Pakistan Strategy: Mini-budget to set the tone for policy action
The GoP is set to announce mini budget on Jan 23'18 (second since coming to power), reportedly to plug the PkR150-160bn revenue shortfall ailing the economy, while possible indications of future direction will be provided by severity of actions
The said measures potentially reduce the deficit to ~5.9% (as per AKD estimate). That said, a fiscal deficit of 5.5% of GDP seems comfortable for IMF, which opens tail risks to already revised PSDP (33.4% released of the revised target of PkR675bn in 1HFY19).
Revenue measures like increase in FED on cement and increase in GST and PDL on petroleum products will not be of much significance given the declining trend in offtake, according to our calculations.
Stock market incentives could provide adrenaline rush for the market in the short run. However, medium to long-term trend is dependent on the policy direction set by the supplementary budget.
We view the mini-budget could bring upon inflationary pressure (hike in fuel prices, cements etc.) setting the course for interest rate hikes (Positive for Banks), while would be conducive for import substitution industries (Autos, selected chemicals, tile manufacturers, paper & board), while negative for OMCs and Cements.
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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