EUR 9.34 For Business Accounts Only

Pakistan Strategy: Coronavirus has all the trappings of a ‘black swan’ (AKD Daily, Feb 11, 2020)

Pakistan Strategy: Coronavirus has all the trappings of a ‘black swan’

• While the role of Chinese authority to curb the spread of N-COV remains commendable (confirmed cases concentrated to Hubei province, lower risk of major outbreaks) resulting pessimism over commodity markets (covered on ) and emerging gaps in global supply chains merit closer analysis
• We delineate possible repercussions for a developing economy, geographically linked and closely aligned with China, as is the case with Pakistan, highlighting the detrimental impact of manufacturing disruptions in China on domestic import of goods, while commenting on possible supply chain disruptions
• Conversely, we find select industry verticals (non-urea fertilizer manufacturers, synthetic fiber) industries that could capitalize on competing imported product disruptions, making inroads into the market and solidifying margins in the process
• Lastly, negative spillovers for CAPEX, BMR and expansion activity may be felt if manufacturing halt in the Mainland is prolonged, where we highlight lower risk for long cycle infrastructure projects. That said, the market may be right to deflect negativity over the near term, as long as manufacturing output begins to resume during the ongoing week (in-line with Asian market expectations) and slowing number of additional confirmed infection cases emerge (contained to Mainland China).
• From a market perspective, heavy weightage Banks and E&P sectors are well-shielded, while the increased risk of Asian contagion weights over commodities in resulting in a favorable positioning for Pakistan (slight relief in balancing external deficit) and could prove positive for energy intensive industry (Cements, RLNG reliant Textiles).

AKD Research