Friday, 3 January 2025

PSX benchmark index up 5.6%WoW

At Pakistan Stock Exchange (PSX) positive momentum continued, with the benchmark KSE-100 index posting a weekly gain of 6,236 points or 5.6%WoW and closing at 117,587 points on Friday, January 03, 2025. The rally was led by the Banks, Fertilizers, and Investment & Securities cos.

The removal of ADR tax and implementation of additional taxation resolved uncertainty over the taxation regime, fostered optimism as banks would shift focus toward deposit growth.

Higher dividend expectations from fertilizer stocks and ongoing restructuring further bolstered investors’ confidence.

On the macro front, inflation eased to a 7-year low of 4.1%, taking real positive interest rates to 890bps, implying further potential rate cut in the upcoming Monetary Policy Committee meeting. Statements from the Finance Ministry and the Prime Minister hinting at interest rates dropping to single digits further fueled this optimism.

A 14%YoY increase in imports widened the trade deficit to US$2.4 billion at end December 2024. Meanwhile, 1QFY25 GDP growth stood at 0.9%, driven by Agriculture and Services sector growth of 1.2% and 1.4%, respectively, while the Industrial sector contracted by 1.0%.

Prime Minister launched home-grown Economic Revival Plan during the week, targeting GDP growth of 6% by FY28, boosting exports to US$60 billion, and taking immediate measures to reduce electricity cost.

Market participation also improved significantly, with average daily traded volume rising by 32%WoW to 1.04 billion shares from 0.79 billion shares a week ago.

Foreign Exchange Reserves held by State Bank of Pakistan (SBP) declined by US$143 million WoW to US$11.7 billion as of December 27, 2024.

Other major news flow during the week included: 1) FBR falls PKR386 billion short of revenue target in first half of the current financial year, 2) Sale of 15% stake in Reko Diq to be finalized soon, 3) OMC volumes for the month of December were up 3%YoY while 1HFY25 volumes were up 4%YoY, 4) Local cement sales decline 4.8%YoY in December, and 5) IMF refuses reduced sales tax rates for refinery sector.

Engineering, Textile Spinning and Banks were amongst the top performers, while Sugar & Allied and Tobacco sectors were laggards.

Major selling was recorded by Companies and Other organizations with a net sell of US$11.3million and US$9.1 million, respectively. Mutual Fund absorbed most of the selling with a net buy of US$16.9 million.

Top performing scrips of the week were: i) PGLC, PSX, EFERT, DAWH, and MTL, while laggards included: TRG, FCCL, AICL, INDU, and PABC.

Market is expected to maintain its positive trajectory, driven by an anticipated shift of funds from fixed income securities to equities amid falling fixed income yields.

With easing inflation, the upcoming MPC meeting will remain a key focus.

Over the medium term, the KSE-100 is anticipated to sustain its upward momentum through CY25, where Pakistan’s leading brokerage house, AKD Securities forecasts KSE-100 Index to reach 165,215 points by December 2025, primarily driven by the strong profitability of fertilizer companies, higher sustainable ROEs of banks and improving cash flows of E&Ps and OMCs, benefitting from falling interest rates.

US plans US$8 billion arms sale to Israel

The administration of President Joe Biden has notified Congress of a proposed US$8 billion arms sale to Israel, a US official said on Friday, with Washington maintaining support for its ally whose war in Gaza has killed tens of thousands, reports Reuters.

The deal would need approval from the House of Representatives and Senate committees and includes munitions for fighter jets and attack helicopters as well as artillery shells, Axios reported earlier. The package also includes small-diameter bombs and warheads, according to Axios.

Protesters have for months demanded an arms embargo against Israel, but US policy has largely remained unchanged. In August 2024, the United States approved the sale of US$20 billion in fighter jets and other military equipment to Israel.

The Biden administration says it is helping its ally defend against Iran-backed militant groups like Hamas in Gaza, Hezbollah in Lebanon and the Houthis in Yemen.

Facing international criticism, Washington has stood by Israel during its assault on Gaza that has displaced nearly all of Gaza's 2.3 million population, caused a hunger crisis and led to genocide accusations.

The Gaza health ministry puts the death toll at over 45,000 people, with many additional feared buried under rubble.

Diplomatic efforts have so far failed to end the 15-month-old Israeli war in Gaza that was triggered after an October 07, 2023 attack by Palestinian Hamas militants that killed 1,200 and in which about 250 were taken hostage, according to Israeli tallies.

Washington, Israel's biggest ally and weapons supplier, has also previously vetoed UN Security Council resolutions on a ceasefire in Gaza.

Democrat Biden is due to leave office on January 20, 2025 when Republican President-elect Donald Trump will succeed him. Both are strong backers of Israel.

 

  

Nippon’s collapsed deal a challenge for Japan

According to the Nikkei Asia, US President Joe Biden's decision on Friday to block Nippon Steel's bid for US Steel shows the outsized influence steel jobs have on American politics, despite being in a state of decline.

Biden ordered a stop to the US$14.9 billion acquisition, citing national security concerns. The steelmakers have said they will "take all appropriate action to protect our legal rights."

In the past 40 years, there have been only two cases of major Japanese acquisitions of U.S. companies in the Rust Belt states of the Midwest and Northeast: tire maker Bridgestone's deal for Firestone and Suntory Holdings' purchase of bourbon maker Beam.

The reason for this is that manufacturing, particularly the automobile industry, has shifted its focus to the Sun Belt states of the South to escape the influence of labor unions.

US Steel, which has its headquarters and main steelworks in Pennsylvania, is a symbol of what was left behind. The US steel industry as a whole is a shadow of its former self. According to US labor statistics, the total number of American steelworkers is now less than that of manicurists.

The transition from blast furnaces to electric arc furnaces, which allow for reduced manpower, is a factor in this workforce decline.

Despite being a minority in terms of labor statistics, the steel industry's political influence remains relatively large due to the hollowing out of other industries -- a situation unlikely to change in the near future. It is no coincidence that Pennsylvania is also a swing state in presidential elections.

Acquisition success has been said to hinge on four points: timing, valuation, the ability to predict changes in the business environment, and the buyer's ability to manage the target.

For the US Steel deal, the time was right for Nippon Steel to buy, aside from the then-impending US presidential election. But the business environment and management factors were shaky.

After its losses at the polls in November, the Democratic Party wants to win back labor union support in preparation for the next presidential election in four years.

President-elect Donald Trump's Republican Party will be keen to hold on to union votes. Even if the acquisition somehow goes through, the combined steelmaker would still face the risk of political interference in management decisions.

Yet this is not a reason to give up on buying American companies. A setback like this should be taken in stride as an opportunity to learn to manage uncertainty.

Nippon Steel has technology that US Steel's leadership wants, including carbon dioxide-trapping pipes and lower-emissions hydrogen reduction steelmaking. Given Trump's stated ambition to revive American manufacturing, all hope for the deal may not be lost.

 

Pakistan Politics: Charter of Democracy or Marriage of Convenience

The alliance between the ruling PML-N and its ‘junior partner’, the PPP, is a testament to the power of politics to bring the foes of yesteryear together against a common foe.

The first time they were compelled to join hands was under the umbrella of the Alliance for the Restoration of Democracy (ARD), following the 1999 military coup by General Pervez Musharraf. With both Nawaz Sharif and Benazir Bhutto in exile, the job of keeping the peace fell on Nawabzada Nasrullah Khan’s shoulders — and it was no easy job.

Then, in May 2006, the two sides came together to sign the 36-point Charter of Democracy in London — regretting their past actions and agreeing on a number of constitutional measures to strengthen democracy in the country.

The outcome of that charter was the smooth transition of power from assemblies under Musharraf to a democratically-elected government in 2008 — an assembly that actually completed its five-year term without being rudely interrupted. Although the PML-N initially joined the PPP cabinet for a brief period, it exited the ruling coalition within months after differences over the restoration of judges deposed by the Musharraf regime.

Analysts believe ‘the common adversary’ will compel both parties to stay part of the alliance, held together with the establishment’s support

Imran Khan’s victory in the 2018 elections saw both parties facing the brunt of what the government of the day saw as accountability. This common foe galvanized the two parties, which found themselves together on the opposition benches.

And when the opportunity to unseat the PTI regime through a vote of no-confidence emerged, both sides banded together with other, smaller parties to form the Pakistan Democratic Move­ment (PDM) alliance that saw out the term of the assemblies until last year’s long-overdue polls were held.

In the wake of last year’s elections, though the PPP became a major part of the alliance of parties that coalesced to form the incumbent ruling setup, it has refused to be bracketed as a coalition partner of the federal government. This is despite the fact that it controls provincial governments in Sindh and Balochistan, and several key constitutional offices — such as the presidency, the Senate chairmanship and the governor houses of Punjab and Khyber Pakhtunkhwa — have been given to the party in exchange for its support.

Politicians — including leaders from both parties — as well as political analysts believe that the presence of a common adversary — Imran Khan — will compel the country’s two main parties to put aside their differences and collaborate to maintain the present set-up, with the backing of the establishment, which is playing a crucial role in holding this unlikely alliance together.

For the PPP, this comes at the cost of having to make many compromises and support some unpopular decisions of the present regime, even to the extent of ignoring dissenting voices emanating from within its own ranks.

In background discussions, many observers said they believed the PPP was prepared to do all of this to ensure that its chairman, Bilawal Bhutto-Zardari, would become the next prime minister whenever the country goes into elections next, as this is only possible only if he remains in the ‘good books’ of those that matter.

In the wake of the February 08, 2024 polls, the PML-N made many attempts to woo the PPP to formally join the federal government, with PM Shehbaz Sharif even delaying the formation of his cabinet in the hope that the PPP might change its mind.

There was pressure on PM Shehbaz from within his own party to have the PPP in the federal cabinet at all cost, as was the case in the PDM era. This, they reasoned, would help them share the fallout from “difficult decisions” which the present setup would inevitably have to take in order to seek a bailout package from the IMF. But while the PPP has continued to resist the offer, it has silently endorsed all the actions of the ruling party.

In the words of political analyst Ahmed Bilal Mehboob, it is the common enemy — the PTI — which is forcing the PPP to cooperate with the PML-N in sustaining the federal government. “The establishment has provided the necessary glue to keep this cooperation going,” he said.

Mehboob, who heads the Pakistan Institute of Legislative Development and Transparency, said the PPP probably thought that by maintaining its distance, the party could protect itself from the fallout of unpopular decisions taken by the PML-N-led federal government.

“If we look closely, we can already see an early election campaign, as the two parties are busy projecting their respective potential candidates for the PM — Bilawal from the PPP and Maryam Nawaz from the PML-N side,” he said.

According to Mehboob, the uneasy alliance between the two parties would continue till the establishment’s binding force lasts and the PPP finds an opportune time to be in a position to win the next general election at the center. However, he said, such a situation may not arise very soon.

In the meantime, he said, the PPP would continue to put pressure and extract as much benefits from the federal government as possible in return for sustaining the present set-up. “One should not rule out the possibility of a coalition federal government of the PPP, the PTI and even the PML-N whenever the stars align.”

The first signs of trouble emerged at the time of the presentation of the federal budget in June 2024, when the PPP complained that it was not taken onboard in the preparation of the budget, forcing Sharif to proactively engage the party. It was at this time when the nation came to know that there had been a written agreement between the two parties regarding power-sharing, the details of which are still not known to the public.

After voting for the budget, the PPP again started complaining that it has not been taken on board by the PML-N on key national issues and important legislation. But despite constantly expressing its reservations over a number of government actions, the party extended unconditional support to the PML-N, enabling it to bulldoze a number of crucial pieces of legislation through parliament, including the extension of the tenures of the three services chiefs.

Then, days after the PPP chairman played a key role in securing the passage of the much-hyped 26th Constitution Amendment that altered the shape of the judiciary, Bilawal Bhutto-Zardari publicly expressed annoyance with the government over a lack of coordination, accusing them of reneging on its promises by not ensuring equal representation for both parties in the newly-empowered Judicial Commission of Pakistan (JCP).

Since then, committees formed by the two sides to iron out their differences have held many rounds of discussion. After each huddle, both come out with the same old mantra of “all is well” within the ruling coalition, even though we all know that is clearly not the case.

According to snippets gleaned from whatever has been reported about their agreement so far, the PML-N government in Punjab was supposed to take the PPP onboard for major administrative decisions and transfers and postings in two districts — Multan and Rahim Yar Khan — where the PPP has a stronghold. It was also agreed that the PPP would be given a due share in development schemes in the province.

But practically, PPP leaders claimed, the PML-N seemed to have changed its mind, with Punjab Chief Minister Maryam Nawaz proving to be the main hurdle in the implementation of the accord.

Responding to this gripe, Punjab Information Minister Azma Bokhari insisted that Maryam followed a “merit-based policy”, and posited that when some 200 PML-N lawmakers don’t get a say in transfers and postings, how could the PPP demand such a boon with its 10 MPAs in Punjab.

Talking to Dawn, a senior PPP leader confirmed that there was a strong group, comprising mostly members from the Punjab, which was quite unhappy over the present arrangement. He said that in recent meetings, they had apprised Bhutto-Zardari about the actions taken by the PML-N in the past to suppress and marginalize the party.

Members from Punjab, he said, were of the view that the PPP could not see a resurgence in the most-populous province until it disassociated itself from the PML-N. The party chairman, however, has advised members to wait for an “appropriate time”, while continuing to raise their voices in parliament.

The PPP has publicly criticized the PML-N’s various governments on a number of issues. Firstly, it was the power subsidy program to provide relief to lifeline consumers during peak summer season. The criticism was no doubt prompted by pressure from Sindh constituents to announce a similar step.

Initially, it was only the PPP’s Punjab chapter that simmered with resentment over the leadership’s decision to join the ruling coalition under the PML-N. However, when the corporate farming initiative of the federal government and its decision to draw more canals from the Indus River came to light, it gave the PPP more ammunition with which to attack its ruling partner.

The plan to irrigate the Cholistan region of south Punjab with what Sindh views as its share of water prompted a strong reaction from Sindh’s political circles, forcing the party to reject the plan in unequivocal terms.

M. B. Soomro, a senior Islamabad-based journalist from Sindh, maintains that for the time being, there is no option before both parties but to stay together. The PPP, he said, was under fire in its home province of Sindh, but at the same time it could not afford to exit the ruling coalition, either. He said the party had perhaps not been able to gauge the on-ground situation in its home province, for which it might have to pay a heavy price, if it fails to satisfy the agitating nationalist forces.

Soomro referred to the contents of a recent handout, issued by the Presidency after a recent meeting between President Asif Ali Zardari and Prime Minister Shehbaz Sharif on December 23, 2024. It stated that President Zardari had “assured the PM of his continued support and cooperation for the country`s progress and stability.”

The meeting had taken place amid an environment of acrimony and reports that last week, key PPP leaders had expressed a lack of confidence in the federal government.

“Had there been no compulsion, the PPP would have opted to sit on the opposition benches till now,” said Soomro, who has been covering politics and parliament for more than two decades.

According to him, “The establishment has been playing the role of a bridge between the two parties and their alliance is necessary to maintain the present system”, adding that the present set-up would continue until “the real powers find an alternative.”

Courtesy: Dawn

Thursday, 2 January 2025

Why was Soleimani sent to Syria?

Four years have passed since the assassination of Lt. Gen. Qassem Soleimani. Every time the anniversary passes, an exceptional biography of an exceptional hero comes to mind. He was a hero who devoted his entire life to others and supported the oppressed, standing tall as an impregnable barrier in the face of imperialist ambitions.

Undoubtedly, one of the most important battles Martyr Soleimani led was in Syria against the Takfiri barbarism engineered by Washington and Tel Aviv.

In his book “Sobh al-Sham,” Martyr Foreign Minister Hossein Amir Abdollahian explains, at the request of Martyr Soleimani, the details of the Syrian crisis that began in 2011 “so that the young generation can learn about the events in Syria and part of our region, and learn about the heroism of General Soleimani.”

Abdollahian thoroughly explains the motives of Tehran and its allies behind supporting Damascus at that stage, “The reader can clearly see on every page of the book eloquent scenes that reflect the courage of Sayyed Ali Khamenei, the Leader of the Islamic Revolution, and his wisdom in preserving Iran’s security to the maximum extent. The great fingerprints of Gen. Soleimani are also clearly evident in its folds, for those who follow with an eye to the heart.”

Abdollahian explains how these efforts have warded off the victory of the “Western-Arab-Hebrew” coalition against the Syrian people, shedding light on “the events that swept West Asia and North Africa. In parallel, the US-Zionist axis was waiting for opportunities to exploit these pivotal transformations. 

“Why did the Egyptians go out and not a single bullet was fired? Why did ISIS not appear in Tahrir Square? Why did this not happen in Tunisia, while events in Syria took a deviant path and turned into a long terrorist war?” Abdollahian wonders 

Abdollahian reaches the conclusion: “Other rulers began to think about what they should do” for fear that the revolutions would not shake their thrones. Washington, too, was highly concerned about the fall of its historical and traditional allies one after the other without having a suitable alternative to them.

Nevertheless, the Zionist colonial entity was the most concerned, according to Abdollahian, so after an in-depth study, the Zionist officials deduced that it was necessary to prevent this torrent by implementing a “Reverse Plan”.

Accordingly, they decided to intervene in the Axis of Resistance’s countries. “In the first stage, they wanted to wreak havoc in Tehran ... They have seriously considered targeting Iran’s nuclear centers. They said we must cut off the head of the snake. After searching and examining, they reached the conclusion that this action entails complications, as it is not possible to attack Tehran and come out of the battle without losses,” he notes.

Abdollahian believed that they had no other options but to “cut off the executive arms protected by Iran” such as Hezbollah, Hamas and the Islamic Jihad. At the height of these transformations, the Israeli entity made a wrong decision to wage war against Gaza on November 14, 2012, estimating that Iran was “preoccupied with the nuclear talks and had many problems that prevented it from paying attention to Gaza,” and that Hezbollah’s fighters “who would confront the Israelis had moved to Syria to combat ISIS.” 

Israel called its war “Pillar of Cloud,” while the Palestinians called it “The Battle of the Stones of Sijil”. The goal was to destroy the Palestinian resistance’s weapons depots. However, on the 8th day, the colonial occupation regime quickly requested a ceasefire without achieving any results. 

Abdollahian adds that the US-Zionist axis found out that among the most important factors that neutralized the scheme to attack Iran and weaken the resistance in Gaza was Syria’s might. Hence, they seriously thought that if they could strike Syria and cut the lines of resistance, the balance of power in the region would fundamentally change. They believed that after the fall of Syria, all routes of sending logistical aid to the resistance movement would be blocked, and the threats facing the Israeli entity in the Golan Heights would be removed. 

Foreign Minister Abdollahian says that the goal of this “Reverse Plan” has never changed, which is to weaken the countries surrounding the Israeli entity and their national armies.

Unfortunately, what he predicted came true. Syria fell, yet as Sayyed Ali Khamenei has asserted, the courageous Syrian youth – who have been inspired by Martyr Soleimani – will overcome the enemies through steadfastness and sacrifice.

Courtesy: Tehran Times

Wednesday, 1 January 2025

Syrian delegation arrives in Saudi Arabia

According to Saudi Gazette, a Syrian delegation, headed by the Minister of Foreign Affairs, Assad Al-Shaibani, arrived in Riyadh on Wednesday for its first official foreign visit. The visit comes in response to an invitation from Saudi Foreign Minister Prince Faisal bin Farhan.

Deputy Foreign Minister of Saudi Arabia, Eng. Waleed Al-Khuraiji, welcomed the Syrian delegation upon its arrival at King Khalid International Airport. The delegation included Minister of Defense Marhaf Abu Qasra and Intelligence Chief Anas Khattab.

Speaking on the occasion, Syrian Foreign Minister Assad Al-Shaibani emphasized that the new political administration in Syria is committed to building relationships that honor the shared history of the two nations.

“The political administration in Syria aspires to open a new and bright chapter in its relations with Saudi Arabia,” Al-Shaibani said.

On his official account on Platform X, he added: “I have just arrived in the Kingdom of Saudi Arabia, accompanied by Minister of Defense Marhaf Abu Qasra and General Intelligence Chief Anas Khattab.”

The visit coincided with the arrival of the first Saudi relief aid convoy to Damascus on Wednesday. The convoy carried food, shelter supplies, and medical aid for the Syrian people.

This diplomatic engagement follows recent remarks by Ahmed Al-Sharaa, head of the new Syrian administration, where he underscored Saudi Arabia’s pivotal role in Syria’s future.

“Saudi Arabia has a significant role to play in Syria’s future,” he said, describing recent Saudi statements regarding Syria as “very positive.”

The new Syrian administration recently appointed Al-Shaibani as Foreign Minister following the ousting of the Assad regime by opposition forces on December 08, 2024.

 

What after Russian gas supply to Europe ends?

According to Reuters, Russian gas supplies sent via Ukraine to Europe for more than 40 years are scheduled to end on January 01, 2025 after Ukraine's Naftogaz refused to renew its latest five-year transit deal with Russia's Gazprom.

Despite the war between the two countries, Ukrainian President Volodymyr Zelenskiy on December 19, 2024 said Kyiv might consider allowing the transit of Russian gas if payments to Moscow were withheld until the fighting ends.

Russian President Vladimir Putin a week later said there was no time left this year to sign a new deal.

Here is what we know about options for when Russian gas transit via Ukraine stops.

HOW BIG ARE THE VOLUMES?

Russia's supply to Europe has fallen dramatically in the wake of Moscow's invasion of Ukraine in February 2022 which spurred the European Union (EU) to cut its dependence on Russian gas.

Moscow spent half a century building its European gas market share, which at its peak stood at about 35% but has fallen to about 8%.

As of December 01, 2024 the EU received less than 14 billion cubic metres (bcm) of gas from Russia via Ukraine, down from 65 bcm/ year when the latest five-year contract began in 2020.

The European Commission has said that volume can be fully replaced by liquefied natural gas and non-Russian pipeline imports.

Moscow has lost market share to rivals such as Norway, the United States and Qatar.

Russia could earn around US$5 billion on sales via Ukraine this year based on an average Russian government gas price forecast of US$339 per 1,000 cubic metres, Reuters calculations show.

Ukraine earns between US$800 million and US$ one billion in transit fees per year.

EU gas prices rallied in 2022 to record highs after the loss of Russian supplies. With supplies set to end, EU officials and traders say a repeat of that rally is unlikely given the now modest volumes involved and the small number of customers remaining.

WHO IS AFFECTED?

The Ukraine route serves Austria and Slovakia. Austria received most of its gas via Ukraine, while Slovakia takes around 3 bcm from Gazprom per year, about two-thirds of its needs.

Gazprom halted supply to Austria's OMV in mid-November 2024 over a contractual dispute but volumes held steady via the route as other buyers stepped in.

Slovakia has said the loss of Russian supply would not hit its consumption and that it has diversified supply contracts. Its main gas buyer SPP has contracts for non-Russian supply with BP, Eni, ExxonMobil, RWE and Shell.

WHAT OPTIONS DO BUYERS HAVE?

Most other Russian gas routes to Europe are shut including Yamal-Europe via Belarus and Nord Stream under the Baltic Sea.

One option is the TurkStream pipeline to Turkey under the Black Sea, Bulgaria, Serbia or Hungary. However, capacity is limited.

Slovakia's gas supply could come from Hungary, roughly a third from Austria and the remainder from the Czech Republic and Poland, according to Austrian energy regulator E-Control.

Austria should not face disruptions as it has prepared for the switch in supply, its regulator has said.

The Czech Republic is likely to tap more supply from Germany pipelines taking advantage of an exemption from a German domestic gas levy from January 01, 2025.

The Czech Republic has said it is ready to provide Slovakia with gas transit and storage capacities.

Russia supplies Moldova with about 2 bcm of gas per year. It is piped via Ukraine to the breakaway region of Transdniestria where it is used to generate cheap power that is sold to government-controlled parts of Moldova.

Gazprom said it plans to suspend supply on January 01, 2025 citing unpaid bills.

Moldovan Prime Minister Dorin Recean has condemned the decision but said the country has diversified sources of supply. The country plans measures to reduce consumption by at least a third from January 01, 2025.

As for Ukraine, its security of supply will not be impacted as it does not use Russian transit gas, the European Commission said.

WHERE DOES THE GAS COME FROM?

The Soviet-era Urengoy-Pomary-Uzhgorod pipeline carries gas from Siberia via the town of Sudzha - which is now under control of Ukrainian military forces - in Russia's Kursk region.

It flows through Ukraine to Slovakia where the pipeline splits into branches going to the Czech Republic and Austria.