· Inflation for the month of Dec’21 is likely to stand at 12.9% vs. 11.5% in the previous month — the fifth consecutive month of continuous increase in curve, bringing CY21 to close at 9.5%, on a similar scale to last year. On a sequential basis, inflation is likely to trend at 0.5% in Dec’21 compared to 3.0% in Nov’21.

· In our base case, we expect inflation for FY22 at 11.3% with the authorities likely recording double digit readings in the remainder of the year (2HFY22 avg. 12.3%YoY/0.5%MoM). However, our estimates are subject to great uncertainty with risks tilted towards the upside, on lack of clarity on the reforms mandated under the IMF program (read sales tax amendments), commodities price trends, and Rabi crop produce.

· Market performance is expected to remain sideways until Pakistan formally comes under the watch of IMF with short kicks being triggered by downward trending commodities (read coal). The resumption of IMF program would provide much needed thrust to market in our view which would put Pakistan’s macro issues on backburner.

· In this backdrop, we favor value to growth where our preferred sectors include Banks (on monetary tightening) and Construction-Allied (ala cements and steel due to strong private sector demand).

Courtesy – AKD Research