Pakistani Capital Market Overview January 2013

Macroeconomic Review & Outlook:

•          The year on year CPI for the month of January 2013 was 8.1% where as for the month of December 2012 it was 7.9%.

•          The current account (CA) of Pakistan was boosted, courtesy of a tranche given by Competitiveness Support Fund (CSF) worth US$ 688m bringing the CA to US$ 250m for the first half of financial year 2013 (July'12-Dec'12).

•          Foreign exchange reserves continued to remain under pressure due to financial account flows and debt repayments to the IMF.

•          Borrowing from the banking system by the government for fiscal funding still continued and has reached PKR 667bn for the period July'12 to 25th of January 2013.

Outlook:-

•          A further rate cut would not be possible given the deteriorating fiscal & external accounts, significant IMF payments which would result in a monetary tightening.

Equity Market Review & Outlook:

•          The index experienced a brisk fall over a temporary political chaos and the PM's possible arrest only to recover the index in the latter half of the month.

•          The index was up by 2% on a month on month basis.

•          The participation in the index remained on the low side as the index attracted average daily volume of 106m shares in Jan'13 vs 160m shares in Dec'12.

•          Foreign participation helped the index during the month with positive net inflows of US$ 15m.

•          Electricity sector out-performed the market due to attractive valuations and healthy payouts. Banking sector was in line with the market performance.

•          Currently market is valued at 7.2 times estimated earnings, offering 6.8% dividend yield.

Outlook:-

•          Investors are waiting for the Dec-end results, expecting strong payouts from commercial banks, electricity, chemicals and oil & gas sectors.

•          The mounting uncertainty of the political and macroeconomic position especially on the external front could make the market remain cautious in the short-term.

Money Market Review & Outlook:

•          The short term rates remained on the higher side for the month owing to relatively tight liquidity position in the system.

•          During the month, SBP continued to inject amounts through Open Market Operations to maintain liquidity.

•          1 year PKRV rates adjusted downwards by 11 bps month on month to 9.2% while 10 year PKRV rates adjusted upwards by 10 bps month on month to 11.6% for the month of January 2013.

•          The market has a mixed opinion on the upcoming monetary policy statement with the majority anticipating, no change in the discount rate.

Outlook:-

•          In anticipation of no rate cut, possible rate hikes could emerge in 4-6 months.

•          Yield curve has continued to steepen indicating increasing expectations of higher interest rates in the near future.

•          Funds will look to invest in shortest treasury bills going forward.

Currency:

·         The rupee continued to depreciate during the month and lost 55 paisas in the interbank market closing at Rs. 97.17 / $ with open market rate closing at Rs. 99.50 / $.

 Sources:- 

www.mcbah.com

www.nafafunds.com

www.almeezangroup.com