MPS_IMF program resumption the key takeaway, (AKD Daily, Nov 24, 2020)
- Monetary Policy Committee (MPC) of the SBP, in its meeting yesterday, expectedly decided to keep the policy rate unchanged at 7.0%. The status quo reflected the largely unchanged inflation outlook and risks to the nascent economic recovery from the recent surge in C19 caseload both domestically and globally.
- In a subsequent analyst briefing, SBP Governor alluded towards a resumption of the program in the next few weeks, with the authorities closing the gap on the contentious issues. According to him, the authorities have reached a consensus on the scale of adjustments (both in fiscal and energy space); the timing of the same remains a key sticking point.
- With a view that the IMF will be back by end of this year, we move up our adjustments for utility rates (20%/10% for electricity and gas) to Jan’21 (vs. Mar’21 previously), which will increase our average inflation estimate to 8.9% (vs. 8.7% previously). As a result, we expect monetary tightening cycle to begin soon with first rate hike of 50bps in Mar’21 (vs. May’21 previously).
- From market’s vantage, kickstart of IMF’s program is a two pronged sword where initial euphoria on resumption may be tempered by possible upfront adjustments. At the same time, investors are likely to keep an eye on the unfolding Covid situation, however, with the country unlikely to enter a complete lockdown, market downside will likely remain limited.
- Expect the market to depict a strong performance from Dec’20 onwards on anticipation of Covid vaccines being ready to use (Pfizer, Moderna, Astrazeneca) by mid-Dec onwards. We continue to like selective E&Ps (Brent at US$46.45), Banks (dividend resumption, interest rate tightening), Textiles (Exports), OMCs (potential new policy) and Autos (new models/variants).
AKD Research
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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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