“No material impact from Pakistan”
PETALING JAYA: Malaysian companies with business interests in Pakistan are monitoring the republic’s faltering economy.
Pakistan’s deteriorating finances and uncertainty surrounding the International Monetary Fund (IMF) bailout weighed on the country’s rupee, according to a Bloomberg report.
The report pointed out that the currency fell around 7% in May – the biggest drop since March 2020, as the country negotiates a bailout package with the IMF and others to keep its economy afloat and avoid failure.
A Business Standard report also said that restoring the delayed IMF program would depend on the government’s ability to make a fiscal adjustment of around 2.5% of gross domestic product.
To demonstrate its commitment to implementing the “reform agenda”, the Pakistani government must end price subsidies for gasoline and diesel, and also increase electricity tariffs, according to the report.
Malayan Banking Bhd (Maybank) has a stake in MCB Bank Ltd, which is one of the largest banks in Pakistan, with a total customer base of eight million, according to Maybank’s website.
MCB Bank has a network of around 1,400 branches across Pakistan and in countries like Sri Lanka, Bahrain and Dubai. In an email response to StarBiz, Maybank said it is “closely monitoring economic developments in Pakistan but does not anticipate any material financial impact to the group as its contribution to the group’s pre-tax profit is 1% for the year ended Dec. 31, 2021 (fiscal year 21).”
Maybank noted that its effective stake in MCB Bank is 19% and is considered a non-controlling interest.
“It is a long-term investment of more than 10 years and it has done relatively well over the years as one of the largest private sector banks in Pakistan,” Maybank said in a statement. the email.
Meanwhile, Axiata Group Bhdedotco Sdn Bhd, a 63% subsidiary of , has a portfolio of over 1,600 managed towers and sites in Pakistan.
In an email response to StarBiz, Axiata said it regularly assesses all business, operational and financial risks in its operations across Asean and South Asia.
“edotco Pakistan’s potential impact on the group is minor at 1.48% of its net assets as of March 31, 2022,” Axiata said.
For its first quarter ended March 31, 2022 (1Q22), Axiata recorded a net loss of RM43 million compared to a net profit of RM75.6 million a year earlier, mainly due to foreign exchange (forex) losses. of RM476.9 million, largely incurred by its mobile operations in Sri Lanka.
Axiata had explained that the net loss in 1Q22 resulted from unrealized foreign exchange losses due to the weakening of the Sri Lankan rupee and the ringgit against the US dollar.
In a recent report, PublicInvest Research noted that of Axiata’s total foreign exchange losses in 1Q22, RM462.5 million represents an unrealized loss.
“Excluding non-core items, 1Q22 normalized net profit was RM370 million, slightly above our estimates and the market at 31% full-year guidance,” the research unit said. , adding that she was concerned about the group’s potential operational and investment risk. in Sri Lanka and Nepal.
“We expect additional downside risk in terms of currency translation losses and provisions,” the research unit added.
PublicInvest Research said while positive on Axiata’s recent acquisitions in Indonesia and the Philippines which should allow the group to diversify into high-growth emerging markets, they are not likely to contribute to higher earnings. high in the short term due to higher cost of financing and amortization charges.
At home, the timing of 5G network rollout has remained uncertain, with the four biggest players (including Celcom) now seeking a majority stake in the country’s 5G agency, Digital Nasional Bhd.
The rationale for majority ownership is to allow telecom companies to exert influence to protect their investment in 5G, according to the research house.