Economists believed that the brokerage companies run in competitive industry in which trading activities can be really impacted by the sustaining economic environment and business cycles. They also mention that the index volume can also be highly affected by event risk, especially resulting from regulatory and political developments of any country. Such factors can lead to greater volatility in earnings and productivity/profitability relative to other industries.
The regulatory structure for broker companies, besides being a statutory requirement also is as significant for offering financier protection and curbing risk factors; strict adherence to the same is considered essential. In addition to the domestic rules, global principles and regulations on conflict of interest and code of ethics would also be referred to on a continuous basis while conducting these assignments. A view on the corporate structure is developed which includes the franchise and reputation of the promoters along with their financial strength.
In Pakistan, Arif Habib Limited (AHL) is no doubt a premier brokerage and financial services company engaged in Equity Trading, Investment Banking, Money Market and Forex, Commodities Trading and Securities Research. It is said that AHL has been market leaders in Broking and Investment Banking services for over 40-year.
The company’s brokerage operations are among the most renowned and trusted in the country assisting scores of Institutional, Corporate, High Net Worth and Retail clients.
The Company’s profit for the year clocked at Rs881 million as against to Rs409 million in the corresponding period last year, an important rise of 115 percent. This translates an impressive earnings per share (EPS) of Rs16.01 as against to Rs7.45 previous year. The finance adepts of AHL also mentioned that the equity of AHL has grown by 18.42 percent to Rs3.19 billion from Rs2.70 billion, working out to a book value per share of Rs58.20, as against to Rs49.19 in the corresponding period previous year.
The Company’s financial consequences reflect strong presentation across all its businesses segments, i.e., equity brokerage, investment banking, money market & forex, also portfolio investments. Based on the presentation during the year, the management of the AHL has recommended a cash dividend for the year closed June 30th, 2017 at Rs10.00 per share i.e.100 percent. The management is also delighted to have attained with an extraordinary growth of 45 percent in its brokerage revenue of Rs402 million for the year. This exceptional presentation in equity brokerage has been attained by considerably enhanced relationships nurtured with local also, international financial institutions, corporates and high net worth individuals, also opening a large number of new accounts across the board. Adepts also mentioned that AHL’s financing costs have declined by 17 percent because of reduction of financing rate and effectual management of liquidity. These funds continue to be utilized towards AHL’s business and investments, which continue to perform absolutely.
LEADING INTERNATIONAL STOCK TRENDS
Pakistan Stock Exchange (PSX) has outperformed during FY2016-17 among leading Global Stock Markets and more particularly in Asian region adding Singapore, China, India, Hong Kong etc. as we know that the PSX ranked 5th best performing market internationally last year. In terms of Index, PSX has explained a growth of greater than 27 percent during first nine months of FY2016-17 and ranked at top of the list among some of the leading foreign and regional stocks.
If we compare it with Bombay Sensex so during the period, Sensex grew only by 9.7 percent. During this period, the MSCI Emerging market index enhanced by 14.9 percent and MSCI frontier market index enhanced by 9.8 percent.
Economists’ estimation of Pakistan’s economy is positive and is underestimating threats to the economy given present rise in global oil rates, depleting dollar reserves and pressures on currency and exports. Upward movement in the global oil price means Pakistan’s import bill will surge remarkably. Now a day, moreover, usage of oil has tremendously gone up because of ever growing vehicles in Pakistan. The State Bank of Pakistan sustained the key interest rate at 5.75 percent for the next two months, which is expected to increase in upcoming monetary policy. So rising the interest rate can affect the profitability of AHL in the future.