Pakistan Economy: 25bps hike speaks volume
Against the consensus expectations of the status quo, the Monetary Policy Committee (MPC) has raised the policy rate by 25bps to 10.25%. The token rate hike of 25bps marks a more calibrated policy response from the Central Bank, striking a balance between growth and macro-imbalances.
Also, the rate hike signifies a continuation of ongoing monetary tightening but in a more staggered manner, and in line with our earlier expectations of calibrated tightening.
Considering the creeping up inflationary pressures amidst elevated macro-imbalances, we expect tightening to continue, with a further 125bps hike in CY19. A more measured policy response from the Central Bank is likely to be undertaken going forward, dispensing relatively moderate 25-50bps hikes.
From market vantage, this hike is not a deal-breaker in terms of raised cost of borrowing (0.32% dip in AKD Universe ex Banks annual earnings), mostly in Cements (dip of 1.1%) Fertillizers (0.9%) and OMCs (0.8%), whereas index heavy Banks (interest rate sensitivity of 1.1x) and E&Ps (other income gains from PIBs) stand to gain
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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