BMA Today for June 14, 2018 
 
     THURSDAY 14 June 2018 
 
 

 

   

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At a Glance

Previous Market Session

Local Market    
 KSE 100 N.A N.A
 KSE T. Value PKRbn N.A N.A
 10YR PIB N.A N.A
 6M KIBOR N.A. N.A.
 PKR/USD N.A. N.A.
Asia Pacific    
 BSE SENSEX 30 N.A N.A.
 NIKKEI 225 N.A N.A.
 STRAITS TIMES INDEX N.A N.A.
 KUALA LUMPUR N.A N.A.
 JAKARTA COMP. N.A N.A.
 THAI SET 50 N.A N.A.
Middle East    
 DFM GENERAL N.A N.A.
 TADAWUL ALL SHARE N.A N.A.
 MSM30 INDEX N.A N.A.
 KUWAIT SE WEIGHTED N.A N.A.
 DSM 20 INDEX N.A N.A.
Global Markets    
 OIL (NYMEX) N.A. N.A.
 US 10YrBOND N.A. N.A.
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 FTSE 100 N.A N.A.
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 S&P 500 N.A N.A.
       
 
In Focus
Pakistan Banks: There is another side to the interest rate uptick story…

   We sense market seems to be focused on one-sided view on interest rate cycle and impact of the same on banks’ earnings. Potential pick-up in non-performing loans (NPL) cycle remains important along with interest rate cycle and not-so-favorable changes in growth environment. We reckon recent policy rate hikes of cumulative 75bps CYTD may not prove to be a tipping point for infection ratio. However, possibility of future rate hikes and expected macro stabilization measures may throw important implications for build-up of infected loans. Key question to us is what %age build-up in infection is required to nullify the positive impact of rate hike on earnings. Current stock of advances suggests a mere 0.5% change in infection ratio may dilute most of the gains from 100bps hike in policy rate. Interestingly, current infection ratio of 7.0% for almost all banks under our sample sits at the lowest level since 2012 (average at 10.3% for top eight banks). We expect infection ratio to first further trend down in 2Q/3Q before start creeping up. MCB, NBP, BAHL and ABL appears to be well-positioned both in terms of asset/liability positioning and the impact of increase in infection ratio on earnings. We reiterate our liking for domestically focused banks with low-duration investment book and low-cost deposits. For the same reason, we now make MCB our top pick in our banking universe replacing UBL.

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Media Watch

Sectoral: Mirpurkhas Sugar Mills plans Rs6.5bln investment in power steel plants / The News
Sectoral: Honda makes third price hike for two wheelers / Dawn
Sectoral: Delayed 300MW power plant at Gwadar to enter implementation stage soon / The Nation
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DISCLAIMER
This memorandum is produced by BMA Capital Management Limited and is only for the use of their clients. While the information contained herein is from sources believed reliable, we do not represent that it is accurate or complete and should not be relied upon as such. Opinions expressed may be revised at any time. This memorandum is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell the securities mentioned.