omc: no mention; hence safe - BMA Capital Management

More documents

Recommendations

Info

2 CAUTIOUS POPULISM BUDGET FY11: NO CHANGE IN FLAVOR June 7, 2010 Touching briefly upon a number of themes, the budget lacked a broad based plan to ensure growth sustainability. Populist measures were announced but limited to the fiscal space available with the government. Incentives extended to promote investment, corporatization and equity market listing are commendable, nonetheless. Wide scale opposition on implementation of Value Added Tax (VAT) forced the government to defer the decision– thereby defeating the originally envisaged goal of increasing documentation in the economy. Our main concern however emanated from the silence adapted by the policy makers on the lingering power deficit and circular debt. ECONOMICS: A CAUTIONED APPROACH In pursuance to keep the economy on growth track, policy shift has been announced to mobilize resources from non development side to capacity building. Deviation from the planned targets and fiscal slippages remained the key dilemma time and again. All the budgetary measures, including fiscal consolidation, bridging investment saving gaps and enhancing potential output through development seem prudent – however implementation of these targets remains challenging. The envisaged GDP growth target of 4.5% for FY11 will be widely dependent on recovery from commodity producing sectors i.e. manufacturing and agriculture; for which power deficit remains the key challenge. On the revenue side, incremental 100bps increase in GST would be the supporting factor up till the implementation of VAT. However given its inflationary impact, inflation target of 9.5% for FY11 seem ambitious to us. On the whole, achievement of fiscal deficit target of 4% of GDP will require resource utilization and strict adherence to the announced austerity measures. MARKET STRATEGY: GRIST TO THE MILL Removal of CGT exemption on equity trading may imply short term attrition in trading volumes. However given that the announcement was in-line with the consensus achieved in Feb10 and continues exemption on long term holding; we do not foresee any knee-jerk reaction on the index. Interplay of global markets may however require an ever closer look. We thus re-iterate our safe investment themes with our KSE100 2010 index target intact at 11,500. BUDGET IMPACTS AND OUR TAKE Sector Budget Impact BMA Recommendation Top Picks Commercial Banks Positive MARKETWEIGHT MCB E&P Neutral MARKETWEIGHT PPL, POL OMCs Neutral OVERWEIGHT PSO Power Neutral OVERWEIGHT HUBC Fertilizer Neutral MARKETWEIGHT ENGRO Cement Neutral OVERWEIGHT ACPL Textile Neutral MARKETWEIGHT - Chemicals Neutral MARKETWEIGHT ICI Automobile Neutral MARKETWEIGHT - Telecom and Tech Neutral MARKETWEIGHT - Refineries Neutral UNDERWEIGHT -
3 TABLE OF CONTENTS Budget FY11: No Change in Flavor 4 Market Strategy: Grist to the Mill 8 Economy: Budget, a Cautioned Approach 11 Summary of Sector Themes and Outlook Banks: Key Beneficiary 16 E&P: Valuations with Convictions 17 OMC: No mention; Hence safe 19 Power: The Back of Beyond 20 Fertilizer: Still Favored! 22 Cements: Still Lurking! 23 Textile: VAT – Fabric-ated! 24 Chemicals: Mixed Reaction 25 Auto: Gears Unchanged 26 Telecom: Silent Talks! 28 Top Investment Ideas 29 June 7, 2010
Page 1: 65 Federal Budget 2010-11 Cautious
Page 5 and 6: 5 June 7, 2010 package will have li
Page 7 and 8: 7 June 7, 2010 against an average o
Page 9 and 10: 9 Sector wise Budget Impact and BMA
Page 11 and 12: ECONOMY Budget Impact Positive Abdu
Page 13 and 14: 13 June 7, 2010 announced in the bu
Page 15 and 16: 15 KEY MEASURES Income tax June 7,
Page 17 and 18: E&P MARKETWEIGHT Budget Impact Neut
Page 19 and 20: OMC OVERWEIGHT Budget Impact Neutra
Page 21 and 22: 21 June 7, 2010 Moreover, seemingly
Page 23 and 24: CEMENTS OVERWEIGHT Budget Impact Ne
Page 25 and 26: CHEMICALS MARKETWEIGHT Budget Impac
Page 27 and 28: 27 Outlook FY11E June 7, 2010 Incre
Page 29 and 30: 29 Top Investment Ideas June 7, 201
Page 31 and 32: BUY Fair Value: PKR 282 Current Pri

omc: no mention; hence safe - BMA Capital Management

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?