Unruly inflation; brace for another rate hike, (AKD Daily, Apr 03, 2023)
Unruly inflation; brace for another rate hike
Headline inflation in the country has ramped up to 35.4%YoY in Mar’23, compared to
31.5%YoY reported in the earlier month. The inflationary pressures were driven by increasing prices of food products in the country, with the food inflation clocking in at
46.9%YoY in Mar’23.
Increased prices of food stuff in the country can be attributed to the shortage that transpired following the floods in Aug’22, along with the shortage as a result of the external
liquidity crisis the country is currently going through.
Core inflation, or Non-Food Non-Energy (NFNE) inflation, on the national level (assuming
urban/rural weight of 60.2%/39.9%) has crossed 20%YoY in Mar’23, clocking in at ~20.4%
YoY, compared to 18.9%YoY reported in the earlier month.
Interest rates in the country have been increased by a cumulative 1,300bps in a span of
~1.5 years. Despite this, inflation is still rampant in the country, and the MPC is likely to
hike interest rates by another 200bps as a consequence.
According to the poll of capital market members conducted by AKD, 75% of our participants shared our view of a 200bps in the upcoming MPC meeting, with another ~16.7%
indicating that the increase could be north of 200bps.
With heightened interest rates, funding working capital requirements and servicing debt
has become a challenge for corporates listed on the PSX. Of note are the highly leveraged
industries, such as Cements, Steels, and Textiles. On the other hand, Commercial Banks
and E&Ps are expected to be beneficiaries of the increased interest rates.
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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