KARACHI:
Responding to Goldman Sachs’ forecast of a rebound in Pakistan’s US dollar-denominated Eurobond, the leading foreign bond maturing in April 2024, and others maintained an uptrend for the second consecutive working day on Friday. This marks a partial recovery from the approximately 5% decline following the post-election upset.
In a story titled ‘Goldman Sachs sees end to Pakistan bond selloff on IMF prospects’, Bloomberg reported on Thursday that “Goldman Sachs Group Inc says Pakistan’s dollar bonds will rebound, overcoming a fractured election mandate, as the leaders of the emerging coalition understand the gravity of the economic crisis and will work together to secure International Monetary Fund aid.”
According to a local research house, Pakistan’s 10-year Eurobond worth $1 billion, maturing in two months on April 15, 2024, ticked up 0.1% to 97.91 cents on Friday. Pakistan has eight foreign bonds listed globally, totalling $7.8 billion, maturing between April 2024 to April 2051. Three of them, including the leading one, maintained an uptrend, while the remaining five bonds ticked down on Friday.
Bloomberg further stated that the South Asian nation’s bonds rallied Thursday, led by notes maturing in April 2024, after the third-biggest group in the new parliament pledged support for former Prime Minister Shehbaz Sharif to take office again. Sharif, who already has a track record with the IMF, obtained a nine-month, $3 billion programme from the multilateral lender last June. These gains helped offset post-election losses that had reached 5%.
The nation is facing a looming deadline to find the money to meet $25 billion of external debt payments starting July, three times its foreign-exchange reserves. Its inflation rate is the highest in Asia, while the economy contracted last fiscal year. Investors demand an additional 11.5 percentage points of yield over Treasuries to buy the country’s bonds, much above the 10 percentage points seen as the threshold of distress.
Hubco in talks to buy stake in Thar coalmine
The IMF has announced its team will visit Pakistan after the new government forms to discuss a medium-term package. “We do not see any of these stakeholders to be a holdout in the upcoming IMF negotiations,” said Dhiraj Bajaj, lead portfolio manager for Asia and Emerging Markets debt at Lombard Odier, referring to the major political parties tipped to form a new government. “The only way forward to their success to stay in power is an IMF programme, and to then regain bilateral funding and meet their external liabilities. We believe this outcome is good for shorter and mid-dated US dollar bonds for now.”
Pakistan’s dollar bonds delivered some of the best returns in emerging markets last year, gaining over 90%. Goldman analysts cautioned that the outlook for Pakistan’s bonds beyond a short-term rebound will depend on global financial conditions. Investors will weigh the risk of sticky US inflation and a longer wait for Federal Reserve rate cuts, which will act as a drag on all distressed debt, including Pakistan’s, the analysts wrote.
Hubco buys stakes in Thar coal
In a notification to PSX on Friday, the Hub Power Company said it has entered into a “definitive agreement” for the acquisition of shares of Sindh Engro Coal Mining Company (SECMC), equivalent to approximately 9.5% of the issued and paid-up ordinary share capital of SECMC, held by Habib Bank Limited. To recall, the power company had entered into talks of the acquisition in mid-January 2024 to take stake in the country’s top coal-rich mine that is supplying the black gold to run power plants.
Published in The Express Tribune, February 17th, 2024.
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