AKD Securities Limited Equity Research – Daily Report

Karachi, June 22, 2018 (PPI-OT): Pakistan Economy: CAD remains elevated for May’18

Current account deficit for May’18 clocked in at US$1.93bn (marginally down 0.7%MoM) vs. US$1.95bn in the previous month. Rise in trade deficit to US$2.9bn (up 6.7%MoM) for the month was offset by a rebound in current transfer (up by US$337mn) and uptick in remittance inflows, recorded at US$1.77bn (reflecting growth of 7.3%MoM). Consequently, current account for 11MFY18 surged to US$15.96bn (vs. US$11.14bn in comparable period last year), surpassing the GoP target of US$15.3bn for full year FY18. The rise in CAD is primarily a function of growing trade deficit recording at US$27.94 (highest ever recorded), as import growth (+16.4%YoY) outpaced the growth in exports (13.2%YoY) while remittance showed marginal recovery (up 3.0%YoY).

Consequently, SBP’s FX reserves sharply fell to US$10.03bn by May-end (cumulative drawdown of US$6.1bn in 11MFY18) in the absence of any material inflows. Going forward, external account imbalance is likely to remain persistent in FY19F with CAD likely to record at 4.95% of GDP (US$16.3bn) considering higher oil imports (+16.8%YoY in FY19F). This together with chunky debt repayments (FY19F: US$7.5bn) during the year is expected to push gross external financing gap to US$20.7bn, according to our estimates.

CAD continues to rise: Remaining elevated, current account deficit for May’18 recorded at US$1.93bn (marginally down 0.7%MoM) vs. US$1.95bn in the previous month. Despite widening trade deficit to US$2.9bn (up 6.7%MoM), rebound in current transfer (up by US$337mn) along with uptick in remittance inflows recording at US$1.8bn (reflecting growth of 7.3%MoM) help contain the deficit at these levels. Consequently, current account for 11MFY18 surged to US$15.96bn vs. US$11.14bn in comparable period last year. Surpassing the GoP target of US$15.3bn for full year FY18, the rising deficit is a function of growth in imports (+16.4%YoY) outpacing the growth in exports (13.2%YoY) with trade deficit reaching its record level of US$27.94bn (up 19.1%YoY).

Remittance Inflows: Supporting the current account, remittance flows for the month recorded at US$1.77bn vs. US$1.65bn in Apr’17. Cumulatively, remittance flows totalled US$18.03bn in 11MFY18 vs. US$17.51bn in 11MFY17, reflecting a growth of 3.0%YoY. In this regard, inflows from KSA and GCC countries remain depressed due to tight labour market conditions while significant uptick in flows from USA and UK (cumulatively up US$706mn) helped lift overall remittances.

Outlook: Going forward, we see current account pressures to remain driven by higher oil imports (+16.8%YoY in FY19F) with CAD likely to record at 4.95% of GDP (US$16.3bn). That said, the deficit is most likely to be contained by higher export growth in light of ~13.9% currency adjustment in FY18TD. Such external imbalance accompanied by chunky debt repayments (FY19F: US$7.5bn) are together expected to push gross external financing gap to US$20.7bn for the next year while keeping FX reserves under pressure.

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AKD Securities Limited Equity Research – Daily Report

Karachi, June 22, 2018 (PPI-OT): Pakistan Economy: CAD remains elevated for May’18

Current account deficit for May’18 clocked in at US$1.93bn (marginally down 0.7%MoM) vs. US$1.95bn in the previous month. Rise in trade deficit to US$2.9bn (up 6.7%MoM) for the month was offset by a rebound in current transfer (up by US$337mn) and uptick in remittance inflows, recorded at US$1.77bn (reflecting growth of 7.3%MoM). Consequently, current account for 11MFY18 surged to US$15.96bn (vs. US$11.14bn in comparable period last year), surpassing the GoP target of US$15.3bn for full year FY18. The rise in CAD is primarily a function of growing trade deficit recording at US$27.94 (highest ever recorded), as import growth (+16.4%YoY) outpaced the growth in exports (13.2%YoY) while remittance showed marginal recovery (up 3.0%YoY).

Consequently, SBP’s FX reserves sharply fell to US$10.03bn by May-end (cumulative drawdown of US$6.1bn in 11MFY18) in the absence of any material inflows. Going forward, external account imbalance is likely to remain persistent in FY19F with CAD likely to record at 4.95% of GDP (US$16.3bn) considering higher oil imports (+16.8%YoY in FY19F). This together with chunky debt repayments (FY19F: US$7.5bn) during the year is expected to push gross external financing gap to US$20.7bn, according to our estimates.

CAD continues to rise: Remaining elevated, current account deficit for May’18 recorded at US$1.93bn (marginally down 0.7%MoM) vs. US$1.95bn in the previous month. Despite widening trade deficit to US$2.9bn (up 6.7%MoM), rebound in current transfer (up by US$337mn) along with uptick in remittance inflows recording at US$1.8bn (reflecting growth of 7.3%MoM) help contain the deficit at these levels. Consequently, current account for 11MFY18 surged to US$15.96bn vs. US$11.14bn in comparable period last year. Surpassing the GoP target of US$15.3bn for full year FY18, the rising deficit is a function of growth in imports (+16.4%YoY) outpacing the growth in exports (13.2%YoY) with trade deficit reaching its record level of US$27.94bn (up 19.1%YoY).

Remittance Inflows: Supporting the current account, remittance flows for the month recorded at US$1.77bn vs. US$1.65bn in Apr’17. Cumulatively, remittance flows totalled US$18.03bn in 11MFY18 vs. US$17.51bn in 11MFY17, reflecting a growth of 3.0%YoY. In this regard, inflows from KSA and GCC countries remain depressed due to tight labour market conditions while significant uptick in flows from USA and UK (cumulatively up US$706mn) helped lift overall remittances.

Outlook: Going forward, we see current account pressures to remain driven by higher oil imports (+16.8%YoY in FY19F) with CAD likely to record at 4.95% of GDP (US$16.3bn). That said, the deficit is most likely to be contained by higher export growth in light of ~13.9% currency adjustment in FY18TD. Such external imbalance accompanied by chunky debt repayments (FY19F: US$7.5bn) are together expected to push gross external financing gap to US$20.7bn for the next year while keeping FX reserves under pressure.

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AKD Securities Limited Equity Research – Daily Report

Karachi, June 22, 2018 (PPI-OT): Pakistan Economy: CAD remains elevated for May’18

Current account deficit for May’18 clocked in at US$1.93bn (marginally down 0.7%MoM) vs. US$1.95bn in the previous month. Rise in trade deficit to US$2.9bn (up 6.7%MoM) for the month was offset by a rebound in current transfer (up by US$337mn) and uptick in remittance inflows, recorded at US$1.77bn (reflecting growth of 7.3%MoM). Consequently, current account for 11MFY18 surged to US$15.96bn (vs. US$11.14bn in comparable period last year), surpassing the GoP target of US$15.3bn for full year FY18. The rise in CAD is primarily a function of growing trade deficit recording at US$27.94 (highest ever recorded), as import growth (+16.4%YoY) outpaced the growth in exports (13.2%YoY) while remittance showed marginal recovery (up 3.0%YoY).

Consequently, SBP’s FX reserves sharply fell to US$10.03bn by May-end (cumulative drawdown of US$6.1bn in 11MFY18) in the absence of any material inflows. Going forward, external account imbalance is likely to remain persistent in FY19F with CAD likely to record at 4.95% of GDP (US$16.3bn) considering higher oil imports (+16.8%YoY in FY19F). This together with chunky debt repayments (FY19F: US$7.5bn) during the year is expected to push gross external financing gap to US$20.7bn, according to our estimates.

CAD continues to rise: Remaining elevated, current account deficit for May’18 recorded at US$1.93bn (marginally down 0.7%MoM) vs. US$1.95bn in the previous month. Despite widening trade deficit to US$2.9bn (up 6.7%MoM), rebound in current transfer (up by US$337mn) along with uptick in remittance inflows recording at US$1.8bn (reflecting growth of 7.3%MoM) help contain the deficit at these levels. Consequently, current account for 11MFY18 surged to US$15.96bn vs. US$11.14bn in comparable period last year. Surpassing the GoP target of US$15.3bn for full year FY18, the rising deficit is a function of growth in imports (+16.4%YoY) outpacing the growth in exports (13.2%YoY) with trade deficit reaching its record level of US$27.94bn (up 19.1%YoY).

Remittance Inflows: Supporting the current account, remittance flows for the month recorded at US$1.77bn vs. US$1.65bn in Apr’17. Cumulatively, remittance flows totalled US$18.03bn in 11MFY18 vs. US$17.51bn in 11MFY17, reflecting a growth of 3.0%YoY. In this regard, inflows from KSA and GCC countries remain depressed due to tight labour market conditions while significant uptick in flows from USA and UK (cumulatively up US$706mn) helped lift overall remittances.

Outlook: Going forward, we see current account pressures to remain driven by higher oil imports (+16.8%YoY in FY19F) with CAD likely to record at 4.95% of GDP (US$16.3bn). That said, the deficit is most likely to be contained by higher export growth in light of ~13.9% currency adjustment in FY18TD. Such external imbalance accompanied by chunky debt repayments (FY19F: US$7.5bn) are together expected to push gross external financing gap to US$20.7bn for the next year while keeping FX reserves under pressure.

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