AKD Quotidian about – Pakistan Economy: CSF helps reduce Oct’13 CAD : AsiaNet-Pakistan

AKD Quotidian about – Pakistan Economy: CSF helps reduce Oct’13 CAD

November 21, 2013 | Brokerage | Share:

Karachi, November 21, 2013 (PPI-OT): The Current Account for Oct’13 has registered a minor deficit of US$166mn vs. a revised deficit of US$574mn in Sep’13.

According to AKD Securities this improvement was primarily due to 1) 9%MoM contraction in balance of goods and services (104%MoM increase in exports of services likely on CSF receipts of US$322mn, 2) 5%MoM increase in workers’ remittances and 3) 50%MoM increase in other current transfers. That said, the 4MFY14 CA deficit was recorded at US$1,366mn (0.5% of GDP), showing significant (450) deterioration compared to a surplus of US$14mn during 4MFY13 (the latter was largely due to chunky CSF receipts).

Although the Current account position has weakened sharply, the Financial Account registered a surplus of US$146mn in Oct’13 vs. a deficit of US$226mn in Sep’13. Going forward, AKD Securities expects the current account to stay under stress in the near-term with risks stemming from seasonal uptick in oil imports in winter, delayed foreign inflows (e.g. Etisalat/3G auction) and repayments to the IMF (US$720mn alone in Nov’13). In this regard, SBP reserves currently stand at a low US$3.8bn, implying an import cover of just over 1 month.

This in turn has kept the PkR/US$ parity under pressure with 8.8% depreciation FYTD vs. 2.1% depreciation during the same period last year. Factors that could ease the prevalent pressure on the currency include timely release of multilateral funding and revival of the privatization process.

Oct’13/4MFY14 Textile Exports update:
Pakistan Bureau of Statistics (PBS) released exports data for Oct’13 yesterday. Textile exports posted a sequential decline during Oct’13 to clock in at US$1.1bn a decline of 12%MoM while exports were flattish on a YoY basis.

The decline in textile exports may primarily be attributable to almost week long Eid holidays during last month. Decline in exports was led by bed wear which registered a 34%MoM decline to clock in at US$163mn followed by cotton yarn at -14%MoM.

Textile Exports Oct'13/4MFY14
              Oct13                                        4MFY14
                 Unit     Qty    MoM   YoY   Value    MoM  YoY      Qty.    YoY    Value   YoY
                              (US$ mn)                                     (US$ mn)
Textiles Total                               1,115   -12%   0%                     4,691    8%
Cotton Yarn       M.T   56,128  -14%   -2%     171   -14%   0%    249,791    5%      758    6%
Cotton Cloth   TH.SQM  146,971   -5%  -15%     235    -3%   9%    603,435  -13%      947    5%
Knitwear       TH.DOZ   11,743   -1%   63%     189    -1%   6%     46,834   37%      764    2%
Bed Wear          M.T   24,368  -30%   12%     163    -34%  7%    105,736   19%      727   21%
R.M Garments   TH.DOZ    2,278   -5%   -3%     144    -6%  -7%      9,667    6%      621    8%

Source: Company Reports and AKD Research

Textile exports however continued to show growth on a cumulative basis where 4MFY14 exports clocked in at US$4.69bn, an increase of 8%YoY. The growth story for the 4MFY14 period was bed wear which registered 21%YoY growth to clock in at US$727mn. Going forward, AKD Securities may see another slow month for exports during Nov’13 due to an 11 day strike by transporters. Currently AKD Research has a buy stance on NML and NCL which offer an upside of 20% and 25% from current levels to AKD Securities’ respective TPs of PkR127/share and PkR68/share.


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