Pakistan Economy: Drawing parallels with 2008
- Pakistan has tended to land in a BoP crisis after almost every 5 years, having insufficient FX reserves to manage the external account. Key ingredients (i.e. large external deficits and hefty debt redemptions) in the making of crisis are almost similar whether it be 2008, 2013 or the more recent 2018.
- Drawing parallels, on the external front, financing gap in FY08 grew to US$10.23bn (6.0% of GDP) with CAD at 8.1%, import cover at ~1 month and PkR devaluing by 22.5%. Current situation plays to the same theme with gross funding need at US$20.4bn (6.5% of GDP), CAD at 5.8% and import cover of ~2 months.
- Historically, periods of commodity price shocks and demand pressures emanating from capacity expansions have been the primary reason for widening CAD. FY08 witnessed trade deficit jumping to 8.7% of GDP on account of higher oil and food import bills while FY18 has been much the same with trade deficit clocking in at 9.9% of GDP.
- That said, with the potential entry into an IMF program, Pakistan is once again likely to see stabilization phase in the medium term, where financial inflows are likely to shore up reserves. Long term stability however, hinges on how the new economic setup uses the monetary and fiscal space available under the program.
- From the market’s vantage, we see space for further correction till corrective structural measures are not undertaken. While current market P/E at 6.29x would appear impressive on face, earnings yield at 15.8% compares unfavorably given current secondary PIB (10y) yields at 11.7% and our anticipation of further 175bps tightening in the policy rate.
AKD Research
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.