Is India Secular?

Without digging too deep into the history of Hindustan, it may be said very conveniently that the rulers have always been hiding their real face behind two strong veils i.e. democracy and secularism. Both these terms have been used to deceive the international community. If one probes the events taking place with the beginning of the division of the subcontinent into Pakistan and Hindustan and particularly over the last two decades, it becomes evident that democracy is a hoax and secularism is the name given to vandalism.
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Pakistan Ijara Sukuk: Rs 117.723 billion bids accepted

Pakistan Ijara Sukuk: Rs 117.723 billion bids accepted

 

In response to tender for the auction of Rs100 billion Government of Pakistan Ijara Sukuk, bids received amounted Rs273.3 billion but the State Bank of Pakistan accepted Bids worth Rs117.7 billion leaving ample liquidity in the market

 

Tender for Sale of 3-Year Government of Pakistan Ijara Sukuk was invited by the State Bank of Pakistan, Karachi through designated Primary Dealers (for Ijara Sukuk) on December 15, 2015. Bids were opened at 11:30 hours on December 15, 2013, which were received as follows:

                                                                                                              

                                                                                                                   (Rs. In Millions)

	Offered Amount (FACE VALUE)	RANGE OF MARGIN over Benchmark (bps)
03-Year Ijara Sukuk	273,303.00	-180.00 to +25.00
Total	273,303.00

 

Out of the above bids, the accepted bids are as under:

 

Maturity Period	Cut-Off Margin Over benchmark (bps)*	Accepted Amount (Face Value)
03 -Yr Ijara Sukuk	Minus 50.00	117,723.00
Total		117,723.00

* This cut-off margin will be applicable to all accepted bids.

 

 

Pakistan announces date for US$ one billion Sukuk auction

Pakistan’s central bank has announced date for the auction of 3-Year Government of Pakistan Ijara Sukuk (GIS). Interested primary dealers have been invited by the Director, Domestic Markets & Monetary Management Department (DMMD), State Bank of Pakistan, Karachi to submit the bids in accordance with the provisions of DMMD circular No.21 dated 09^th December, 2015, already placed on the website of State Bank of Pakistan.

Maximum value of the asset under the present issuance program of the Ijara Sukuk is Rs.315.083 billion and bids can be rejected without by the central bank without assigning any reason.

 

 

 

 

 

 

 

1. Receipt of Tenders             Up to the date of auction (11:15 hrs)
2. Opening of tenders             11:30 hours on the date of auction
3. Communication of result     On the date of auction
4. 1^st Rental Coupon               To be determined one day prior to the settlement date

 

 

 

 

 

Impact of low oil prices on Pakistan

In its latest meeting OPEC decided to maintain its oil output. This has triggered another slide in global crude oil prices. There are growing expectations that prices may remain low for longer than expected period.

One of Pakistan’s leading brokerages houses has analyzed possible implications of lower oil prices on the local stock market under three oil price assumptions of Arabian Light crude (WTI and Brent are less related to Pakistan as the country buys crude mainly from the Middle eastern countries. The brokerage house has based its analysis on three assumptions: 1) US$35/bbl, 2) US$40/bbl and 3) US$45/bbl) against its base case of US$50/bbl.

Remaining a key positive on the macro front, significant improvements are expected on 1) the BoP position on lower oil imports and 2) controlled inflation opening up room for continued monetary easing.

However, from the market's perspective this scenario will be a drag on index heavyweight Oil & Gas sector. Additionally, lower interest rates will continue weighing on banking sector's performance, however boding well for leveraged plays and high dividend plays.

Pakistan continues to benefit from lower oil prices, where another slide in the commodity's price holds positive implications for the country. Sensitivity analysis undertaken by the brokerage house indicates that with US$5/bbl reduction in CY16 will result in additional import bill savings of US$8 million/annum where oil averaging below US$45/bbl could comfortably lead to current account surplus for FY16.

Besides helping to sustain recent improvements in the BoP position, lower oil prices also have trickle down benefits on inflation, which can sustain at current levels (2.5%YoY average in CY15) across the medium term. With lower fuel costs and indirect impact on food, the sensitivity analysis indicates CY16 CPI average can hover in the range of 2.8% to 4.2%YoY.

A downwards trend in oil prices can effectively counter the low-base effect on CPI numbers, unlocking room for further monetary easing. While room could exist for a rate cut at US$45/bbl average. It is expected that the central bank may remain cautious with potential and discount rate may hover around at 5.5% at the lower extreme.

Pulled lower by falling global oil prices, Oil & Gas companies have experienced broad based selling (down 33%CYTD). E&Ps suffer from hampered profitability with POL being the most affected on account of high oil price partiality (53% of revenues in FY15). That said, the gas heavy (80%+ of overall production, 1,173mmcfd in FY14) OGDC continues to persevere in the E&P sector as its profitability is the least hurt by tumbling oil prices. Volatility in oil prices and its consequent impact on the interest rate cycle is likely to have negative implications for banking sector's profitability.

For the Big-6 banks, this is most likely to reduce CY16 earnings by 5%-18% assuming the worst case scenario. However, factors such as potential increase in the capital gains backlog and any uptick in private sector credit growth are expected to provide support to bottom-line should the interest rates come down further. In this backdrop, banks with a higher CASA ratio, greater concentration towards high margin consumer/SME segments, and higher PIB/investment ratio are expected to fare better than the rest. 

While Oil & Gas and Banks are likely to bear the brunt in case of lower oil prices and continued monetary easing, brokerage house sees cost side benefits trickling down to sectors with 1) high leverage sectors like Fertilizers, Cements and Telecom 2) higher fuel and energy costs sectors like Cements, Foods ,Shipping and Aviation.

Apart from these, Power sector is likely to benefit from reduced liquidity constraints amid lower cost of generation while a lower interest rate environment should keep the sector in limelight on account of attractive dividend yields.

Auction of Rs300 billion Ijara Sukuk to be held in last week of December

And finally State Bank of Pakistan (SBP) has announced auction of Government of Pakistan Ijara Sukuk (GIS-16) having Jinnah International Airport, Karachi as the underlying Asset.

Though, the size of auction was not announced the Government of Pakistan (GoP) is likely to mop up abut Rs 300 billion (around US$3 billion) through GIS-16.

There are twin objectives, top of the agenda being meeting the fiscal deficit and also facilitating Islamic financial institutions, particularly Islamic banks suffering from excessive liquidity problem.

GIS-16 will have a tenor of three years from the date of issue and Sukuk will be issued in multiple of one hundred thousand rupees. Profit on will be paid bi-annually on the basis of rental rate announced by the SBP prior to start of each half year.

Although SBP has not announced any auction date, the industry experts strongly believe that the auction will he held during last week of December 2015. Experts say the issue is already late by almost a month.

According to provisions of the notification of the GoP Ijara Sukuk Rules 2008 Islamic Banking Department of SBP will be responsible for monitoring of proper execution and the legal documentation.

Pakistan US$3 billion Ijara Sukuk auction delayed

The Government of Pakistan (GoP) was scheduled to issue Rs315 billion (equivalent to more than US$3 billion) Ijara Sukuk (GIS-16) by end November this year. The auction was to be held soon after over Rs212 billion Ijara Sukuk maturing on 21st November.
This has led to two serious issues: 1) the GoP still running short of money and 2) Islamic financial institutions sitting tons of non-yielding deposits. It is also feared that banks may also be failing in meeting statutory liquidity requirement (SLR).
It is believed that the underlined asset for the proposed GIS-16 issue was Jinnah International Terminal, Karachi.
One completely fails to understand promptness of Finance Minister in imposing additional taxes of Rs40 billion but completely ignoring GIS-16. If one can recall the Minister has been saying repeatedly that PML-N government was serious in promoting Islamic finance in the country.
The delay in auction is worth probing. The minister is requested to kindly find out what the debt management department is doing? 

Winners and losers of oil war

The US and Saudi Arabia will never accept that they are entwined in an apparent oil war. While Saudi Arabia keeps on producing oil at record level to maintain its share in the global markets, its earnings are plunging. Despite decline in price the shale oil production has not seen any significant reduction, although number of active rigs have declined to blow 600 from above 1,600.

On the face it appears that the US and Saudi Arabia are fighting ‘price war’, the perception is negated because both the countries connived to take the price above USS147/barrel. They are still supporting each other to punish Russia and Iran.

Oil from many countries is being pilfered by ISIS, which is being bought by those who claim to be fighting a war with the most brutal outfit, drawing strength from selling pilfered oil. In a way Kurds also don’t have the ownership of oil which they are exporting from Iraq.

Countries called P5+1 agreed with Iran to remove sanctions, but the restrictions still continue. Iran has borne the brunt most, because its oil related revenue has nearly halved and it is not yet clear when will it get the chance to boost oil exports.

Initially, Saudi Arabia was not willing to curtail daily production by OPEC members, but now it is talking about containing production provided Russia and other non-OPEC members also agree to curtail output.

With winter approaching fast, consumption of heating oil and gas is expected to rise but stockpiles are still hovering at record levels.

It may be true that all eyed are fixed on 4^th December meeting of oil cartel but little is expected to change. The three giants, the US, Saudi Arabia and Russia are not likely to change their stance.

The credible signs of improvement in the US economy are missing, Chinese economy is still faltering and IMF has already curtailed rate of global economic growth.

One point is clear that oil demand is not likely to grow significantly in the near future. Therefore, the only option available to oil producing countries is to curtail production. Many analysts are of the view that December 4 will come and go but the glut will continue.

Let no one forget that the biggest beneficiary of declining oil prices are OECD, are they ready to take a hit? The reply is a loud NO!