Inflation will subside by the middle of next year: AHL – Journal

KARACHI: Arif Habib Ltd (AHL), which is the investment banking arm of the eponymous industrial conglomerate, said on Friday that it expects inflation to return to single digits in the second half of the next calendar year in due to the high base effect, currency stabilization, monetary easing and slowdown in world commodity prices.

Speaking to the press at the launch of a report titled “Pakistan Investment Strategy 2022,” Shahid Ali Habib, CEO of Arif Habib Ltd, said the outlook for inflation depended on the pace of domestic demand , fuel and electricity prices in addition to global commodity prices.

“As the year progresses, we expect that aggregate supply (is) likely to catch up with demand and bottlenecks in global commodity and other goods markets (will) be resolved. “he said, adding that commodity prices are expected to” slow down moderately. ” mid 2022 with a resumption of supplies.

AHL expects the key rate to drop from the current 9.75% to 10% by June. With inflationary pressures likely to ease in the second half of 2022, the benchmark interest rate will drop and close the calendar year at 9.25%, he said.

The brokerage expects the country’s external account to remain under pressure in the short term and recover in the second half of 2022. Reserves should remain at adequate levels for the remainder of the year, ”he said. he declares.

On the tax side, he said revenue collection is expected to improve as the government intends to eliminate some tax exemptions while reducing current and development spending.

“Over the next few quarters, our base currency outlook is less pessimistic than initially feared. We expect the rupee to reach 178 rupees by June and 183 rupees by December, ”he said, adding that the Financial Action Task Force is likely to lift Pakistan’s status from gray list to white list by the end of 2022.

Stock market forecasts

Mr Habib said he expects the KSE-100 index to reach 55,000 points by the end of the next calendar year, an increase of around 25%.

“Our forward price-to-earnings (P / E) ratio for 2022 is 4.9, which is lower than the 10-year P / E of 8.3 … earnings growth is expected to reach 12.4 %”, he added. he said.

Mr Habib said he forecasts a 12.4% increase in profits for the KSE-100 constituent companies in 2022. The estimate is based on a likely 18.3% jump in bank profits and an increase of 29.8% of energy profits. exploration and production companies.

Given the market fluctuations over the past six years, the index suffered a large sell-off worth $ 2.3 billion from foreign investors. Foreign ownership as a percentage of free float market capitalization fell to its lowest level in 10 years of around $ 2 billion, he said, noting that number would drop back to $ 500 million after exclusion from the stake. foreign strategic.

“We believe that the recent (MSCI) reclassification at the frontier of the emerging market is likely to regain the attention of foreign participants,” he said.

Posted in Dawn, December 25, 2021

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