Pakistan: Bank deposits reported at PKR22.5 trillion at end December 2022

According to State Bank of Pakistan (SBP) data, banking sector deposits increased by slightly more than 7%YoY to RKR22.5 trillion by end December 2022.

Analysts cited multiple plausible explanations for the rise in bank deposits, the biggest being, increase in the rate of return on deposits on the back of persistent hike in the policy rate.

In the face of difficult macroeconomic circumstances, such as bearish stock market activity, keeping surplus funds in the banks remained one of the preferred choices.

Analysts also attribute the increase to robust inflow of remittances on the back of depreciating Pak rupee (PKR).

Roshan Digital Accounts also helped in attracting funds, supporting banking sector’s deposits.

Due to consumers' increasing preference for using digital payment methods, cash was allowed to remain in the bank accounts.

Since the policy rate remains on the higher side, banks remained focused on mobilizing current accounts and extend their branch networks in order to protect net interest margins.

Banking sector succeeded in maintaining asset quality despite uncertain politico-economic landscape, according to analysts, which is despite that banks have indicated in recent briefings that they have provided enough for any unforeseen event.

Banks’ advance-to-deposit ratio increased by 463 basis points (bps) to 53%, while the investment-to-deposit ratio rose by1,233 bps to 79.7% in December 2022..

Banks’ advances were up 17%YoY to PKR11.9 trillion as of December 31, 2022. The advances rose by 7.4%MoM.

The investments by banks jumped 26.7%YoY to PKR18 trillion.

 

 

 

 

Su-Nav committed to having cadets on every ship

Su-Nav is a relatively new name to the world of third-party ship management but has a strong commitment to training for the future including having cadets on board all vessels it manages.

Founded in 2019 Su-Nav is headquartered in Chennai, India with another office in Singapore, and new office opening in Dubai. Su-Nav, CEO, Sachit Sahoonja comes a lengthy career both at sea and ashore with the world’s largest ship manager V.Ships before striking out his own with a couple of former colleagues in July 2019.

Taking this step Sahoonja says he believes there was a space for smaller, alternative manager that would stick to the basics.

The company’s name SuNav reflects this back-to-basics approach and means good ship in Sanskrit. “We want a good ship and that's all I think every owner is wanting is just a good ship,” he tells Seatrade Maritime News in a recent interview.

Despite enduring the difficulties of the pandemic and the company’s offices being closed for six months early in its existence Su-Nav has today grown its fleet to 33 ships under management. Something that certainly marks Su-Nav out from the crowd in the third-party management business is that it has a policy of having cadets on all the vessels it manages.

It is a common complaint from managers that they want to have cadets onboard vessels but principals don’t want to pay for having trainees on their ships, so how has Su-Nav been able to achieve this?

Sahoonja explains that all the ships under its management have two cadets onboard equating to around 60 – 70 trainees at one time. To date 75 have completed their training and nine who are now officers on board its ships and over the next two years the manager will have 60 more junior officers.  

“So, you can imagine we have 60 – 70 cadets all the time on our ships and these people will come back and work for us,” he explains.

By doing this he says there are trying to provide a future solution for their owners that they are not hunting in the market for seafarers.

In terms of persuading owners of the requirement to have cadets on board the disruption brought about to the crewing sector by the Covid pandemic and more recently the war in Ukraine helped Su-Nav’s cause in convincing them that need their own cadets for the future.

“Now the owners are getting used to this idea that anything can happen. You need your own crew, you need people who have been with you, you need people who know your culture,” he explains.

As result Su-Nav has been able to convince owners that in 3-year time they will have officers for their ships, and be paying first year wages, rather than second or third year wages if sourcing crew from the market. In the longer-term he believes these officers will stay with the company becoming chief officers and captains.

Sahoonja says that seafarers will be the people who allow them to continue expanding the company in the future so are most important building block at this time.

Speaking of expansion Su-Nav plans to have its Dubai office up and running by the first quarter of this year a location that Sahoonja believes managers cannot be ignore at this time.

“Whoever was in Singapore and Hong Kong will definitely be in Dubai as well,” he says.

 

Russia faces no problem in selling oil

Russian oil producers have had no difficulties in securing export deals despite Western sanctions and price caps, Russian Deputy Prime Minister Alexander Novak told a televised online government meeting on Wednesday.

"We've been in constant contact with the companies, the contract making for February has been completed, and on the whole, the companies are not saying they have problems as of today," Novak told the meeting led by President Vladimir Putin.

Russian oil production has so far shown resilience in the face of the sanctions, imposed after Moscow sent troops into Ukraine on February 24, 2022 and of the price caps, introduced by Western countries in December 2022.

Putin in December 2022 signed a decree that banned the supply of crude oil and oil products from February 01, 2023 for five months to nations that abide by the cap.

Novak said the main problem for Russian oil was a high discount to international benchmarks as well as rising freight costs.

Russian oil traditionally sells at a discount to international benchmarks such as Brent. The discount, has widened since the imposition of sanctions and now stands at up to US$30/barrel to Brent.

"But I hope that the situation will be temporary and it (discount) should decrease over time, as we saw in 2022," Novak said.

Putin, who has long advocated the idea of reversing the price differentials in favour of Russian oil, told Novak that the state budget should not suffer as a result of the discount.

Putin struck an upbeat tone about the wider Russian economy.

"We can state with assurance that the financial and banking system of the country, the economy as a whole, is in a stable state, and is actively developing," Putin said. "We have every reason to believe these tempos will be maintained in 2023."

Russian Economy Minister Maxim Reshetnikov told the meeting that domestic inflation was 11.9% in 2022. He said inflation was likely to be substantially lower by the end of the first quarter, with the second quarter figure below the targeted 4%.

 

 

 

 

 

PSO earning to plunge due to inventory losses

Pakistan’s largest oil marketing company, operating in the public sector, Pakistan State Oil (PSO) is expected to announce its 2QFY23 financial result. The Company is expected to post profit after tax of PKR2.4 billion (EPS: PKR5.1). The said increase can be attributed to increase in HSD offtakes (up 53%QoQ), owed to the sowing demand in the rabi season during October and November 2022.

Recovery in offtakes was imminent as compared to the severely dampened fuel demand (floods/price hikes) during 1QFY23, resulting in total offtakes rising by 26%QoQ during 2QFY23.

The company’s revenue is expected to rise to PKR880.6 billion, changing by 2.1%QoQ/69%YoY, mainly on the back of the rise in fuel prices as compared to the last year (2QFY22: PKR140/124 per liter for MS/HSD).

The company is anticipated to record inventory losses of PKR12.2 billion (PKR26/share) for 2QFY23, as ex-refinery prices for MS/HSD fell by 18%/11% during the period as compared to the previous quarter.

Subsequently resulting in gross margins for the quarter to end at 0.7% as compared to 0.2% 1QFY23.

The effective tax is expected to rise to 56% for the period (vs 1QFY23: 70% ET), as minimum turnover tax (0.5% on gross POL sales) hampers the already beat-down bottom-line.

At a normalized tax rate of 33%, the earnings per share would have clocked in at PKR7.76/share.

Finally, analysts expect the topline from LNG segment to clock in at PKR232 billion, majorly on the back of rising LNG prices globally (energy crunch in Europe/ Asia) coupled with increased volumes (new LNG deal with Qatar @ 10.2% slope, signed last year).

To note, PSO’s average DES price for the quarter stood at US$11.39/mmbtu as against US$13.43/mmbtu in the previous quarter.

The liking for PSO is due to: 1) gas & power tariff adjustments may prove to be cash-positive, 2) modernization plans in refinery subsidiary (PRL) to enhance productivity, and 3) phasing out of RFO coupled with increasing share of retail fuels, resulting in stable margins to drive unhampered future cash flow.

For this reason, our December 2023 price of PKR215/share provides a total return of 53%, with forward dividend yields of 7% for FY23 and /10%for FY24.

Mohammed Bin Salman chosen most influential Arab leader of 2022

Saudi Crown Prince and Prime Minister Mohammed Bin Salman (MBS) has been chosen the most influential Arab leader of 2022, according to an opinion poll conducted by the RT Arabic channel.

The Crown Prince has secured around 7.4 million (62.3%) votes out of the total votes of those who participated in the poll.

MBS obtained 7,399,451 votes out of the total 11,877,546 votes of those polled. The poll began on December 15, 2022 and ended on January 09, 2023.

The percentage of votes obtained by the Crown Prince broke the record in the history of opinion polls that RT Arabic conducts by the end of every year.

In the opinion poll, the second place went to the United Arab Emirates President Sheikh Mohammed Bin Zayed, securing 2,950,543 votes that represent 24.8% of the total votes.

Egyptian President Abdel Fattah El-Sisi won the third place with 1,387,497 votes; making up 11.7% of the total votes of those participated in the poll, carried out by RT Arabic, a global multilingual television news network based in Russia.

2022 a remarkable year of shipping history

According to Seatrade Maritime News, shipbroker Clarkson's ClarkSea index covering about 80% of shipping capacity soared by almost a third to record levels in 2022. Container shipping underpinned the gains but other sectors including car carriers, tankers and LNGs were also star performers.

Shipping’s stellar performance last year was the result of many factors but overall growth in energy shipping of around 4% was one of the fundamentals driving the ClarkSea index to a record US$37,253 per day for the year.

Average earnings for tankers rose by more than 470%, with VLCCs scoring a record rise of 642%YoY. Medium-range product tankers scored well too, notching up a 370% increase in rates for a typical 12 year old vessel – up from US$6,740 a day in 2021 to an average of US$31,775 in 2022.

In contrast, container rates underwent a sharp correction over the second half of 2022, down from record levels at the start. Market reports suggest that rates are likely to weaken further and Clarkson notes that this will coincide with a rise in delivery volumes.

Everything is relative, however, the box market is still firm in historic terms and the reopening of China could have a positive impact, Clarkson suggests.

The container and dry bulk sectors are the most vulnerable to risks from the world economy but uncertainties prevail in other sectors too.

The uncertainties include low orderbooks, the impact of new environmental regulations from January, as well as other ‘inefficiencies’ and geopolitical factors, according to Clarksons Research.

The cross-sector ClarkSea Index stood at US$31,539 per day in early November 2022, significantly below the last year’s average of US$37,548 per day and well down on the 18 successive weeks between March and July when it exceeded $40,000 per day, levels last seen at the height of the 2000s‘supercycle.

During the first half of the year 2022, the container market was exceptionally strong and bulker markets were generally firm, the research firm noted in its most recent market report.

Since then market fundamentals have shifted again. Container markets softened sharply during September and October 2022, partly due to faltering demand and lower port congestion. Bulk carrier earnings, meanwhile, are down by 27% over the second half of the year 2022 as compared to the first-half average.

On the other hand, energy-related shipping markets strengthened, with average tanker earning breaking through US$50,000 per day in October 2022, double the March average.

Ton-mile demand, meanwhile, continues to strengthen as a result of the Ukraine conflict. The war has also had a dramatic impact on gas carrier markets, with VLGC earnings at year-to-date highs and LNG carrier rates at record levels.

The ClarkSea Index rose 3% last week to US$32,482 per day, up 35% year-on-year, and 134% above the t-year trend. Crude tanker rates continued to strength, with average VLCC earnings reaching US$86,860 per day, Clarkson said, the highest level since April 2020. Product tanker rates eased, meanwhile, but MR earnings still remain firm at an average of US$32,047 per day.

Bulk carrier rates remain relatively soft, although the steady decline in Capesize earnings came to a halt, with spot rates rising 41% week-on-week to US$11,657 per day. Panamax and handy vessels are firmer than other bulk segments at present but are still only about half of the mid-May figure of more than US$30,000 per day.

Container rates are also continuing to ease. The Shanghai Containerized Freight Index (SCFI) slipped 9% week-on-week to 1,443 points, below end-2020 levels and only 14% above the 2020 average.

 

 

Direct shipping line launched between Iran and Cuba

Iranian Deputy Foreign Minister for Economic Diplomacy Mehdi Safari said a direct shipping line has been launched between Iran and Cuba which is expected to significantly improve the economic relations between the two countries.

“A Direct shipping line has been established between Iran and Cuba since the last 20 days, which will increase the trade between the two countries,” Safari told IRIB on Monday.

“Based on the conducted research, our country has also the potential to cooperate with Cuba in carrying out various projects, especially in the field of energy,” the official said.

In May 2022, Iran and Cuba finalized a roadmap for barter trade between the two countries and signed a document in this regard during the 18th meeting of their joint economic committee in Tehran.

As reported, the document was signed by Iran’s Deputy Industry Minister for Commercial and Trade Affairs Mohammad-Sadegh Mofatteh and Cuba's Deputy Prime Minister Ricardo Cabrisas Ruiz.

During the meeting, the officials explored the existing capacities and market needs of the other side in various fields and good agreements were reached for long-term cooperation in order to improve the level of trade exchanges.

The two countries also stressed the need for developing industrial, mining, and trade cooperation between the two countries during the mentioned event.

Attended by senior officials and representatives of various economic sectors from both sides, the 18th meeting of the Iran-Cuba Joint Economic Committee was held in Tehran during May 15-17, 2022.

As the special envoy of the Cuban president, Cabrisas Ruiz headed a high-ranking delegation to Iran with the aim of meeting with the officials of the Islamic Republic and attending the meeting of the two countries’ joint economic committee.

During his stay in Tehran, Cabrisas Ruiz also met with Iranian Finance and Economic Affairs Minister Ehsan Khandouzi, during which he stressed the expansion of economic ties between the two countries.

Speaking in this meeting, Khandouzi stated that the Iranian government has always welcomed the establishment of long-term and stable economic relations with Latin American countries, especially Cuba.

“Given the excellent political relations between the two countries, Cuba is of particular importance to the Islamic Republic of Iran,” he added.

Referring to the history of cooperation between the two countries in the fields of health and agriculture, Khandouzi emphasized the need to improve economic relations between the two countries and said: “We are expected to take more serious steps to develop cooperation and implement agreements.”

The minister further pointed to the lack of proper knowledge regarding business and economic opportunities and advantages of trade and investment between the two countries as the most important reason for the weak trade collaborations between Iran and Cuban private sectors.

He then announced Iran’s readiness to hold online meetings with the presence of representatives of the government and private sectors of Iran and Cuba in order to exchange knowledge about the business and investment opportunities of the two countries.