With Covid19 Under Control, Pakistan Enjoys V-Shaped Recovery in Manufacturing

With coronavirus spread contained, Pakistan economy is rebounding with V-shaped economic recovery.   Pakistanis have once again defied all foreign and domestic doomsayers, including media, activists and think tanks of all varieties. The nation's monthly Quantum Index of Manufacturing (QIM) for July 2020 has returned to where it was a year ago in July 2019, according to data released by Pakistan Bureau of Statistics.  Meanwhile, the number of daily new cases has declined from over 6,000 a day in June to around 500 a day now. There has also been dramatic reduction in hospital admissions and the need for intensive care. The LSMI output increased by 5.02% for July, 2020 compared to July, 2019 and 9.54% in June, 2020.  The recovery in manufacturing is quite broad, extending from cement production to fuel sales and growing demand for automobiles to home appliances, according to Bloomberg News.  Pakistan has successfully overcome the challenges posed  by the pandemic and its economic impact. Khan-Bajwa cooperation has been one of the keys to the country's success in dealing with the twin crises.


Covid19 Cases in Pakistan. Source: Our World in Data

Broad Recovery: 
The recovery in manufacturing is quite broad, extending from cement production to fuel sales and growing demand for automobiles to home appliances, according to Bloomberg News. The nation's monthly Quantum Index of Manufacturing (QIM) for July 2020 has returned to where it was a year ago in July 2019, according to data released by Pakistan Bureau of Statistics.  Meanwhile, the number of daily new cases has declined from over 6,000 a day in June to around 500 a day now.  There has also been dramatic reduction in hospital admissions and the need for intensive care. The LSMI output has increased by 5.02% for July, 2020 compared to July, 2019 and 9.54% if compared to June 2020. Month-wise trend of QIM from July, 2018 to July, 2020.    
Pakistan Monthly Quantum Index of Manufacturing. Source: PBS

Cement Sales: 

Pakistan is once again experiencing a construction boom with new incentives under Naya Pakistan Housing Program. Monthly cement sales rose to near all-time high of almost 5 million tons in July 2020 as construction activity picked up in both housing and CPEC-related projects. 

Pakistan Cement Sales. Source: Bloomberg

Car Sales:

Gasoline sales in June, 2020 hit new record  and local car deliveries rose to about 10,000 units as people returned to work after easing of lockdown in May, 2020. Kia Motors Corp.’s local unit is planning to add a second shift at its factory in Karachi from January.  

Pakistan Car Sales Recovery. Source: Bloomberg

Multiple Sectors Growing: 

Sectors including food, beverages & tobacco, coke & petroleum products, pharmaceuticals and non metallic mineral products saw an increase in production in July 2020.  Muzzammil Aslam, chief executive officer at Tangent Capital Advisors Pvt., was quoted by Bloomberg as saying, “It has surprised everybody".  Aslam expects Pakistan economy at 4%-5% in current fiscal year, higher than the government’s 2.1% target. “The growth is led by an aggregate demand push.”

Summary:
Pakistanis have defied all foreign and domestic doomsayers, including media, activists and think tanks of all varieties. Pakistan has successfully fought off the deadly COVID19 virus and begun to bounce back economically. Moody's rating agency has raised Pakistan's economic outlook from "under review for downgrade" to "stable". Pakistan's Planning Minister Asad Umar is talking of a "V-shaped recovery". Monthly cement sales have rebounded to pre-pandemic level, fuel sales have increased, tax collection is up,  exports are rising and the Karachi stock market is booming again. Prime Minister Imran Khan and Army Chief General Javed Bajwa have been on the same page in tackling the health and economic crises faced by Pakistan. Contrary to the critics of Pakistan's civil-military ties,  Khan-Bajwa cooperation has been one of the keys to the country's success in dealing with the twin crises.

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Comment by Riaz Haq on October 10, 2020 at 10:03am

#Pakistan’s Orange Line #Metro train project under #CPEC completed in #Lahore. A total of 27 sets of trains will be put into use which are expected to provide traveling service for 250,000 passengers daily, at the early stage of the commercial operation. https://www.wefornews.com/pakistans-orange-line-metro-train-project...


The Orange Line Metro Train project in Lahore under the China-Pakistan Economic Corridor (CPEC), has been completed and was delivered to the Pakistani side, it was announced.

As an early-harvest project of the CPEC, the Orange Line is Pakistan’s first-ever mass rapid urban transit train service, and the project is built by a joint venture of China State Railway Group Co., Ltd. and China North Industries Corporation, Xinhua news agency reported.

With a total investment of around $1.6 billion, the construction work of the Orange Line project started in September 2015, and the project is expected to be put into commercial operation soon.

Wang Yunlin, executive deputy general manager of the Orange Line project, told the media that despite the Covid-19 pandemic and tight construction schedule, the project was successfully completed and delivered.

Over 2,000 local people were employed at the peak of the project’s construction, he said, adding that the travelling of local people will be greatly improved after the project is put into commercial operation.

According to the joint venture, the length of the Orange Line project is 25.58 km, and the project has 26 stations including 24 elevated stops and two underground stations, connecting several densely-populated areas of Lahore.

A total of 27 sets of trains will be put into use which are expected to provide travelling service for 250,000 passengers daily, at the early stage of the commercial operation.

Comment by Riaz Haq on October 11, 2020 at 11:29pm

Workers' #remittances to #Pakistan above $2 billion for 4th consecutive month in September, increasing to $2.3 billion, 31.2% up from last year, and 9% higher than in August. Remittances rose to a record $ 7.1 billion in Q1-FY21, 31.1% up over last year.


https://www.marketscreener.com/news/latest/State-Bank-of-Pakistan-T...


ERD/M&PRD/PR/01/2020-106

October 12, 2020

Trend of Strong Workers' Remittances Continues in September

Workers' remittances remained above $2 billion for the fourth consecutive month in September. They increased to $2.3 billion, 31.2 percent higher than the same month last year and 9 percent higher than in August.
On a cumulative basis, remittances rose to a record $ 7.1 billion in Q1-FY21, 31.1 higher than the same period last year.
The level of remittances in September was slightly higher than SBP's projections of $ 2 billion. Efforts under the Pakistan Remittances Initiative (PRI) and the gradual re-opening of major host destinations such as Middle East, Europe and United States contributed to the sustained increase in workers' remittances.

Comment by Riaz Haq on October 13, 2020 at 10:01am

#Auto sales in #Pakistan up 20% month-to-month and 10% year-over-year. Post-#COVID19 #economic recovery well underway.

Honda up 67% year-over-year

Toyota up 102% year-over-year

Suzuki down 23% year-over-year

https://twitter.com/haqsmusings/status/1315815850486583298?s=20

Comment by Riaz Haq on October 22, 2020 at 7:59am

Pakistan on #IPO spree, with as many as 10 companies lining up to go public. #Pakistan's #KSE100 index has jumped 52% since March, beating runners-up #Vietnam & #India. It's still one the world's cheapest markets with forward price-earnings multiple of 7.4 https://gn24.ae/aab4cb2a6f8f000 https://twitter.com/haqsmusings/status/1319290702384173056?s=20

Pakistan's market for initial public offerings is coming out of hibernation and heading for a record year. The nation, which has posted the fastest equity rally in Asia since March, will host about 10 new share sales in the fiscal year to June 2021, according to its top adviser Arif Habib Ltd.

That follows a 17-month streak of no new initial share sales and beats the previous record of nine deals in 2008. "IPOs will always be active when the stock market is performing and company valuations are good," Arif Habib's CEO Shahid Ali Habib said in Karachi.

"There is a lot of liquidity too with funds shifting allocation from the fixed-income class to equities."

Pakistan's benchmark stock index has jumped 52 per cent since March, beating runners-up Vietnam and India, and gaining twice as much as China. Yet, it remains one the world's cheapest markets with forward price-earnings multiple of 7.4 times.

The appeal of momentum and valuation is luring companies to tap public funds. Pakistan had two company listings in July. Now, Agha Steel Industries Ltd. is raising 3.8 billion rupees ($23.5 million), in the country's third-largest deal from the private sector.
Also, industrial-automation company Avanceon Ltd. and rubber-products maker Service Industries Ltd. plan to list their subsidiaries. Arif Habib, which has led two offerings this year, expects at least another five deals. The adviser has handled half of the 36 initial public offerings in the past decade, according to data compiled by Bloomberg.

Equity gains in Pakistan have been partly fueled by falling returns on fixed income after benchmark interest rates fell by almost half to 7 per cent. The nation's economic growth is also recovering thanks to a drop in new virus cases.

Comment by Riaz Haq on October 25, 2020 at 10:36am

Shahid Ali Habib on double digit increase in corporate earnings in Pakistan:


83 companies of #PSX have so far announced quarterly (July-Sep) results showing an AVG earning growth of 51% yoy. Out of KSE100, 43 companies have announced so far showing an AVG earning growth of 46% yoy. Outstanding growth pace in this quarter!

#Pakistan #EmergingMarkets

https://twitter.com/shahidalihabib1/status/1320225106522738688?s=21

Comment by Riaz Haq on October 26, 2020 at 3:28pm

https://www.dawn.com/news/1586960

On the front of global trade, the pandemic-related disruptions and trade barriers such as higher tariffs on key suppliers (China and India) opened up a window of opportunity for Pakistani exporters. The changing market dynamics in the West, where economic stress increased the share of low-end products in the market, also worked for the advantage of Pakistan. The fact that the country dealt with the health crisis better and succeeded in containing the number of cases and the mortality rate also encouraged overseas importers to mark Pakistan as a safe and viable source for imports.

“I have been in the business of industrial chemicals and dyes for years, but had just been catering to local demand. But with over 20pc tariff on Chinese products in the United States, my produce entered the gigantic US market. I started exports to the West this year for the first time and the month-on-month increase has given me confidence to look at the possibility of scaling up the capacity to realise the full potential of exports,” a former president of a chamber of commerce and industry said.

“Pakistan’s industry is bouncing back on the strength of sound fundamentals. Cheaper credit and supportive fiscal measures helped, but it’s the rising demand that has energised businesses. We hope that the government and the opposition will realise the gravity of the economic situation and ensure stability if it cares about the country and its hard-pressed people,” said Shariq Vohra, newly elected president of the Karachi Chamber of Commerce and Industry (KCCI). He said there are 2,700 industrial units in the city, 90ppc of them being small with 10-20 employees.

Comment by Riaz Haq on October 30, 2020 at 12:49pm

Shell #Pakistan quarterly profits jump from Rs 570 million last year to Rs 1.8 billion in Q3/2020 in spite of the impact of #coronavirus #pandemic. #oil #energy https://profit.pakistantoday.com.pk/2020/10/28/shell-pakistan-posts...

The Board of Directors of Shell Pakistan Limited on Wednesday announced the company’s financial results for the third quarter ending September 30, 2020.

The company posted an after tax profit of Rs1,812 million in 3Q2020 compared to the profit of Rs570 million in the same period of last year.

“Overall, the financials still present a challenging situation, driven primarily by the unprecedented coronavirus pandemic and its effects, which resulted in declining fuels demand and volatility in the international oil prices,” read a statement issued by the company.

Over the course of the nine months, Pak Rupee devalued against the US dollar by a further 6pc. Although Pak Rupee remained relatively stable during the quarter, its effects were felt in the overall results of the company.

Being part of an import dependent industry where a large percentage of the company’s costs are denominated in foreign currency, this devaluation had an impact on its cost base and, in turn, on its financial performance.

Comment by Riaz Haq on October 31, 2020 at 1:12pm

Opening Early Helped Pakistan Boost Exports During Pandemic

https://www.bloomberg.com/news/articles/2020-10-29/opening-early-he...

Pakistan’s decision to loosen pandemic restrictions early has helped the nation’s exports emerge stronger than its South Asian peers.

Outbound shipments have grown at a faster pace than Bangladesh and India as textiles, which account for half of the total export, led the recovery, data show. Islamabad saw total shipments grow 7% in September, compared with New Delhi’s 6% and Dhaka’s 3.5%.

Pakistan Prime Minister Imran Khan’s administration was the first in the region to ease pandemic restrictions, allowing export units to reopen in April, a month after locking them down to stem the spread of Covid-19. That’s helped draw companies from Guess? Inc., Hugo Boss AG, Target Corp. and Hanesbrands Inc. to the South Asian nation, according to people familiar with the matter, who requested anonymity since details about buyers is private.

“Pakistan has seen orders shifting from multiple nations including China, India and Bangladesh,” said Shahid Sattar, secretary general at the All Pakistan Textile Mills Association. “Garment manufacturers are operating near maximum capacity and many can’t take any orders for the next six months.”

Hugo Boss said in an email that it focuses on long-term supplier partnerships while watching for “additional or new procurement channels.” Hanesbrands said it sources from many countries, including China and Pakistan, to supplement production from company-owned facilities. Neither company provided details. Guess and Target didn’t respond to requests for comment.


Even as lockdown curbs disrupted trade in India and Bangladesh for at least two months beginning late March, Pakistan was already making face masks and personal protective gear for export. The South Asian nation also gained some orders from companies looking to diversify their supply chains amid the trade war between the U.S. and China, the world’s top textile exporter, despite factories there reopening as early as April.

“This war between two giants has given us new opportunities in polyester-cotton products,” said Khalid Mehmood, head of garment and home textile operations at Nishat Mills Ltd., the nation’s largest textile maker. “So there is a six-month slot for Pakistan now to capture maximum number of customer that were China based.”


Executives from Nishat Mills and Interloop Ltd., one of the world’s largest manufacturers of socks that counts Nike Inc. and Adidas AG among its clients, said they have seen some orders diverted to them from China. Meanwhile, Gadoon Textile Mills Ltd. has received orders redirected from Bangladesh, the world’s second-largest apparel exporter, and India, the third-largest textile exporter.

“The orders we were exporting to Europe and the U.S. have not recovered,” Muhammad Imran Moten, chief financial officer at Gadoon, said during an analyst briefing. “But diversion of orders from China and Bangladesh is the compensating factor.”

Increase in exports, which account for some 10% of Pakistan’s gross domestic product, can help spur growth in the economy after its first contraction in 68 years in the year ended June. Khan’s government is targeting a growth of 2.1% in the current financial year.

But there are risks on the horizon that may temper growth prospects for the economy. Khan’s government announced measures this week to contain a second wave of Covid-19 infections, including mandatory wearing of masks in public and early closure of markets and restaurants. Then there’s the issue of competitiveness.

Comment by Riaz Haq on November 14, 2020 at 8:44pm

During the period, the PTI government repaid 78 percent more debt than PML-N government, the (Finance) advisor (Hafeez Shaikh) tweeted on Saturday.

https://www.brecorder.com/news/40032870

He said that despite the challenges posed by Covid-19, Pakistan's industrial sector was thriving as Large scale Manufacturing Industry (LSMI) including textile production and auto-sales were on the rise. "PTI government incurred 48pc less external liabilities in first 9 quarters compared to

PML-N government's last 9 quarters while doing 78pc more debt servicing. Despite the challenges posed by Covid-19, Pakistan's industrial sector is thriving. LSM, textile production & auto-sales are on the rise," the advisor tweeted."

The advisor shared State Bank of Pakistan's data which showed that the net to external debt stood at $24.8 billion during PML-N tenure from March 2016 to June 2018, where as in PTI's tenure from June 2018 to September 2020, the net external debt stood at $18.5 billion.

The overall liabilities impact was recorded at $31.1 billion during the PML-N period under review whereas the overall liabilities impact has been recorded at $16.1 billion in PTI's tenure under review.

The external debt serviced (principal + interest) stood at $16.7 billion in PML's period whereas it stood at $29.7 billion during the PTI's tenure of nine quarters under review.

Meanwhile, quoting Pakistan Bureau of Statistics latest statistics, he said, the Large Scale Manufacturing growth increased 7.65 percent in September 2020, compared to last September whereas it grew by 4.81 percent during the first quarter of the current fiscal year (July-Sept 2020-21).

On year-on-year basis, the non-metallic mineral products grew by 21 percent in September 2020, pharmaceuticals by 20 percent, food by 10pc, autos by 28 percent, textiles by 2.5 percent, fertilizers by 8 percent, paper and board by 12 percent, chemicals by 8 percent and rubber 15 percent.

On the other hand, the car sales have increased from 10,853 units in October 2019 to 14,054 October 2020, showing an increase of 29 percent.

Likewise, the sale of motorcycles also increased by 12 percent, from 156,872 units in last October to 175,294 units in October 2020 whereas the sale of tractors went up from 2,861 to 4,482, showing growth of 57 percent and trucks and buses sale grew from 349 units to 388 units, a growth of 11 percent.

Comment by Riaz Haq on November 14, 2020 at 8:46pm

Debt comparison 9 quarters PTI vs PMLN

https://twitter.com/MuzzammilAslam3/status/1327656481366421505?s=20

Much of the increase in net ext debt during PTI period (of $18.5bn) has been thanks to the legacy left behind by PMLN of burgeoning current account deficit - $13.43bn FY18/19 + $2.96bn FY19/20. As we experience current account balance net debt increment should further decelerate

https://twitter.com/javedhassan/status/1327659911149445120?s=20

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