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Team AKD Research
EUR 8.94 For Business Accounts Only

Pakistan Strategy_Surging oil prices bring E&Ps to the fore, (AKD Daily, Jun 02, 2021)

AKD Daily

Pakistan Strategy: Surging oil prices bring E&Ps to the fore,

  • Oil prices have picked momentum, with Brent surpassing US$70/bbl, up ~40/60% CYTD/FYTD, where subsiding COVID’19 cases in India (down to 40% of third wave’s peak) acted as a catalyst.
  • Oil demand recovery by 6.0mn bpd in CY21 is likely to be sufficient to absorb additional supply by Iran post potential lift-off of US sanctions, and as OPEC adds 25% of pre-COVID’19 production over May-Jul’21.
  • While earnings accretive for the E&P sector, surge in oil prices are also prescient of worsening circular debt accumulation for the sector. OGDC remains our top pick, with FY22/23F D/Y of 7.9/7.9% on offer at last close.
  • From macro vantage, surging oil prices will have a twofold impact on economic metrics where a US$5/bbl change in our oil assumption (US$65/bbl for FY22) translates into, i) US$1bn negative impact on current account balance, ii) 30bps surge in our monthly inflation estimate.
  • Privatization sword back in sheath would allow some price performance in E&P space, which together with expectation of pro-growth policies in the upcoming budget, should stretch the recent bull-run in the market.

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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.

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