Pakistan Strategy: SEF makes a tough Budget easier to swallow,
- Benchmark equity indices have succumbed to tough macro-economics having been riled by uncertainty over policy outlook, showcased by KSE100/All indices falling 6.2/11.7% CYTD, accompanied by drab volumes (KSE 100/All average volumes at 86.6/130.3mn shares, down 1.4/33.2%YoY)
- Flight to value for investors is confirmed by KSE100/All volume share rising to 66.5% (crossing 76% during May), with Budget FY20 (likely a carbon copy of IMF benchmarks) shaping-up to be a dampener for market sentiment. In this backdrop, the confirmed formation of a PkR20-25bn State Enterprise Fund (SEF) is of increased significance (KSE-100 index +11.1% from last week intraday low of 32,354pts).
- We draw parallels between the 2009 NIT-SEF and proposed SEF, contrasting the two periods (market recovering from Oct-Dec’08 trading freeze prior to NIT-SEF) highlighting its vital role in calming investor unease (post global financial crisis).
- With a decade between the two periods, the proposed size, fund constituents and cost of funds supplied (at Kibor +1% in 2009 by four financing institutions) are understandably different, we believe the Fund addresses medium term liquidity constraints providing a cushion against whole-sale sell-offs or erratic market moves.
- An extended trading hiatus awaits (Eid holidays), after which investors face an increasingly formidable series of events (Budget FY20, FATF plenary) the outcomes of which carry significant downside risks. We re-iterate out liking for relatively safer bets, including Banks (MCB, MEBL), E&Ps (OGDC) and IPPs (HUBC, NCPL, NPL).
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.
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