BMA Today for November 6, 2019 
 
     WEDNESDAY 6 November 2019 
 
 

 

   

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At a Glance

Previous Market Session

Local Market    
 KSE 100 N.A N.A
 KSE T. Value PKRbn N.A N.A
 10YR PIB N.A N.A
 6M KIBOR N.A. N.A.
 PKR/USD N.A. N.A.
Asia Pacific    
 BSE SENSEX 30 N.A N.A.
 NIKKEI 225 N.A N.A.
 STRAITS TIMES INDEX N.A N.A.
 KUALA LUMPUR N.A N.A.
 JAKARTA COMP. N.A N.A.
 THAI SET 50 N.A N.A.
Middle East    
 DFM GENERAL N.A N.A.
 TADAWUL ALL SHARE N.A N.A.
 MSM30 INDEX N.A N.A.
 KUWAIT SE WEIGHTED N.A N.A.
 DSM 20 INDEX N.A N.A.
Global Markets    
 OIL (NYMEX) N.A. N.A.
 US 10YrBOND N.A. N.A.
 LIBOR6MTH N.A. N.A.
 FTSE 100 N.A N.A.
 DOWJONES N.A N.A.
 S&P 500 N.A N.A.
       
 
In Focus
Pakistan Economy: Out of the Woods

   Decline in imports; external account within manageable limits: Significant decline in imports has resulted in reduction of Current Account Deficit (CAD). Imports during first 4 months of FY20 stood at USD15.3bn, down 19.3% YoY or USD3.7bn. Exports, however, have remained flat at around USD2bn. Primary fiscal account is in surplus: Pakistan has posted a primary fiscal surplus (excludes debt servicing cost) of 0.06% of GDP during Jul-Aug’19. This is encouraging as it allays concerns on Pakistan’s inability to meet the International Monetary Fund’s (IMF) primary deficit target of -0.6% for FY20. Federal Board of Revenue (FBR) tax collection for July-Oct’19 period has shown decent growth of 15% YoY. This is despite the slowdown in collection of taxes at import stage. GDP growth remains subdued: For the first 2 months Jul-Aug’19, large scale manufacturing (LSM) index has shown a decline of 6% over corresponding period last year. Furthermore, cotton crop target has been revised down to 10.2mn bales from 15mn bales earlier. This subdued performance will keep GDP growth at 3% for FY20. Inflation trending lower; Interest rate cut likely this month: As per our estimates, Sept’19 Consumer Price Index (CPI) inflation was peak inflation for FY20. Going forward, inflation (on new base) is expected to remain in double digits till Feb’20 after which we expect it in single digits. Based on these inflation expectations, we expect State Bank of Pakistan (SBP) to cut interest rates by 50 basis points this month. Stable economics is market positive: Back in Jul’19 when we had published our strategy report, longer tenure government paper (5/10-yr) was trading at 13.75/14.00%. Given stabilizing economics and lower expectations of inflation, this has come down to 11.25-11.50%, a reduction of 250 basis points. We now expect the KSE-100 Index to close FY20 at 45,000-47,000 range compared to earlier expectations of 42,000-44,000. We remain Overweight on E&Ps, Banks, Fertilizers, Textiles, and Chemicals.

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Media Watch

National: Second round Govt-opposition talks end in deadlock / The News
Economy: Pakistan seeks USD9bn Chinese loan for ML-1 commits to border fencing / Dawn
Economy: Nepra approves Rs1.82 unit hike in power tariff / Business Recorder
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DISCLAIMER
This memorandum is produced by BMA Capital Management Limited and is only for the use of their clients. While the information contained herein is from sources believed reliable, we do not represent that it is accurate or complete and should not be relied upon as such. Opinions expressed may be revised at any time. This memorandum is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell the securities mentioned.