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.