Pak Economy: Widening Gap steering towards a bailout program
Exhausting external financing resources can lead to an IMF bailout program against a rising external financing gap, in our view. In this regard, a sizable current account deficit (FY19F: US$16.3bn) accompanied by chunky debt repayments (FY19F: US$7.5bn) are together expected to push gross external financing gap to US$20.7bn for the next year (average US$19.5bn in FY19-20). Consequently, untimely materialization of adequate inflows or a lack thereof can further strain FX reserves (SBP FX reserves down by US$6.1bn in FY18TD to reach an import cover of 2.23 months) where we estimate SBP FX reserves can shrink to <1 month of import cover by FY19-end in such a scenario. Approaching the IMF for a financing facility through either its External Fund Facility (EFF) or Stand-By Arrangement (SBA) remains a plausible option (adequate quota available under both facilities), in our view. Encouragingly, the program should immediately focus on stabilization measures and structural reforms. Post a financing facility, currency devaluation is likely to be limited (also in line with historical trend) as REER has also declined to 111x (excluding yesterday's devaluation move) from 125x in Nov'17, likely near its equilibrium levels. However, a delay in materialization of a financing facility can keep the currency under pressure where market forces pushing the PkR beyond our estimated currency parity of PkR124/US$ during FY19F cannot be ruled out.
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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