Report
EUR 8.45 For Business Accounts Only

Pakistan Economy_SBP ups the ante! (AKD Daily, Jun 26, 2020)

Pakistan Economy: SBP ups the ante!

  • In an emergent meeting yesterday, the MPC of the SBP has cut the policy rate by a further 100bps to 7%, clearly prioritizing economic growth over inflation. The latest move takes cumulative easing to 625bps over the past three months or so.
  • The rate cut is a balancing act from the authorities, where lack of fiscal stimulus has been aptly balanced through emphatic monetary stimulus. The improved external situation post materialization of funding flows from multilaterals also provided the space for another bold cut when the domestic currency was under pressure.
  • After an aggressive easing of cum 625bps and with the real interest rate on a forward-looking basis close to zero, the room for further easing has clearly narrowed.  We expect the central bank to be on a ‘long pause’. The yesterday MPC meeting has rendered the scheduled meeting in Jul’20 as a non-event, where we expect the MPC to hold interest rate steady.
  • With the timing more-so than the quantum of easing a surprise, it remains to be seen whether the latest interest rate cut acts as a catalyst to market performance. On the valuation side, however, market appears a clear long term buy with E/Y (earnings yield) at 15.6% vs. risk free rate (DR) at 7.0%, an astounding difference of 8.6%.
  • Top plays include Cements (LUCK, MLCF), Fertz (FFC with D/Y at 11%) and Technology (SYS). Despite interest rate cuts, we continue to like Banks on valuations (MEBL, UBL).

AKD Research

Provider
AKD Securities Limited
AKD Securities Limited

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.

Analysts
Umer Farooq

Other Reports from AKD Securities Limited
Other Reports from these Analysts

ResearchPool Subscriptions

Get the most out of your insights

Get in touch