Wednesday, September 25, 2013 | Fresh banking spreads fall to 4.

46 percent in August Staff Report KARACHI: Weighted average spreads marginally slid by 3.0 basis points (bps) to 6.28 percent in August 2013, while similar trend was observed in the fresh spreads as they decreased to 4.46 percent, according to latest State Bank of Pakistan (SBP) data. With the latest monetary policy statement (MPS) increasing interest rate by 50 bps along with high inflation figures expected in fiscal year 2013-14 (FY14), Foundation Securities analyst believes further rate hike could be on the cards improving the core margins of the banking sector. While loan portfolio growth is likely to remain timid, apart from certain firm industry dynamics, the banks are expected to keep placing funds in risk-free assets following their risk aversion policy. Weighted average lending rates have further declined by 17 bps on monthly basis and 171 bps on yearly basis to 11.11 percent in August 2013 while overall deposits decreased by 14 bps on monthly basis to 4.83 percent. This has resultantly pulled down weighted average spreads by 3.0 bps on monthly and 67 bps on yearly basis to 6.28 percent. Fresh spreads too have followed a similar trend of weighted average spreads as they reduced by 29 bps on monthly basis to 4.46 percent in August 2013 from 4.75 percent in July 2013. Fresh lending rates reduced by 51 bps on monthly basis to 9.69 percent whereas lower than proportionate decrease in fresh deposit rates of 23 bps was witnessed on monthly basis to 5.22 percent. As of September 6, 2013, banking deposits have remained muted until now with qualifying time deposits declining by 2.0 percent. Moreover, with 50 bps decrease in the interest rate announced in June 2013, the analyst expected interest income to come under duress for the banking sector. Due to uncertainty of interest rate hike, the banking sector has refrained from investing in new investments especially in government papers as shown in the previous T-bills auctions resulting in total investment to drop by 13 percent and hence investments to deposit ratio to reduce to 50 percent. However, as conditions become clearer, the analyst expects placement of funds to increase as seen in the last T-bills

auction. In the latest monetary policy statement, the SBP increased the key policy rate by 50 bps to 9.5 percent and also pointing out inflationary figure of 11 to 12 percent in FY14. Due to higher inflationary expectation, banking sector sentiments are signalling to another rate hike in the near-term, especially in the next monetary policy to be announced in November 2013. This was reflected in the latest T-bills auction where majority of the bids (99 percent) were in the three months tenor while zero bids in the 12 months tenor. Core margins will slightly recover in coming months on the back of increase in the key policy rate. However, higher inflationary expectation could trigger another rate hike. The analyst believed, while loan portfolio growth is likely to remain timid, apart from certain industries, the banks are expected to keep placing funds in risk-free assets.
http://www.dailytimes.com.pk/default.asp?page=2013\09\25\story_25-9-2013_pg5_4

Sunday, November 3, 2013

Karachi Stock Exchange Weekly Analysis 3 Nov, 2013
The Karachi Stock Exchange (KSE) market was bullish, on account of above expected corporate results. KSE 100 index closed at 2 2,649.09 points by gaining 203.5 points or 0.91 percent. While KSE 30 index closed at 17,238.26 points by gaining 179.96 or 1.05 percent. Average daily turnover fell by 14 percent on week-on-week basis to 115 million shares against 133 million shares, whereas the dollar value fell by nine percent on week-on-week basis. The KSE-100 Index closed the week at 22,649 points, up by 0.91%WoW with average daily traded volumes clocking in at 115mn shares, down 13.64%WoW. The index heavyweight MCB Bank Limited and the Oil and Gas Development Company Limited remained the major supporters to the rally.

Following news have played vital role in Karachi Stock Market index movement:

Chief of TTP killed in a drone attack & likely revenge activity by TTP Expectations of Interest rate hike in upcoming November Monetary Policy Any statements from the IMF team on quarterly review on Pakistan will also be eyed With the MPS expected towards the end of next week, an expected hike in the DR could possibly put the Banking Sector in the limelight while companies with significant leverage could lose out The KSE100 rose by 4.3% in the month of Oct13, with the main driver of the market being the resumption in foreign portfolio investment, with US$51mn of net portfolio investment during the month PSO (+83%YoY), ENGRO (+1236%YoY) and NML (+48%YoY) were among the key blue chip companies that registered strong earnings growth Interestingly foreign investors bought nearly USD50mn worth of stocks out of which nearly USD41.5mn worth of buying was made in the last ten days of the month while individuals and companies were on the selling side BIPL has planned to issue rights shares up to PKR750mn, as the exemption granted by the SBP for MCR expired on March 31 Rising inflation coupled with rupee depreciation minimized the continuous swift import of Chinese brand mobiles and accessories in the first quarter of the 1QFY14 as the overall telecom sector imports declined by 14.46 % NFDC released its monthly report on 28th Oct, indicating urea sales have jumped 91% YoY to 504k tons while DAP sales were down 19% YoY during the month of Sep13 Foreigners aided the indexs growth and the market saw foreign buying worth $18 million during the week The country's liquid foreign reserves rose by US$267mn mainly due to arrival of Collation Support Fund (CSF) inflows of US$322mn Drug Regulatory Authority (DRA) will announce an increase in prices of generic pharmaceuticals next week Expected submission of Pakistans request for the EU GSP Plus Status to the EU Parliament later this month The fertiliser sector was back in the limelight as resumption of regular gas supply to fertiliser plants meant a return to normal production levels, resulting in huge gains for Engro Fertilizers and Fatima Fertilizers. Fauji Fertilizer Company, which was less affected by the gas outages, also managed to post earnings above expectations, triggering buying in its stock Pakistan State Oil, Bank Alfalah Limited, National Bank of Pakistan, Nishat Chunian Limited, Nishat Chunian Power Limited, Fatima Fertilizer, Maple Leaf Cement, Engro Corporation, Pakistan Petroleum Limited and Fauji Fertilizer Company were among the blue-chips, which announced their above expectation results

Top ten gainers of last week were: Colgate Palmolive, Century Paper, Nestle Pakistan, Siemens Pak Engg., National Foods, Arif Habib Corp, Attock Cement Ltd, Allied Bank, J.D.W.Sugar and

Following news have played vital role in Karachi Stock Market index movement:

Chief of TTP killed in a drone attack & likely revenge activity by TTP Expectations of Interest rate hike in upcoming November Monetary Policy Any statements from the IMF team on quarterly review on Pakistan will also be eyed With the MPS expected towards the end of next week, an expected hike in the DR could possibly put the Banking Sector in the limelight while companies with significant leverage could lose out The KSE100 rose by 4.3% in the month of Oct13, with the main driver of the market being the resumption in foreign portfolio investment, with US$51mn of net portfolio investment during the month PSO (+83%YoY), ENGRO (+1236%YoY) and NML (+48%YoY) were among the key blue chip companies that registered strong earnings growth Interestingly foreign investors bought nearly USD50mn worth of stocks out of which nearly USD41.5mn worth of buying was made in the last ten days of the month while individuals and companies were on the selling side BIPL has planned to issue rights shares up to PKR750mn, as the exemption granted by the SBP for MCR expired on March 31 Rising inflation coupled with rupee depreciation minimized the continuous swift import of Chinese brand mobiles and accessories in the first quarter of the 1QFY14 as the overall telecom sector imports declined by 14.46 % NFDC released its monthly report on 28th Oct, indicating urea sales have jumped 91% YoY to 504k tons while DAP sales were down 19% YoY during the month of Sep13 Foreigners aided the indexs growth and the market saw foreign buying worth $18 million during the week The country's liquid foreign reserves rose by US$267mn mainly due to arrival of Collation Support Fund (CSF) inflows of US$322mn Drug Regulatory Authority (DRA) will announce an increase in prices of generic pharmaceuticals next week Expected submission of Pakistans request for the EU GSP Plus Status to the EU Parliament later this month The fertiliser sector was back in the limelight as resumption of regular gas supply to fertiliser plants meant a return to normal production levels, resulting in huge gains for Engro Fertilizers and Fatima Fertilizers. Fauji Fertilizer Company, which was less affected by the gas outages, also managed to post earnings above expectations, triggering buying in its stock Pakistan State Oil, Bank Alfalah Limited, National Bank of Pakistan, Nishat Chunian Limited, Nishat Chunian Power Limited, Fatima Fertilizer, Maple Leaf Cement, Engro Corporation, Pakistan Petroleum Limited and Fauji Fertilizer Company were among the blue-chips, which announced their above expectation results

Top ten gainers of last week were: Colgate Palmolive, Century Paper, Nestle Pakistan, Siemens Pak Engg., National Foods, Arif Habib Corp, Attock Cement Ltd, Allied Bank, J.D.W.Sugar and

Nishat Power Ltd. Top ten losers of last week were: JS Bank Ltd, Jah.Sidd. Co., Netsol Technologies, TriPack Films Limited, Shifa International Hospitals, Thal Limited, Azgard Nine, Cherat Cement, Kohinoor Textile and TRG Pakistan Ltd. Top ten volume leaders were: JSCL, PTC, BOP, ENGRO, NBP, FCCL, DGKC, EFOODS, MLCF, and PSO. Thank you very much for reading this article. NOTE: The information posted in this blog (forum) is based on current affairs & investors point of view. There may be discrepancy in the ground realities. Written by: Rana Khurram
http://www.karachistockexchange.org/2013_11_01_archive.html

Monetary policy review

By Editorial Published: February 10, 2013

No one likes to admit failure. No one likes to accept defeat. But it seems that is exactly what the State Bank of Pakistan (SBP) has done. After going out on a limb and reducing the policy rate by over 450 basis points over the past 18 months, it seems the regulator has admitted that the strategy has failed. In the latest monetary policy announcement, the regulator has kept the policy rate, or in simpler terms, the interest unchanged at 9.5 per cent. Consumer Price Index inflation went to a low of 6.9 per cent last year but has now once again surged to 8.1 per cent. Core inflation is also inching back up and it is very likely that it will have hit double digits by the time the next monetary policy announcement is due. The basic premise that the SBP had adopted was quite simple. It never openly admitted to this but by drastically reducing the interest rate, it had hoped that banks would find it unattractive to lend to the government and, in doing so, had hoped to achieve two things. On the one hand, it had hoped that this might have some kind of a restrictive effect on runaway government borrowing. On the other hand, it had hoped that the banks would instead start lending to the private sector.

It has always been obvious that the task of containing the size of fiscal deficit and governments borrowing requirements from the banking system is becoming more and more difficult, but it is now equally obvious that despite all its efforts, the SBP has been unable to gain any kind of control over this. The year-on-year growth in broad money, on average, has been almost 18 per cent against average GDP growth of less than four per cent. This has left a very large gap for inflationary pressures and the signs are already there with inflation once again creeping towards double digits. Many fear that energy costs are not accurately represented in the calculation of inflation, which is why inflation is not already in double digits. In comparison, growth fiscal borrowings from scheduled banks was 41.3 per cent on January 25. Over the last four years, fiscal borrowings from the scheduled banks for budgetary support have grown by an average of around 60 per cent. The average growth in credit to private businesses, on the other hand, has only been four per cent during the same period. The end result is that the domestic debt has risen by 25.6 per cent on average, while private fixed investment has contracted by 9.4 per cent in the economy. The SBP, without actually saying so, has admitted failure in its attempt to kick-start expansion of private sector credit and to trigger investment and growth as a result of cuts in the interest rate. This rationale had been its main argument for lowering the interest rate. That rationale was absent and quietly swept under the rug in the latest monetary policy announcement. However, it would be unfair to place the entire blame for the lack of private sector credit expansion on the central bank. Other factors like energy shortages, the poor law and order situation and the unwillingness of industrialists to invest in this situation, or for banks to lend in a stagnant economy are probably more to blame for the non-existent demand for credit. The unchanged interest rate was not a surprise for anyone. What did catch many by surprise was the narrowing of the interest corridor by 50 basis points from seven to 6.5 per cent and the indication that the SBP was going to limit Open Market Operations (OMO) that have been a thorn of contention between the IMF and the Pakistan government, which wants a new agreement. In the past year alone, the regulator has effectively pumped close to half a trillion rupees into the market through OMOs. The indication that this may be coming to an end could be a condition set by the IMF if there is to be any chance of a new agreement. But whether that really is the case, is anybodys guess. Published in The Express Tribune, February 10th, 2013. http://tribune.com.pk/story/504999/monetary-policy-review/