January 24, 2021 (MLN): The KSE-100 index lost 62.96 points during the departed week and closed 45,868-mark i.e. nearly 0.14% percent lower than the closing of the previous week.
According to AKD Securities, lackluster news on macro levels led to profit taking during the outgoing week, offsetting the result season driven exuberance. Major news included hike in Discos’ unified base tariff by Rs. 1.95/KWh vs. proposal of PkR3.34/KWh; Rs200 billion impact calculated, indicating towards inflationary uptrend in upcoming months.
The decision to disconnect gas supply to captive power plants from Feb 01st and Mar 01st for industries and export oriented industries, respectively encouraging industries to shift towards grid electricity also had an impact on benchmark index’s performance.
Moreover, SBP kept policy rate unchanged at 7%, wherein MPC said the monetary policy settings shall remain unchanged in the near term as economy heads towards recovery phase, the report added.
The benchmark index was led down by the performance of Oil and Gas Exploration Companies, which snatched around 143 points to it. This was followed by Fertilizer, Oil and Gas Marketing, and Automobile Assembler which took away 44, 33, and 25 points, respectively.
Company-wise, the scrips of PPL, OGDC, POL, ENGRO and MCB closed the week in the red zone, as they lost 65, 59, 59, 31, and 22 points, respectively.
Meanwhile, the KSE All Share Market Cap decreased by $87.70 million or 0.17% over the week, being recorded at $51.72 billion as compared to a Market Cap of $50.81 billion recorded last week.
Figures released by NCCPL showed that foreign investors purchased USD 5.5 million worth of stocks during the week with Overseas Pakistanis doing the bulk of the purchasing @ USD 6.99 million. On the local front, Individual Investors bought USD 15.47 million worth of stocks. Excessive selling was witnessed locally as well as Mutual Funds sold stocks worth USD 19.89 million.
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January 24, 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:
The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP), in its meeting held on Friday, in Karachi, decided to maintain the Policy Rate at 7 percent.
The same day, a meeting of the Cabinet Committee on Energy (CCOE) was held under the Chairmanship of Federal Minister Asad Umar, wherein the committee approved a proposal for discontinuation of natural gas supply for power generation.
Meanwhile, the Executive Committee of the National Economic Council (ECNEC) approved the largest health care project ever done by the federal government worth Rs. 70 billion.
Minister for Science Technology Fawad Chaudhry on Friday hoped that the government will soon finalize the mechanism for the successful implementation of 'EV Policy for 4-Wheelers' in the country to boost the economy, reduce pollution levels and generate employment in the transport sector.
On the vaccine front, Pakistan's Foreign Minister Shah Mehmood Qureshi said on Thursday that China has agreed to provide half a million doses of the Chinese Sinopharm COVID-19 free of cost to Pakistan by January 31.
On Thursday, the government increased the electricity tariff by 1.95 rupees per unit against the proposed raise of 2.18 rupees per unit, due to the burden that capacity charges will reach 1,455 billion rupees by the end of 2023, Minister for Power Division Omar Ayub announced on Thursday.
Furthermore, Federal Minister for Privatization Mohammed Mian Soomro chaired the Privatization Commission (PC) Board meeting on Thursday, in Islamabad, wherein the board approved committees for pre-qualification of potential bidders for HBFCL, JCC, and FWB.
Besides, the government on Thursday issued revised profit rates for National Saving Schemes certificates, which will be put into effect from January 21, 2020.
On Wednesday, Adviser to Prime Minister for Commerce and Investment, Abdul Razak Dawood informed that the Temporary Economic Refinance Facility (TERF) providing long-term concessionary refinance at 5% for manufacturers and exporters has shown excellent results.
In addition, he also informed that Government approved Rs. 213 million for Duty Drawback of Local Taxes and Levies (DLTL) payments of the non-textile sector.
Moreover, in a bid to attract investments in Panda Bonds, the Federal Government exempted the payment of principal and profits on such bonds from all kinds of tax.
On the upside, in a major achievement towards ensuring ease of doing business, Pakistan improved 31 positions, from 142nd to 111th, on the rank of Trading Across Border Index.
On the equity front, Sazgar Engineering Works Limited submitted a progress report in respect of utilization of proceeds of Right Issue of Rs. 710 million for the setting up of the company’s four-wheeler project, up to December 31, 2020.
Shell Pakistan Limited, in response to an inquiry letter sent by PSX, clarified that the MoU signed with K-Electric to explore the possibility of electric charging stations, initially at three locations in Karachi, is only preliminary and nothing concrete has been finalized as of the date hereof.
K-Electric Limited (KEL), welcomed the landmark decision by the Sindh High Court, under which all petitions challenging the privatization of the company have been dismissed in favor of KE, its shareholders, and the Privatization Commission (GOP), as announced in the open court on Thursday.
Furthermore, the Pakistan Stock Exchange, on Wednesday and Thursday, issued a series of notifications to various companies inquiring about the unusual changes in the price and volume of their shares.
Besides, Hi-Tech Lubricants Ltd. (HTL) and Hyundai Nishat Motor (Pvt.) Ltd. (HNMPL) through its After-Sales Department entered into an agreement on January 18, 2021, for the Sale, Supply & Branding of ZIC Brand Lubricants to all the Authorized / Designated Dealers of HNMPL.
Also, the Board of Directors of Cherat Cement Company Limited, in its meeting held on January 18, 2021, decided to undertake BMR for Cement Line 1 and install the main Crusher.
In addition, Samin Textiles Limited received a notice of Public announcement of intention from potential Acquirer i.e. Mr. Haroon Ahmad Khan to acquire more than 30% shares of the company, together with Management control.
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January 24, 2021 (MLN): The weekly economic roundup summarizes the country's key economic and financial data for the week from various sectors to keep an eye on next week's trends.
- The Weekly Sensitive Price Indicator (SPI) for the Combined Group increased by 0.32% during the week ended Jan 21, 2021 while the SPI increased by 6.54% compared to the corresponding period from last year.
- The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP), in its meeting held on January 22, 2021, in Karachi, has decided to maintain the Policy Rate at 7 percent.
- Pakistan's Forex Reserves decreased by USD 398.70 Million or 1.94% and the total liquid foreign reserves held by the country stood at USD 20,120.30 Million on Jan 15, 2021.
- The Banking sector spread for December 2020 decreased by 13 basis points (bps) over the month which brings its latest value to 4.35% as compared to the prior month's spread of 4.48%. Similarly, the spread has reduced by 172 bps as compared to the same period last year.
- Pakistan recorded a current account deficit of $662 million in December 2020 after a revised surplus of $513 million the previous month.
- Pakistan’s trade deficit in services witnessed a significant increase in the month of December 2020 as it rose by 3.55x to stand at $128 million against the deficit of $36 million recorded in November 2020.
- Pakistan welcomed Foreign Direct Investments of $193.6 million during the month of December 2020, after witnessing divestment of $16 million in November 2020.
- China emerged as the largest direct foreign investor in Pakistan during December 2020, with a net direct investment of $53.7 million, followed by Hongkong and United States who invested $30.9 million and $27.7 million net respectively, according to SBP data issued.
- The government has issued revised profit rates for National Saving Schemes certificates, which will be put into effect from January 21, 2020.
- The government has increased electricity tariff by 1.95 rupees per unit against the proposed raise of 2.18 rupees per unit, due to the burden that capacity charges will reach 1,455 billion rupees by the end of 2023, Minister for Power Division Omar Ayub announced on Thursday.
- The Executive Committee of the National Economic Council (ECNEC) has approved the largest health care project ever done by the federal government worth Rs. 70 billion.
- Information and Communication Technology exports have witnessed a surge of 958 million dollars at the highest growth rate of 40 percent in the first half of the current fiscal year.
- The Executive Committee of the National Economic Council (ECNEC) Thursday approved a summary regarding the construction of the Gwadar-Ratodero Road Project (M-8) sponsored by the Ministry of Communication and executed by the National Highway Authority (NHA) at a rationalized cost of Rs 38,026.28 million.
- The government of Pakistan has retired Rs.87.53 billion during the week ended January 08, 2021, which brings its total net borrowing for the ongoing fiscal year 2021 to Rs.273.14 billion. As of the prior week, the government had borrowed a net sum of Rs.360.67 billion.
- The non-government sector has retired a net sum of Rs.128.87 billion during the week ended January 08, 2021, which brings the cumulative net borrowing for ongoing fiscal year FY2021 to Rs.189.62 billion. The net borrowing as of the prior week was recorded at Rs.318.49 billion.
- The privatization Commission (PC) Board was briefed about the latest progress made in the transactions of House Building Finance Corporation (HBFCL), Jinnah Convention Center (JCC), and First Women Bank (FWB) which are at advanced stages. The transaction structures of said entities have already been approved by the CCoP/Cabinet. The Board approved the committees for the pre-qualification of the potential bidders.
- National Power Regulatory Authority (NEPRA) on Thursday informed that the Public hearing on the CCPA petition for a fuel price adjustment (FCA) for December 2020 will be conducted on Wednesday, January 27, 2021.
- The State Bank of Pakistan (SBP), under its refinancing scheme for protecting businesses from the impact of COVID-19, has so far deferred Rs657.16 billion principal repayments of loans for up to one year.
- 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.
- The Federal Government has released Rs. 319.56 billion for various ongoing and new social sector uplift projects till date under its Public Sector Development Programme (PSDP) 2020-21.
- Savings mobilization by the National Savings Schemes (NSS) during July-Oct FY21 clocked in at Rs. 24.8 billion, compared to Rs.80.97 billion recorded in the same period of the previous fiscal year, marking a decline of 69% YoY.
- Pakistan’s Power Sector has received the highest net FDI worth $80.9 million in December’20, followed by the Trade and Oil & Gas Exploration sector with net negative FDI of $28.2 million and $26.5 million respectively.
- In a major achievement towards ensuring ease of doing business, Pakistan has improved 31 positions, from 142nd to 111th, on the rank of Trading Across Border Index.
- The total debt of the Central Government during the month of November 2020 surged by Rs. 3.69 trillion or 11% YoY to stand at Rs. 35.82 trillion when compared to Rs 32.13 trillion recorded in November 2019.
- The Central Directorate of National Savings (CDNS) has reached the free deposit of Rs 430 billion in the last six months from July 01 to December 31st current Fiscal Year (FY) 2020-21.
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|Jan 22, 2021||Jan 15, 2021|
|Avg Daily Volume||509,763,908||682,133,634|
|Gold (Karachi) Rs/10 gm||96,708||96,794|
|NY Light Crude||52.27||52.36|
|Open Market Rates|
|Jan 22, 2021||Jan 15, 2021|
|T-Bill Auction Cutoff Yield||Jan 13, 2021||Dec 30, 2020|
|PIB Auction Cutoff Yield||Jan 06, 2021||Dec 09, 2020|
|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|
|Jan 15, 2021||Jan 08, 2021|
|SBP FX Reserves *||13,013.80||13,400.00|
|Bank FX Reseves *||7,106.50||7,119.00|
|Total FX Reserves *||20,120.30||20,519.00|
|Jan 21, 2021||Jan 14, 2021|
|SPI (Combined Group) **||140.15||139.70|
|Change - WoW (pct)||0.32||-0.22|
|Change - YOY (pct)||6.54||5.77|
|Consumer Price Index (Base 2015-16)||140.86||141.83|
|Change - MOM (pct)||-0.68||0.82|
|Change - YOY (pct)||7.98||8.35|
|WholeSale Price Index (Base 2015-16)||149.79||149.28|
|Change - MOM (pct)||0.34||-0.94|
|Change - YOY (pct)||5.67||5.00|
|Sensitive Price Indicator (Base 2015-16)||140.68||142.56|
|Change - MOM (pct)||-1.32||1.47|
|Change - YOY (pct)||7.92||7.98|
|Trade Balance *||-2,683.00||-2,137.00|
|Home Remittances *||2,436.97||2,338.64|
|Total Foreign Investment *||202.45||-36.25|
|Current Account Balance *||-662.00||513.00|
|Large Scale Manufacturing Index||147.32||145.36|
|Change - MOM (pct)||1.35||4.65|
|Change - YOY (pct)||14.45||7.38|
|Sep 30, 2020||Jun 30, 2020|
|Pakistan's External Debt *||113,803.35||112,858.18|
|GDP Growth Rate||-0.38||1.91|
|Trade Balance * (July - June)||-23,183.00||-31,805.00|
|Worker Remittances * (July - June)||23,120.97||21,739.40|
|Foreign Investment * (July - June)||2,038.21||-54.80|
|Annual Inflation Rate % (July - June)||10.74||6.80|
|* Amount in USD Million|
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January 24, 2021: With a new year and a new administration in the White House, the US central bank nonetheless faces an unprecedented challenge in guiding the post-pandemic economic recovery.
One thing Federal Reserve Chair Jerome Powell is unlikely to face from President Joe Biden is the barrage of Twitter attacks he was subject to, sometimes daily, under former president Donald Trump.
White House spokeswoman Jen Psaki last week said Biden "clearly has a great deal of respect and value for the Federal Reserve and role they play."
But even absent political pressures, the outlook is daunting.
The initial rollout of Covid-19 vaccines has raised hopes companies will be able to open for business and shoppers will open their wallets, improving the economy's prospects.
But the historic nature of the job losses during the pandemic -- more than 10 million US workers remain unemployed -- coupled with the likelihood inflation in some sectors could spike once the recovery takes hold, will test the Federal Reserve's limited toolkit.
These challenges could be discussed when the Fed's policy-setting Federal Open Market Committee (FOMC) opens its first two-day policy meeting of the year on Tuesday.
After slashing the benchmark lending rate to zero early in the coronavirus crisis, and massively increasing bond purchases to pump cash into the economy, the FOMC has signaled will not change policy in the near future.
"I think they've set their course pretty clearly," Stephanie Aaronson, a vice president at the Brookings Institution and former Fed research economist, told AFP. "I would be surprised if that really changed throughout the spring."
- Unprecedented scenario -
Business shutdowns imposed to contain the spread of the virus caused immediate, massive job losses in 2020, and at the end of the year, four million people had been unemployed for six months or more, comprising 37 percent of total unemployment.
The expectation for more government aid under the Biden administration -- which has proposed a massive $1.9 trillion rescue package -- will give the central bankers hope for a more solid rebound and improved hiring, Aaronson said.
Still, so much about the pandemic-induced recession has been historic, and the recovery too will present policymakers with scenarios they have never encountered.
When the recovery does begin, the Fed's main nemesis -- inflation -- is likely to flare up in areas that bounce back first, like hotels, restaurants and air travel.
"There are many aspects of our current economy that are still unprecedented. And that means that their job is incredibly challenging," George Washington University economist Tara Sinclair said in an interview.
The Fed last year announced a new framework that gives officials flexibility to address the situation.
The central bank pledged to allow inflation to exceed its two percent goal for a time to ensure the unemployment rate drops from its 6.7 percent level at the end of 2020.
That is a radical shift from the past, when central bankers would raise rates early to head off inflation.
"They can see the whites of inflation's eyes before they need to be necessarily thinking about really changing policy" under the new framework, Sinclair said.
But Aaronson noted that Powell will have to communicate clearly to both Wall Street and small businesses to calm concerns.
Overshooting on inflation "shouldn't induce a loss of credibility, as long as they are able to convince people say that it's transitory and that this is absolutely part of what they're aiming for," she said.
The Fed's preferred inflation measure, the PCE price index, is running at just over one percent as of November.