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Weekly News Roundup

February 28, 2021 (MLN): The highlights of the 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:

Pakistan remained in FATF’s grey list, however, the Financial Action Task Force (FATF) Thursday appreciated Pakistan for the significant progress made on the entire action plan as Pakistan completed with 24 out of 27 items rated as largely addressed and the remaining 3 items partially addressed.

On Friday, Pakistan, Qatar sign a 10-year LNG supply agreement as per which Qatar will provide Pakistan three million tons of Liquified Natural Gas (LNG) for 10 years

On Thursday, the National Electric Power Regulatory Authority (NEPRA) reserved its decision into fuel price adjustments (FCA) for month of January on a petition filed by Central Power Purchase Agency (CPPA-G) on behalf of power distribution companies.On Friday, the Economic Coordination Committee (ECC) of the Cabinet approved revocation of Neelum Jhelum surcharge with immediate effect.

On Wednesday, Fitch Solutions made downward revisions to Pakistan’s coal power growth forecasts for the ongoing quarter, given the slow progress on China-Pakistan Economic Corridor coal-powered projects of late, and increasing downside risks to the sector from the moratorium on coal.

On the upside, Kyrgyzstan has shown interest in getting access to Gwadar and Karachi ports by using the rail and road links being constructed under China-Pakistan Economic Corridor.

Furthermore, Ministry of Commerce on Friday informed that on February 24, 2021, Pakistan joined the Madrid Trademark System of World Intellectual Property Organization (WIPO)..

Financial Results:

Apart from this, several listed companies announced their financial results amid the ongoing earnings season last week, some of which are as follows: 

Lotte Chemical Pakistan (LOTCHEM) earned Rs. 2.12 billion (EPS: 1.4) during the year ended December 31, 2020, i.e. nearly 61% lower as compared to the earnings of same period last year.

Pakistan Petroleum Limited (PPL) disclosed its financial performance for 1HFY21 as per which the company posted a mere 6.79% YoY increase in net profits to Rs 26 billion (EPS: Rs 9.59/sh) as opposed to the profits of Rs 24.4 billion (EPS: 8.98/sh) reported in the corresponding period last year.

Hub Power Company Limited (HUBC) posted earnings of Rs. 16.88 billion (EPS: 12.60) for the half-year ended December 31, 2020, i.e. around 48% higher than the earnings recorded in same period of last year.

Indus Motor Company Limited (INDU), announced its financial results for 1HFY21 today, wherein the company reported more than twofold increase in net profits to Rs 4.8 billion from Rs 2.3 billion in the corresponding period last year.

Standard Chartered Bank earned profits of Rs. 13.13 billion (EPS: 3.39) during the year ended December 31, 2020, i.e. around 18% lower as compared to the earnings recorded in same period of last year.

General Tyre and Rubber Company (GTYR) posted net profits of Rs 405.9 million during 1HFY21, which is 13.8x higher than the profits of Rs 29.29 million earned in the corresponding period last year.

Nestle Pakistan Limited earned 21% higher profits in CY20 compared to CY19. The net profits of the company during the year recorded at Rs 8.9 billion as opposed to Rs 7.35 billion reported in 2019.

Nishat Chunian Power Limited (NCPL) witnessed a 32% YoY decline in net profits to Rs 1.42 billion during 1HFY21, compared to the profits of Rs 2 billion in the corresponding period last year.

Pioneer Cement Limited (PIOC) reported profits of Rs. 606.5 million (EPS: 2.67) for the half-year ended December 31, 2020, against losses of Rs. 111.6 million (LPS: 0.49) reported during the same period of last year.

Maple Leaf Cement Factory Limited earned profits of Rs. 1.62 billion (EPS: 1.48), as opposed to the losses of Rs. 1.76 billion (LPS: 2.42) recorded during the same period of last year.

United Bank Limited (UBL) unveiled its financial performance for the CY20, wherein the bank witnessed 9% YoY growth in consolidated profits to Rs 20.79 billion from Rs 19 billion earned in the previous year.

Oil and Gas Development Company Limited (OGDCL) reported 20.5% YoY decline in net profits to Rs 42.2 billion with Earnings per share (EPS) of Rs 9.82/sh during 1HFY21, against the profits of Rs 53 billion (EPS: Rs 12.35/sh) earned in the corresponding period last year.

 Byco Petroleum earned net profits of Rs 621.95 million (EPS: Rs 0.12/sh) during 1HFY21, compared to the corresponding period last year when a company incurred a loss of Rs 22 million (LPS: 0.004/sh).

Habib Metropolitan Bank Limited (HMB) reported 77% YoY increase in CY20 profits to Rs 12.335 million against the profits of Rs 6.96 billion earned in CY19.

Hi-Tech Lubricants (HTL) disclosed its financial results today for the 1HFY21, wherein the company witnessed a turnaround in its bottom-line  as it reported net profits of Rs 304.8 million compared to the loss of Rs 134.36 million in the same period last year.

Announcements

On the equity front, Pakistan State Oil Company Limited (PSO) signed a Long Term LNG Sales and Purchase Agreement (SPA) with Qatar Petroleum (QP), pursuant to Federal Cabinet’s approval of bilateral Government to Government Agreement (G to G) which shall augment cooperation in the Energy Sector between Pakistan and Qatar.

Azgard Nine Limited ceased to exercise control over the activities of Montebello S.R.L (MBL), previously a 100% owned subsidiary of the company, as a result of ongoing bankruptcy proceedings and management of the liquidation process of MBL by the Court appointed trustee.

The Board of Directors of Unity Foods Limited, in its meeting held on February 25, 2021, approved in-principle acquisition of 16,467,818 (31%) shares of Sunridge Food (Private) Limited at Rs. 28 per share.

The Board of Directors of Gul Ahmed Textile Mills Limited has authorized the company to re-formulate and propose the terms for a carve-out/hive-out of its local business segment (including retail business along with related assets) into a wholly owned subsidiary which was put on hold last year due to COVID Pandemic, along with a reorganization of other related assets by means of a merger / demerger and upon finalization of the same by the management, be presented to the BoD for their consideration.

The Economic Coordination Committee of the Cabinet removed the cap on the distribution of dividend by Mari Petroleum Company Limited (MPCL).

The SECP granted the extension of ninety days to make a Public Announcement of Offer (PAO) by AKD Securities, on the behalf of the acquirers, ARY Communications Limited and ARY Digital FZLLC, which now may be made till May 05, 2021.

The Board of Directors of Hascol Petroleum Limited, in their Extraordinary Meeting held on February 23, 2021, granted its approval to raise the authorized share capital of the company from Rs. 10 billion to Rs. 50 billion.

Netsol Technologies Limited issued a clarification to Pakistan Stock Exchange, wherein it has denied having any connection with a recent article containing price-sensitive information, written by an independent blogger that is being circulated on social media platforms.

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Weekly Economic Roundup

February 28, 2020 (MLN): The latest weekly roundup is here to update few financial and economic releases, providing a guide to monitor trends in the upcoming week.

  • The Weekly Sensitive Price Indicator (SPI) for the Combined Group increased by 2.41% during the week ended Feb 25, 2021 while the SPI increased by 13.89% compared to the corresponding period from last year.
  • Multinational companies operating in Pakistan repatriated $1.025 billion in profit and dividends on investments in the country during the seven months of FY21 which was 8% higher than the profits of $946.6 million repatriated in the corresponding period of last year.
  • The gross sale of securities by foreign investors during the week ended February 19, 2021 was recorded at Rs.11.4 billion, which is around 11 percent lower than the figures recorded last week.
  • The State Bank of Pakistan (SBP) conducted an Open Market Operation on Friday in which it injected Rs.1,102.95 Billion into the market for 7 Days.
  • USA remained as the top export destination for Pakistan with $2.68 billion worth of shipments in Jul-Jan FY21, against the exports of $2.44 billion in the same period of last year, showing an increase of 10% YoY.
  • Among Pakistan’s top trading partners, China remained the top source of imports for Pakistan during July-Jan FY21, followed by United Arab Emirates (UAE), Singapore, and the USA.
  • Pakistan's Forex Reserves decreased by USD 17.00 Million or 0.08% and the total liquid foreign reserves held by the country stood at USD 20,041.60 Million on Feb 19, 2021. According to data published by the State Bank of Pakistan (SBP) its reserves increased by USD 19.00 Million.
  • Pakistan has received $6.66 billion total external inflows during July-Jan FY21 from bilateral and multilateral development partners, foreign commercial borrowing, and time deposits to restructure its economy and finance its development projects.
  • The State Bank of Pakistan (SBP) conducted an auction on Wednesday in which it sold Market Treasury Bills (MTBs) worth Rs.791.51 billion for 3 and 6 months.
  • The Ministry of Commerce released Rs 5.5 billion under the Drawback of Local Taxes and Levies (DLTL) scheme, which includes Rs 3.762 billion for the textiles & Rs. 1.738 billion for the non-textile sector under the Drawback of Local Taxes and Levies (DLTL) scheme.
  • The total DAP offtake during the month of January 2021 was 82 thousand tonnes, registering an increase of 87.9 percent as compared to the offtake of 44 thousand tonnes in January 2020.
  • The overall urea offtake during the month of January 2021 was 649 thousand tonnes, which witnessed an increase of 147.8 per cent as compared to the offtake of 262 thousand tonnes in January 2020.
  • The total nutrient offtake during the month of January 2021 was about 434 thousand tonnes compared to 177 thousand tonnes during January 2020, showing an increase of 145.1 per cent.
  • Federal Minister for Industries and Production, Hammad Azhar on Tuesday informed total industrial power consumption in the country increased by 17 percent in January 2021compared to same period of last year.
  • The savings of the Central Directorate of National Savings (CDNS) reached to the free deposit of Rs 530 billion during the last 7 months in the current Fiscal Year (FY) 2020-21.
  • The State Bank of Pakistan (SBP), under its refinancing scheme for protecting businesses from the impact of COVID-19, has so far deferred Rs657.14 billion principal repayments of loans up to one year.
  • Dun & Bradstreet Pakistan and Gallup Pakistan issued their report on ‘Pakistan Consumer Confidence Index (CCI)’ for Q4 2020, as per which, the Consumer Confidence Index remained 90.3 points in Q4 2020, compared to 88.7 points in Q3 2020, translating into 1.8% quarter-on-quarter increase.
  • Pakistan’s current account deficit reduced to US$229 million in January 2021 from US$652 million last month and US$512 million in the same month a year ago, showing an improvement of 65% MoM and 55% YoY, largely due to recovery in exports and strong remittances.
  • Pakistan’s trade deficit in services stood at $126 million during the month of January 2021, signifying a decline of 10%, as compared to the previous month and 36% as compared to the same period of last year (SPLY).
  • The Banking sector spread for January 2021 marginally dilated by 3 basis points (bps) over the month which brings its latest value to 4.38% as compared to prior month's spread of 4.35%. In contrast, the spread has reduced by 132 bps as compared to the same period last year.
  • Pakistan's outstanding debts as of January 31, 2021 stand at a collossal amount of Rs.23.33 trillion whereas total debt at the end of prior month was Rs.23.56 trillion, meaning that around Rs.227.38 billion were retired during this month alone.
  • Pakistan’s Trade Sector received the highest net FDI worth $61.5 million in January’21, followed by the Power and Financial Business sector with net FDI of $40.9 million and $35.3 million respectively.
  • The country attracted $1.145 billion of net FDI during July-Jan FY21, with China, Netherlands and Hongkong appeared as the top three investors in Pakistan with net FDI of $402.8 million, $122 million, and $105.2 million respectively.
  • The non-government sector has borrowed another net sum of Rs.25.58 billion during the week ended February 05, 2021, which brings the cumulative net borrowing for ongoing fiscal year FY2021 to Rs.312.66 billion. The net borrowing as of prior week was recorded at Rs.287.08 billion.
  • The government of Pakistan acquired an additional debt of Rs.10.14 billion during the week ended February 12, 2021, which brings its total net borrowing for ongoing fiscal year 2021 to Rs.172.6 billion. As of prior week, the government had borrowed a net sum of Rs.162.45 billion.
  • Foreign Investment in Pakistan totaled $240.6 million during the month of January, i.e. nearly 19% higher as compared to the previous month but 85% lower as compared to the same month of last year.

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CPI Preview: Inflation to make a comeback in February’21

February 28, 2021 (MLN):  The inflationary relief that has been seen for the past two months (Dec’20 and Jan’21)  will no longer be sustained as the headline inflation for the month of February 2021, is likely to witness a sharp rebound after slipping to a two-year low of 5.65% on high-base effect and muted food inflation in Jan’21.

Going by the projections put forth by various brokerage houses, the inflation is expected to clock in at around 8.15%-9.1% with an average estimate of 8.48% YoY compared to 5.65%YoY in the last month and 12.40%YoY in February 2020. This would bring 8MFY21 average inflation to 8.23% as against 11.70% in the corresponding period last year.

On monthly basis, inflation is expected to escalate with an average estimate of 1.56% MoM compared to the decrease of 0.21% MoM in January 2021.

The expected resurgence in the cost of living is driven by an increase in electricity and food prices as indicated by the Sensitive Price Index (SPI) data so far. The food index which is expected to inflate by around 12.81% YoY during Feb’21, the major contributors to the upsurge in food inflation include; wheat flour (13.59% YoY), rice (7.71% YoY), meat (10.37% YoY), chicken (32.70% YoY), fresh milk (14.35% YoY), cooking oil (12.94% YoY), vegetable ghee (16.60% YoY), sugar (19.59% YoY) and condiments (47.21% YoY).

In addition to this, the recent revisions in electricity tariffs and fuel prices (+5.4%MoM) on account of the Oil bull cycle are also likely to pull up inflation for Feb’21. To note, the Government has notified an increase in base tariff of PKR1.95/unit across all consumer categories including life-line consumers and Dec’20 fuel price adjustment of PkR1.54/unit pushing up overall housing index by 4.44%MoM, a report by AKD Securities highlighted.

Besides these, cotton cloth, education, and footwear prices also increased significantly during the month leading to an increase in Non-Food Non-Energy (NFNE) inflation.

CPI Projections for February 2021

YOY

MOM

Spectrum

8.20

1.33

Next Capital

8.20

1.3

Pearl Securities

8.40

1.5

Abbasi and Company Ltd

8.80

1.90

Foundation Securities

9.10

2.10

Ismail Iqbal Securities

8.50

1.60

Aba Ali Habib Securities

8.15

1.29

Darson Securities

8.30

1.43

AKD Securities

8.70

-

Range

9.1 - 8.15

2.1 - 1.29

Mode

8.20

-

Median

8.40

1.47

Average

8.48

1.56

Expected Average Inflation in 8MFY21

8.23%

 

INFLATION OUTLOOK:  

With the end of the higher base effect in Mar'21, the headline inflation is expected to start peaking up, further increase in oil prices, upcoming Ramadan season and hovering food prices expected to take inflation towards the north.

Furthermore, in the medium run, IMF directives to increase tax revenues in FY22 to PkR5.9 trillion vs. revised PkR4.7 trillion for the current year should result in inflationary pressure jacking up. To this end, the Govt. is already considering withdrawing sales tax exemptions worth PKR 360 billion which would push up consumer end prices.

IMF and Pakistan authorities completed a staff-level agreement which is yet to be approved by the IMF Board. The resumption of the IMF program is clearly positive from the market’s perspective as it will keep the external account in a comfortable position despite potential pressure from the pickup in imports in line with economic activity and rising commodity prices, pushing SBP to maintain interest rates at the current level, AKD Securities cited.

Moreover, it will open ways to raise /rollover debt through Eurobond, Sukuk, and Panda Bonds and provide stability on the external as well as the fiscal front, another report by Pearl Securities said.

Next Capital sees inflationary pressures continuing and expects the readings to reach double-digit by the end of the current fiscal year, with higher energy and food prices where some ease is being witnessed in vegetable prices.

On the monetary policy side, Pearl Securities perceives no signs of early increase and decrease in policy rates. Similarly, AKD Securities expects SBP to keep interest rates on hold in at least the next two monetary policy meetings based on a stable external account outlook (USD 750 million-1bn Eurobond planned next month).

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Key Pakistan Market Stats and Economic Indicators

Market Data and Economic Indicators

Weekly Performance
 Feb 26, 2021Feb 19, 2021
PKR InterBank158.1007159.1023
KSE100 Index45,865.0246,227.65
Avg Daily Volume589,297,783594,931,762
Gold (Karachi) Rs/10 gm93,66494,264
KIBOR 6M7.657.57
10Y PIB10.2010.20
EUR1.2071.2109
GBP1.39221.4005
CHF0.90810.8966
JPY106.53105.548
GOLD1734.51783.32
NY Light Crude61.559.24
Open Market Rates
 Feb 26, 2021Feb 19, 2021
USD158.50159.60
EUR191.58193.64
GBP220.95223.82
JPY1.48881.5152
AED43.1843.49
SAR42.3342.64
SBP Data
T-Bill Auction Cutoff YieldFeb 24, 2021Feb 10, 2021
3M7.24867.1799
6M7.54987.4900
12MBids Rejected7.7989
PIB Auction Cutoff YieldFeb 03, 2021Jan 06, 2021
3Y8.99348.4999
5Y9.58909.5298
10Y10.05009.9900
15YNo Bids ReceivedBids Rejected
20Y10.5800Bids Rejected
Interest Rate CorridorJun 26, 2020May 18, 2020
SBP Policy Rate7.008.00
SBP Reverse Repo Rate8.009.00
SBP Repo Rate6.007.00
Weekly Indicators
 Feb 19, 2021Feb 12, 2021
SBP FX Reserves *12,908.7012,889.70
Bank FX Reseves *7,132.907,168.90
Total FX Reserves *20,041.6020,058.60
 Feb 25, 2021Feb 18, 2021
SPI (Combined Group) **147.09143.63
Change - WoW (pct)2.410.55
Change - YOY (pct)13.899.92
Monthly Indicators
 JanuaryDecember
Consumer Price Index (Base 2015-16)140.56140.86
Change - MOM (pct)-0.21-0.68
Change - YOY (pct)5.667.98
WholeSale Price Index (Base 2015-16)153.53149.79
Change - MOM (pct)2.500.34
Change - YOY (pct)6.375.67
Sensitive Price Indicator (Base 2015-16)140.08140.68
Change - MOM (pct)-0.43-1.32
Change - YOY (pct)6.447.92
 JanuaryDecember
Exports *2,132.002,366.00
Imports *4,733.005,005.00
Trade Balance *-2,601.00-2,639.00
 JanuaryDecember
Home Remittances *2,273.572,436.98
 JanuaryDecember
Total Foreign Investment *240.55202.39
 JanuaryDecember
Current Account Balance *-229.00-652.00
FY21912.001,141.00
FY20-2,544.00-2,032.00
 DecemberNovember
Large Scale Manufacturing Index167.21147.31
Change - MOM (pct)13.511.34
Change - YOY (pct)11.3914.44
Quarterly Indicators
 Dec 31, 2020Sep 30, 2020
Pakistan's External Debt *115,755.84113,798.10
Annual Indicators
 FY20FY19
GDP Growth Rate-0.381.91
Agriculture2.670.58
Manufacturing-0.275.43
Commodity Sector-0.05-0.90
Services Sector-0.593.75
Trade Balance * (July - June)-23,183.00-31,805.00
Worker Remittances * (July - June)23,120.9721,739.40
Foreign Investment * (July - June)2,038.21-54.80
Annual Inflation Rate % (July - June)10.746.80
* Amount in USD Million

 

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Kyrgyzstan shows interest in getting access to Gwadar, Karachi...

February 28, 2021: Kyrgyzstan has shown interest in getting access to Gwadar and Karachi ports by using the rail and road links being constructed under China-Pakistan Economic Corridor.

Talking to business community in Lahore, Kyrgyzstan's Ambassador to Pakistan Erik Beishembiev said his country wants to develop short transportation links through its territory between Central Asia, China and Pakistan.

The Ambassador said his country greatly values relations with Pakistan and wants to further diversify and strengthen bilateral relations.

He said direct flights between the two countries on regular basis would help improve trade and cooperation in tourism sector.

Radio Pakistan

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