FAISAL JIWANI is
currently working at Capital One Equities as an Equity Analyst. He is
responsible for the analysis of Power, Auto and Transport sectors. Prior
to this, he worked with Ace Securities as a Research Analyst. He was
responsible for equity research in the cement sector and also compiled
an investment leaflet of top 30 leading companies of Karachi Stock
Exchange. Faisal has done his MBA from Institute of Business
Administration (IBA) Karachi. One of his objectives is to serve the
organization, wherever he is working, with the skills he has developed.
He is also involved in community service.
do you review the recent movement of the KSE-100 index?
FAISAL JIWANI: The
KSE-100 index went up from 3000 points last year to a peak of over 5600
and witnessed a fall to current level. However, evaluation multiples
have not surged as much. The rallies during the recent past have been
factoring in the improved economic fundamentals for the listed companies
and cannot be termed misleading. Dividend yields are still attractive
but investors should also look at the cash flows of the corporates and
also abstain from becoming a victim of herd mentality.
Will the budget for 2004-05 have any positive impact on the listed
on import of plants and machinery, particularly those not manufactured
locally, have been reduced. Along with this duties on raw materials have
been rationalized. Specific attention has been paid to improve income of
the rural population, including waiver of duty on tractors. All these
factors will induce more farm-based activities and will strengthen the
agriculture base of the country. The performance of Pakistan's two
industries, textiles and sugar, is directly dependent on adequate
availability of raw materials at competitive prices.
sectors enjoy the highest growth potential?
Telecommunication, banking and the financial sectors have immense
potential for growth in the medium to long term. The tele-density in the
country is very low and there exists a huge potential in the rural
areas. Currently, the government's deregulation policy is focusing on it
as PTA has offered two licenses each for LL and LDI, which has generated
tremendous interest among local and foreign investors. Heavy capital
expenditure is expected to take place in the industry and the recent
relaxation of duties on the import of machinery is a major step in this
direction. Banking sector will benefit on the back of increased
borrowings by the private sector and the financing schemes such as car
and housing finance. Government is also encouraging SME financing, which
is a high yielding business.
incentive has been announced for cement sector. How would this impact
the construction sector?
no incentive has been directly announced for the cement sector, indirect
incentives in terms of higher expenditure by the government on
infrastructure and reduction in duties machinery used in construction
will bode well for the industry.
new capacity in fertilizer sector be added?
major reduction in input costs has been announced in the budget. The key
factor on which addition of new capacity is dependent is the gas
(feedstock) price. Feedstock constitutes a major part of total cost of
production. It is expected that the GoP will shortly announce the
amended Fertilizer Policy. A committee was constituted to suggest
changes in the existing policy to ensure investment in grass-root
should be the facets of forthcoming National Industrial Policy?
forthcoming National Industrial Policy should address the challenges
emancipating from the WTO regime along with focusing on the smaller
sectors that have not been showing much growth in the recent years. A
little support to the sectors ignored in the past will make them able to
come out of their gloom. This in turn will help in accelerating the
industrial growth rate even further up.
is the outlook for GDP growth?
FAISAL: I feel
that Pakistan has now established strong macro-economic fundamentals and
is all set to come out of economic instability which has prevailed in
the previous years. This has provided enough fiscal space to the
government to allocate more funds for the PSDP in the proposed finance
bill, which would spur economic activity, and augur well for the
sustenance of GDP growth rate in the country. Private sector credit
off-take has increased in the current fiscal benefiting textiles, auto
and housing sector, whereas few banks have been very liberal in high
yielding SME lending, which again serve the same purpose. The proposed
widening of the budget deficit supports our view of GDP growth. However,
on a micro-level further rationalization is needed.