ISLAMABAD: Pakistan direly needs to boost the share of foreign direct investment in its economy to put it on a sustained footing.
This was stressed by Asad Abbas, the Securities Manager of Arif Habib Securities Limited.
WealthPK had a talk with Asad Abbas on the performance of Pakistan’s economy, and he was very upfront in expressing his mind on the state of economy.
Q: How did the equity market perform in the previous financial year?
A: The benchmark KSE-100 index finished FY22 at 41,541 points, slightly down by 5.815 points or 12.28%, year-over-year. The dollar-based returns fell to a negative 32.54% as a result of sharp rupee depreciation.
Market activity remained weak, with average volumes down 44.76% YoY to 291 million shares and average traded value down 54.69% to $55 million as several external and macroeconomic factors went negative.
Q: What causes the exchange rate swings?
A: Exchange rate swings occur when there is too much demand for dollars, but the foreign currency happens to be in short supply, stressing the home currency, and plunging its value. Remittances and exports are the two main sources of dollar inflows, but they are not growing at a pace with which imports are growing. Though the State Bank of Pakistan has put some curbs on imports by restricting banks to open letters of credit for imports with its prior approval, this has not helped to a great extent.
Q: How has the economic downturn affected the performance of the stock market?
A: The equity market has borne the brunt of a slowing economy, increasing inflationary pressures exacerbated by the commodity super-cycle and greater political noise. Market sentiment was further affected by the delays in approval of the latest tranche by the International Monetary Fund as well as their reclassification from MSCI Emerging Markets to Frontier Markets. Slump in stocks performance is greatly attributed to high cost of doing business amid high borrowing costs. The recent flooding has also dealt a blow to the country’s economy, battering its agriculture sector and causing the prospects of flood shortages in the coming months.
Q: How important is foreign direct investment (FDI) for a country like Pakistan to boost its economy?
A: Foreign direct investment plays a great role in boosting economic growth in countries the world over. Businesses, which receive FDI have uninterrupted raw material and labour force supplies. FDI facilitates product placement services in the most significant markets. FDI helps businesses speedily employ modern technology, and knowledge, and achieve economies of scale in the best possible way. Developing nations like Pakistan with significant public debt and challenging economic conditions desperately need FDI.
Countries pushing for achieving robust and sustainable economic growth can and should always seek international capital inflows.
Q: What steps have you taken to improve the earnings per share during the last two years?
A: Arif Habib Securities Limited is one of the top securities firms in Pakistan. We have a good management structure in place where we engage with our clients through groups and give them daily access to all the information they require, including market trends. In addition, we have a competent research staff that produces daily market forecasts and shares this data with clients.
Q: What steps do we need to take to put our economy on a sustainable growth path?
A: Pakistan is blessed with both natural and human resources. A skill development programme that invests in human capital will guarantee long-term inclusive growth and lower the unemployment rate. Recognising this, the government is working to create possibilities for young people to obtain employment and gain financial inclusion so they may contribute positively to improving Pakistan’s standing in the international markets.
Financial Performance in FY22
Arif Habib Securities Limited’s revenue decreased 27% to Rs1.13 billion in FY22 compared with Rs1.54 billion in the previous fiscal.
The operating income of the company registered an increase of 24% during FY22 and stood at Rs88 million as against a gain of Rs70.8 million the previous year.
The company posted a net profit of Rs826 million in FY22 compared to a profit of Rs2.1 billion in FY21, showing a massive decrease of 60% year-on-year, reports WealthPK.
About the company
Arif Habib Limited is a publicly-traded company. It was initially established as an unquoted public-limited company with Arif Habib Corporation Limited as its sole shareholder. The company’s main business includes investments, share brokerage, interbank broking, IPO underwriting, consulting and consultancy services, and initial public offerings.
