Thursday, June 01 2023

Stocks lose 341 points on profit selling
The Pakistan Stock Exchange (PSX) witnessed a negative session on Wednesday, with the benchmark index of representative shares ceding ground to the bears by the end of trading. Arif Habib Ltd said the KSE-100 index hit an intraday low of 406.62 points following the market chatter about new tax measures in the upcoming budget. Investors decided to book profits after news reports emerged that the proposed tax on corporate reserves would likely be limited in nature. Resultantly, the likely quantum of pay-outs by corporate entities to avoid the proposed advance tax might not be as large as expected earlier. As a result, the KSE-100 index settled at 41,330.56 points, down 341.10 points or 0.82 per cent from the preceding session. The overall trading volume decreased 20pc to 158.1 million shares. The traded value went down 4.6pc to $21.4m on a day-on-day basis. Stocks contributing significantly to the traded volume included WorldCall Telecom Ltd (20.7m shares), Maple Leaf Cement Factory Ltd (8.7m shares), Fauji Cement Company Ltd (6.4m shares), TRG Pakistan Ltd (5.9m shares) and Cnergyico PK Ltd (5.3m shares). Sectors contributing the most to the index performance were technology and communication (-86.6 points), cement (-67.9 points), exploration and production (-51.5 points), chemical (-27 points) and fertiliser (-18.9 points).
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A steep price
PAKISTAN’S economy faces a severe multidimensional crisis amid a gloomy and uncertain outlook. A recent State Bank report on the state of the economy during the first half of the present fiscal year admits that macroeconomic fundamentals are deteriorating, but it understates the severity of the painful crisis the country and its people have been contending with for the last one year — just as Finance Minister Ishaq Dar does when he contends the country is not on the verge of a financial crisis and will “absolutely not” default. To prove his point, he has pointed to the current account surplus of $570m and $18m recorded in March and April, respectively. But he did not say that the government achieved this surplus at the cost of GDP growth, which is forecast to stay flat this fiscal year amid widespread industrial closures and productivity cuts, and tens of thousands of lost jobs. At least the State Bank has been more forthcoming than Mr Dar. The latter’s mismanagement of the economy over the last eight months proves that he is part of the problem. No wonder, Princeton economist Atif Mian has tweeted: “To thump your chest and say, ‘see we have not defaulted’ means nothing if you continue to ignore the underlying crisis.”
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CORPORATE WINDOW: Pre-budget dejection
Tycoons, aware of challenges and Prime Minister Shehbaz’s government’s weakness, are not hopeful. The volatile market is desperate for positive signals. The people, however, expected relief in an election-year budget. To avoid higher levies on their income/profit, bankers, brokers and barons are lobbying hard, approaching heavyweights in the power corridors. The currency dealers, commodity traders and commercial importers are labouring to universalise their interests for policy support. Exporters site forex squeeze in the country to justify the demand for preferential treatment. Agriculturists tie food security in Pakistan with their fortunes for concessions. The ruling coalition and allied parties have taken a dent in political capital by pursuing stabilisation policies and will do all it takes in the budget to win constituents back. The representatives of different segments of people and businesses told sad tales of mounting difficulties in sustaining families and enterprises in a shrinking economy.
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Chemical plant faces delays amid forex crunch
Engro Polymer and Chemicals Ltd (EPCL) — which is the country’s only manufacturer of polyvinyl chloride or PVC resin used in plastic and rubber production — has been facing long delays in setting up its $23 million hydrogen peroxide plant. Speaking to a group of journalists at the Bin Qasim factory on Wednesday, company officials said the cost of the under-construction facility has exceeded the initial estimate as the firm is struggling to import machinery amid restrictions on dollar outflows. The country’s only integrated chlor-vinyl chemical complex generates hydrogen as a by-product of its caustic manufacturing process, which is currently used as a fuel in its power plant. The project aims to divert hydrogen to the production of hydrogen peroxide, which is mainly used as a bleaching agent in the textile industry. According to Chief Commercial Officer Muhammad Idrees, the proposed plant will likely start commercial production next year. It’ll sell its output to export-oriented textile mills whose foreign customers prefer bleaches that are oxygen-based as opposed to chlorine-based. “The main hurdle is the curb on imports due to the foreign exchange crisis,” he said.
Related news categories: business chemical economic-indicators fertilizers psx stock-exchanges
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Govt exceeds auction target, borrows Rs2.3tr
The government raised Rs2.29 trillion through treasury bill auctions on Wednesday, surpassing the target, as well as the requirement for the maturity of the bills. The cash-starved government raised a total of Rs2.286tr, exceeding the target of Rs1.8tr. This amount also exceeded the required funds for the maturity of the treasury bills on the same day by 35 per cent. In fact, the government raised Rs596bn more than the required amount of Rs1.69tr for the maturity. The government has been actively borrowing to address the revenue shortfall. According to a recent report by the State Bank of Pakistan, the government borrowed Rs3.147tr from scheduled banks during the first 10-and-a-half months of the current fiscal year, FY23. The bidding trend also showed that banks are keen to invest in short-term three-month papers, anticipating a potential increase in interest rates in the upcoming weeks or months. The total bids from banks amounted to Rs3.060tr. This trend reflects the banks’ preference to invest a maximum portion of their funds in risk-free government papers rather than lending to the private sector. Consequently, lending to the private sector has declined to just 2pc during the first 10-and-a-half months of this fiscal year.
Related news categories: business economic-indicators misc