee/Cooking Oil, Fertilizer, and Wheat flour companies), so that credible and verified cost information is available to assist in factual (rather than speculative) policy making.

In order to curb the bid rigging in tenders and public procurements, the CCP has prepared an in-house IT-based Bid Rigging Analysis and Detection (BRAD) system to help detect signs of collusion in the bidding process.

On the legal front, the Islamabad and Lahore High Courts have resumed hearings in the cases wherein the CCP’s constitutionality has been challenged by the undertakings. The government, through the Attorney General of Pakistan, has been extending full support to the CCP in resolving the pending issues.

Certain other recent initiatives include initiation of online webinars to help educate the businesses and consumers around Competition Law; launch of draft study on the Competition Concerns in the LPG Sector; and working on the State of Competition report after a pause of 10 years.

PSX to set up fund to support the attack...

July 2, 2020: The Board of directors of Pakistan Stock Exchange has announced that PSX will set up a fund to financially assist families of the martyred security personnel and those who were injured defending the National Stock Exchange on Monday 29th June.

The board condemned this dastardly and cowardly attack in the strongest possible terms. This was an attack which targeted not only innocent people but also the economic stability and the investment environment of Pakistan.

The board also commended the PSX management for the calm and effective manner in which the security protocols were implemented. They noted, that despite such an extreme event, the market did not stop working for even a minute and all disaster recovery and business continuity measures worked seamlessly.

‘PSX, as the premier capital market of the country, is fully cognizant of its responsibilities and recognizes the suffering caused to the families of those who have been martyred and injured. We stand with them at this time and will also help them in a practical and sustainable manner. To this end, PSX will set up a fund and endowed it with an upfront donation of Rs 10 Million’, an official statement said.

The management is in discussion with brokers, and other capital market organisations and institutions who have reached out and expressed a desire to support this effort. In addition, PSX staff and directors in their individual capacity have also committed their support. Hence, it expects the size of the fund to increase substantially.

In addition, PSX will contribute to medical expenses and continue paying salary of our two injured guards till they are fit to resume their duties.

Gold slips by Rs 600 per tola to Rs...

July 02, 2020 (MLN): Contrary to the previous session, today, gold witnessed a decrease in demand as the price of 24 Karat-Gold dropped by Rs 600 to Rs 104,600 per tola in bullion markets. The precious yellow metal of 24-Karat had closed at Rs 105,200 per tola on the last day.

According to the Karachi Sarafa Association, the price of 10-gram gold also witnessed a decrease of Rs 514 to settle at Rs 89,678 against Rs 90,192 on the last trading day.

On the other hand, the silver prices remained flat at Rs 1,050 per tola.  Similarly, 10-gram silver remained stable at Rs 900.20.

In the global market, gold prices inched lower by $8 to clock in at to $1,774 per ounce while silver was valued at $17.96 per ounce.

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PKR strengthens by 1.2 rupees against greenback

July 02, 2020 (MLN): Pakistani rupee (PKR) appreciated by 1.2 rupees against US Dollar (USD) in today's interbank session as the currency closed the day's trade at PKR 166.89 per USD, against last session's closing of PKR 168.05 per USD.

The rupee witnessed a mild activity in intraday trade as it was traded in a range of 84 paisa per USD showing an intraday high bid of 167.45 and an intraday Low offer of 167.00.

Within the Open Market, PKR was traded at 167/168.50 per USD.

Alternatively, the currency lost 2.5 rupees to the Pound Sterling as the day's closing quote stood at PKR 209 per GBP, while the previous session closed at PKR 206.5 per GBP.

On the other hand, PKR's value strengthened by 7 paisa against EUR which closed at PKR 188.54 at the interbank today.

On another note, within the money market, the overnight repo rate towards close of the session was 6.00/6.50 percent, whereas the 1 week rate was 6.90/9.95 percent.

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CPI Review: A whiff of inflation in FY21?

July 02, 2020 (MLN): In June 2020, Pakistan’s cost of living, based on Consumer Price Index (CPI), rose to 8.59% in the annual terms compared to 8.22% YoY in May’20 and 8% in June’19 respectively, in line with the market expectations, released by Pakistan Bureau of Statistics (PBS)

This takes the FY20 National CPI average to 10.74% vs 6.80% in FY19.

The month of June saw easiness of lockdown measures which led to the reopening of businesses, resulting in an increase in demand for goods and services.

This increase in inflation was primarily attributed to the Food Index which increased by 2.1% MoM, wherein the major commodities which witnessed an increase in prices include wheat, eggs, tomatoes, vegetables, and spices.

On the other hand, a reduction in energy prices by Rs 7 per liter, and a decline in perishable food items pushed headline inflation lower.

However, the upsurge in the food index outweighed the benefit from a 1.1% drop in the transport index. Moreover, the rise in transport services by 7.5% MoM also diluted the impact of lower petroleum prices, as per research note by Ismail Iqbal Securities.

Apart from transportation index, Housing rent, Water, Electricity, Gas & other fuels which weighs 23.63% in CPI also kept the inflation restrained in June as it shrank by 0.16% MoM, mainly on an account of a 5.46% reduction in prices of Liquefied Hydrocarbons i.e. Kerosene oil.

In FY20, the major contributor to increase in annual inflation rate was the cost of food whereas the transportation index provided huge support in suppressing the inflation numbers on the back of lower oil prices.

Going forward, market analysts see that inflationary pressure will increase in the upcoming month due to several reasons which include; hike in gas & petrol prices, demand and supply pressure on major food commodities especially the shocks due to locust attacks and quarterly review of house rent index.

The recent depreciation of PKR along with an increase in international oil price, and expected hike in gas and electricity tariffs would uplift the inflation in FY21. The government has projected 6.5% inflation in FY21 while the SBP has forecasted the inflation would remain in the range of 7-9% during FY21, another report by Aba Ali Habib revealed.

Keeping the current inflation trajectory into consideration, the research by Pearl Securities highlighted that State Bank of Pakistan believes that the benefit of keeping a positive real interest rate is not worth at this point as their prime focus is on higher GDP growth rate and employment level. There is the possibility that interest rates are near to bottoming-out, however, the report argued that there is still a little elbow room in 1HFY21 for SBP to ease policy rate by another 100 bps.

However, according to Ismail Iqbal’s research note, interest rates would remain stable in the near term.  

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