Karachi: Provisional oil marketing sates volumes have been released for the month of November 2011.
According to AKD Securities, Oil marketing sales volumes have increased by 12%YoY to 1.67mntons against a Nov’10 off-take of 1.49mn tons. In terms of oil product sales, APL outperformed with a 59%YoY increase in overall volumes led by higher HSD sales (up 110%YoY) and MS (up 71%YoY).
PSO followed with a `15%YoY increase in sales volumes to 1.O7mn tons led by higher MS sales (up 39%YoY) and HSD volumes (up 8%YoY). Volumes for Shell continued to decline down 23%YoY underscored by lower fuel oil sales (down 96%YoY). While AKD Securities remains Market Weight on oil marketing, AKD Securities reiterates AKD Securities’ preference for Pakistan State Oil where depressed valuations provide upside exposure to a long term volume growth.
Weak Remittances ahead of CA data
Inward remittances have registered at US$5.24bn in 5MFY12 against US$4.43bn in 5MFY11, translating into a growth of 18%YoY. In the month of Nov’11, remittances have clocked in at US$925mn, flat on a YoY basis but down 9%MoM from US$1,018mn in Oct’11. AKD Securities’ full- year FY12F estimate for remittances is US$12.5bn. Considering that the trade deficit has widened by 27%MoM to US$2.17bn in Nov’11, AKD Securities anticipates the Nov’11 Unadjusted Current Account deficit (excluding financial flows) at S$700mn at the least.
In relation to this, a US Congressional panel has frozen US$700mn in aid for Pakistan (part of a defense bill that is expected to be approved this week). Within this backdrop, any slowdown in remittances (e.g. Saudi Arabia is reportedly proposing to control outward remittances) poses magnified risks on the Balance of Payment front and consequently the PKR exchange rate (accelerated depreciation of 4% vs. the US$ in the last month).
As a result, while the Nov’11 CPI recording of 1O.2%YoY (vs. Discount Rate of 12%) reopens possibilities for monetary easing in Jan’12, recent PKR depreciation amid a widening of the CA deficit poses tangible risks. In this regard, a T-bill auction is scheduled to be held today (target: PKR100bn) where a Bloomberg survey indicates that yields could rise by 15bps-20bps.