Pakistan Stock Exchange outperforms other global equity benchmarks WoW basis

Continuing the momentum gained in the latter part of last week, the benchmark index of Pakistan Stock Exchange (PSX) closed the week ended on 3rd April 2020 at 31,622 points, posting 12.5%WoW gain. It was the highest ever in points gain, (up 3,512 points WoW) and highest weekly gain in percentage terms since February 2000, outperforming other global equity benchmarks on weekly basis. Across the board attractive valuations, cabinet approval of the stimulus package announced last week and kick-start of essential industries in the coming week (another incentive package for Construction sector announced on Friday) aided investor sentiment in tandem with encouraging news flow regarding number of recoveries from coronavirus. For the week top gainers included: ASTL, CHCC, MLCF, PIOC and KAPCO.

As a result, average traded volume jumped to 227.7 million shares, from 150.0 million shares traded a week ago. Within main board items, Cements led the show, gaining 26.0%WoW on expectation of the construction sector incentive package and news flow suggesting initiation of construction activities at Diamer Bhasha dam. It was followed by E&Ps/OMCs gaining 15.7/23.2%WoW, on Brent price rising more than 30% in anticipation of deal between Saudi Arabia and Russia. Flow wise, net buyers were Individuals (US$13.0 million), Mutual Funds (US$10.3 million), and Insurance (US$9.0 million), mostly absorbing sale by foreigners (US$36.1 million).

On the international front, global institutional investors continue to sell despite undemanding valuations driven by redemption pressures across both active and passive investment strategies. At the same sovereign allocators of global capital are also calling in redemptions due to calls for support from respective governments to fund relief measures as economies face various levels of impacts due to the virus outbreak. A fresh round of allocations may only be likely over the medium to longer term as economies only gradually reopen within the backdrop of large scale stimulus programs launched by central banks. Stimulus programs will eventually translate into higher risk tolerance improving allocations towards frontier and emerging markets.

Analysts advocate buy-and-hold investment strategy with a long term investment horizon since the impact of coronavirus outbreak is yet to be completely gauged. They also suggest continuing to monitor data regarding the virus, testing capacity augmentation, provincial measures to mandate social distancing (including length and severity of lockdowns.

Unhinged Foreign Policy of United States

UN Secretary General Antonio Guterres has called for an "immediate global ceasefire" to focus on fighting Covid-19. He has appealed for the "waiving of sanctions that can undermine countries' capacity to respond to the pandemic." But Washington is not listening. Requests from Venezuela and Iran for emergency IMF loans to buy medical supplies were blocked by U.S. interventions.

The Trump administration is reacting to the pandemic stress by lashing out at perceived internal and external enemies. Secretary of State Mike Pompeo is leading the external onslaught.

Just a month ago Pompeo announced an increase of sanctions against Iran. The sanctions block money transfers. They make it impossible for Iran to import the medical equipment it urgently needs to counter the epidemic.

While the US renewed the sanction waiver which allows Iraq to import electricity and gas from Iran, the waiver is now limited to only 30 days. One third of Iraq's electricity depends on those imports from Iran and, if the waiver is not renewed, its hospitals will go dark just when the epidemic will reach its zenith.

Parts of the Trump administration are even pressing for a wider war against alleged Iranian proxy forces in Iraq.

The Pentagon has ordered military commanders to plan for an escalation of American combat in Iraq, issuing a directive last week to prepare a campaign to destroy an Iranian-backed militia group that has threatened more attacks against American troops.

But the United States’ top commander in Iraq has warned that such a campaign could be bloody and counterproductive and risks war with Iran.

Some top officials, including Secretary of State Mike Pompeo and Robert C. O’Brien, the national security adviser, have been pushing for aggressive new action against Iran and its proxy forces — and see an opportunity to try to destroy Iranian-backed militia groups in Iraq as leaders in Iran are distracted by the pandemic crisis in their country.

Military leaders, including Defense Secretary Mark T. Esper and Gen. Mark A. Milley, the chairman of the Joint Chiefs of Staff, have been wary of a sharp military escalation, warning it could further destabilize the Middle East at a time when President Trump has said he hopes to reduce the number of American troops in the region.

The plan is lunatic. One can’t "destroy" Kataib Hezbollah and other Iraqi Shia groups which Iran helped to build during the war against ISIS. These groups are part of political parties with deep roots in the Iraqi society.

France, Italy and the Czech Republic have started to withdraw from Iraq. Denmark is also leaving and the UK is removing 50% of its force.

There are less then 5,000 US soldiers in Iraq and a war on Kataib Hezbollah could mobilized hundreds of thousands Iraqis to fight against the US occupation. Such a war would also involve Iran and the US would certainly lose it.

The US has currently two aircraft carrier groups in the Arab sea to threaten Iran. But those ships are of no use right now. They are 'cruise ships with guns'. Nuclear powered five billion dollar Petri Dishes for novel coronavirus outbreaks.

Two US carrier groups in the Pacific are already out of action because they have larger outbreaks on board. It is only a question of time until the other carriers follow.

It is not only Iraq and Iran the US is aiming at. The US State Department cut its contributions to health care in Yemen just in time of the highest need:

Officials with the United States Agency for International Development said the decision to halt funding, reported earlier by The Washington Post, included exceptions for “critical, lifesaving activities, including treatment of malnutrition as well as water, sanitation and hygiene programs aimed at keeping people healthy and staving off disease.”

But humanitarian officials said the agency’s exceptions did not provide for continued funding of basic health care programs, which are heavily reliant on foreign aid, and did not seem to take into account what might occur when the coronavirus begins to spread.

Russia strongly opposes US sanctions against Iran amid coronavirus pandemic

The Aide to the Russian President Yuri Ushakov in a phone conversation with Iran's Ambassador to Russia Kazem Jalali emphasized Moscow's strong opposition to US sanctions against Iran, especially amid coronavirus outbreak.

The two sides discussed medical terrorism against Iran, the latest spread of the coronavirus worldwide, and the measures taken by Iran to combat the virus in the country.

In this conversation, the Iranian ambassador talked about medical terrorism and the extensive US sanctions against the Iranian nation, in particular preventing many countries from sending medical aid to Iran to combat coronavirus.

Jalali also appreciated Russia's humanitarian aid to Iran and sending test kits as well as Russian political support to Iran.

Ushakov, for his part, emphasized Russia's strong opposition to US sanctions on Iran, especially when Iran is fighting against coronavirus outbreak.

The two sides discussed launching a Russia-China-based campaign to lift sanctions on Iran.

While the countries are trying to boost cooperation in the fight against COVID-19 pandemic, the US still continues its unilateral sanctions against Iran which have affected the country’s power to contain the outbreak.

The new sanctions come as China and Russia, in particular, have urged the US to remove its sanctions on Tehran since the restrictions could interfere with Iran’s efforts to contain the coronavirus outbreak in the country.

As of Saturday, the death toll from the coronavirus outbreak in Iran has risen to 1,433 with 19,644 confirmed cases.

It may be recalled that Iranian Foreign Minister Mohammad Javad Zarif highlighted that what the United States is carrying out against the Iranian nation is a crime against humanity.

“The banking and financial restrictions imposed do not identify whether you are purchasing humanitarian items or not. When a bank deems it risky to do business with Iran, it simply closes the door,” said Zarif.

In addition, European manufacturers of medical equipment do not sell their products to Iran because the US is threatening them with penalties, added Zarif. “There are several ways through which the United States is practicing economic and medical terrorism against Iran. Looking at it from a legal perspective, it is a crime against humanity.”

Asked about official offer of United States to help Iran, Zarif said that the offer was ‘hypocritical’. “A few days ago, US Secretary of State, Pompeo asked other countries to set conditions to help Iran with the fight against coronavirus. All the United States needs to do is to stop interfering.”

“We will take care of ourselves and have enough friends in the world to help us. Stop economic terrorism. If you are not ready to do this, then we ask the world to stop just watching this bullying. This is inhumane.”

“Iranians are dying and people are accepting American bullying just in the hope that they will not be hit. This will not work.”

Calls for lifting unilateral sanctions imposed by the United States against Iran has increased during the recent weeks as the country is facing problems with buying its required medicine and equipment to contain the coronavirus outbreak. Meanwhile, Washington has announced that it will not abandon the maximum pressure policy. 

Iran has emerged as one of the hard-hit countries by the virus. As of Saturday, the death toll from the coronavirus outbreak in Iran rose to 1,556 with 20,610 confirmed cases.