Pakistan Economy_MPC to stick with Status Quo, (AKD Daily, Jan 21, 2021)
- The MPC of the SBP — scheduled to meet tomorrow — is likely to maintain policy rate at 7.0% to support nascent economic recovery given uncertainties posed by resurfacing COVID cases domestically and internationally, capitalizing on room granted by transitory inflationary readings (mostly food supply led) and adequate external buffers.
- Jan’21 inflation is likely to stand at 6.1% vs. 7.97% in Dec’20, predominantly due to high base affect while tighter control on food prices (down 2.0%MoM) particularly out-of-season fall in eggs (15.6%MoM) and chicken prices (26.4%MoM) also played its part.
- With authorities approaching IMF program resumption, the timing and scale of adjustments render our inflation forecast for CY21 of 9.46%YoY subject to uncertainty where we have incorporated 20/10% increase in electricity/gas tariffs from Mar’21. Consequently, in our base case we expect 150bps hike in interest rates in next 12-18 though Central Bank may face timing hurdles in reverting to policy framework with uncertainties clouding the outlook for COVID-19 vaccination program.
- Sentiments surrounding the outcome of two key events, IMF negotiations for program resumption and FATF’s mid-Feb meet are likely to percolate through upcoming results season, where base case expectations are constructive but event risk could make for a choppy ride. Hence, possible pull-backs open room for building positions in Banks (HBL, MCB), Cements (LUCK, MLCF), Textiles (NML), consumer durables (INDU, PAEL) and PSO.
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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