Corrigendum: Pakistan Economy: Inflation to ease as supply shock fades away, (AKD Daily, Dec 24, 2019)
- Following a steep jump in Nov’19, national headline inflation is likely to decelerate to 12.41%YoY in Dec’19 vs. 12.67%YoY in the preceding month and 5.40%YoY in Dec’18. Price normalization after mini supply shock and a seasonal decline in certain food items along with downward revision in POL prices are major factors driving inflation lower.
- Sequentially, the CPI index is likely to decline 0.54%MoM largely due to price normalization vs. an average monthly increase of 1.49%MoM in 5MFY20, signifying an early sign of price stability. For instance, consider SPI basket (Dec’19 vs. Nov’19), out of total 67 items, prices of the 50 items (~70% of the basket) have either declined or remained largely flat assuming mid-month price level.
- That said, inflation readings until Feb’20 are likely to remain elevated (Dec’19-Feb’20 average inflation: 12.23%YoY) aided both by soft base and utility price adjustments. With respect to the latter, the OGRA has approved a 29% weighted avg. hike in gas prices for domestic consumers. This will have a direct inflationary impact of 0.17% assuming full pass-on (0.04% in case of subsidy for lifeline consumers (up to 50units).
- While the latest price trends suggest inflationary pressures are losing momentum, the rate cut from the central bank would require a significant decline in inflation as stressed by the IMF in its latest review. We expect the inflation to moderate from Mar’20 onwards, as the economy moves past the 1QCY20 adjustment cycle, thus anticipate the first rate cut in 2QCY20.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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