Pakistan textile sector performance far from satisfactory

In continuation of the previous month's positive performance, external trade shows improvement in November 2016 exports amounting to US$1.76 billion, exhibiting reversal from the consistent monthly downward trend seen this year. Textiles and clothing sector, which constitutes more than 60% of country's exports also picked pace, rising 9.7%YoY to US$1.05 billion during the month under review. This growth was broad-based recovery in both low value (+15.6%YoY) and value-added segments (+7.6%YoY). However, on a cumulative basis, 5MFY17 textile exports were still lower at US$5.13 billion.

Going forward, analysts expect textile exports to largely remain under pressure due to: 1) demand side bottlenecks with weak Chinese demand outlook and economic slowdown in the EU following Brexit, 2) lower currency competitiveness amid sharp depreciation in regional currencies and 3) low commodity prices. That said, sector anxiously await yet to be announced incentive package estimated around Rs75 billion by the Government of Pakistan (GoP). This aimed at enhancing export competitiveness over regional countries and providing relief to the textile sector. Moreover, encouraging cotton arrivals to date for MY17 (up 12.33%YoY to 10.14 million bales) is expected to reduce cotton shortfall next year.

Performance of the value added sector posted growth with Knitwear, Readymade garments and Bedwear registering double digit growth. Moreover, the low valued added segment depicted commendable recovery after a consistent decline this year, where exports of cotton yarn increased by 42.1%YoY/10.3%MoM. However, on a cumulative basis, textile exports after recovery still remain unimpressive with 5MFY17 exports recording a decline of 2.0%YoY.

According to the fortnightly cotton arrivals report of PCGA, a total of 10.14 million bales arrived in the country by Mid December this year as against 9.03 million bales last year, up 12.33%YoY. Arrivals from Punjab increased by 19.38%YoY to 6.44 million bales, while flows from Sindh increased marginally by 1.86%YoY to 3.70 million. Initially the GoP had fixed the target of cotton for MY17 around 14 million bales, which was later slashed to less than 11 million bales. In an attempt to ensure ample availability of cotton in the country, the GoP has also lifted ban on cotton from India.

Going forward, any substantial increase in the export of textiles and clothing seems unlikely amid emerging: 1) concerns on low currency competitiveness following sharp decline in regional currencies, 2) risk of potential decline in exports to European Union post Brexist and 3) sluggish Chinese demand. The added irritants are disruption in supply of electricity and gas despite high tariffs. Ministry of Textiles, Ministry of Commerce and Trade Development Authority of Pakistan (TDAP) seems to have gone into complete hibernation.

What are the motives behind alleging Russia of hacking US election?

In one of my recent posts I have stated that elections are engineered in third world countries but in the US election is engineered in an organized manner. After the victory of Donald Trump a debate has started in the US that Russia has hacked election. Accepting all my inadequacies the following points come to my mind. I request my reads, especially the think tanks from the United States and those in power in Russia to help the world in understanding the purpose behind this propaganda.

My first question is, has Russia attained power to rig election of a country that has defeated USSR in Afghanistan, which led to disintegration of the then second largest super power?

My second question, what is the motive behind this propaganda?

My third question, what are the motive behind maligning Russia or CIA and NSA?

My fourth question, why entry of Donald in White House is being denied?

My fifth question, who is the bigger war monger, Donald or mighty CIA, NSA and Pentagon?

My sixth question, is the media in the US also subservient to military might?

As I have accepted earlier my inadequacies, kindly have some patience to read my replies also.

My explanation to the first question is that there is a clear motive behind accusing Russia, killing two birds with the same stone. While the effort is aimed at maligning Russia, it is also exposing failures of CIA and NSA. I will abstain from raising finger at Russia, but tend to agree with those who have been saying that CIA/NSA and Pentagon have been acting on false information, the worst being presence of weapons of mass destruction in Iraq.

The reply to my second question may sound outrageous but I could not resist from saying it. Despite all the propaganda against Donald, Hillary lost the election. This is a defeat of those who could be termed non-state actors, the Zionists. May be they believe that establishing a link between Donald and Russia could stop his entry into the White House.

The reply to third question is that lately Russia has defeated the US on various fronts, specifically in Syria. This has happened despite the best efforts and tall claims of CIA and NSA. Those believing in maintaining status quo are not ready to accept their defeat. However, while accusing Russia they forget that they are also accepting failure of their intelligence agencies. In my views they are accepting the supremacy of Russia to seek more funds for CIA and NSA for their capacity building to open new war fronts around the globe, the next front is South China Sea.

The possible explanation of fourth question is the apprehension that Donald’s cordial relationship with Russia may lead to withdrawal of support for ISIS and closing of the front in Syria. This is being taken as a victory of Iran, which the Zionists don’t approve. Ironically, US military might, intelligence and ‘embedded journalists’, who have been counting days of Syrian President are not ready to accept their defeat.

To find reply to fifth question readers have to read my latest post, US war mania. Over the years I have been saying that US is the biggest arms supplier and to increase sale of arms it has to create new rebel groups, provide them funds and training to sell arms to the incumbent governments of these countries. Contrary to the impression created by dishonest western media, I have a feeling that Donald wishes to focus more on domestic issues, spend more funds on creation and improvisation of infrastructure for the benefit of masses rather than spending billions of dollars of taxpayers’ money on proxy wars. This policy of Donald is not approved by war mongers and owners of the armament factories of the US.

Lesson of the story is that the US citizens are so engrossed in ‘other’ activities that they even don’t have time to question why tax payers’ money is being spent on wars rather than on millions of US citizens still living below the poverty line. Groups having vested interest have been preaching ‘change of regime’ in countries around the world must also do the same at home.  

US war mania

Today Facebook reminded me that on 17th December 2011, I posted a question: do you believe that after taking an exit from Iraq, USA is trying to open new fronts? I also apprehended that some of the potential targets among Muslim countries could be Iran, Pakistan and Saudi Arabia. I also asked the readers: does my assertions carry any weight?

When I posted this question about five years back, I didn't have good knowledge of geopolitics in South Asia and MENA. If I look at 5-year history now, ongoing war in Syria and changed relationship of US with Saudi Arabia show that the world’s super power wants to keep war ongoing in this region. The US has not attacked Saudi Arabia but has caused it huge economic losses by bringing down crude oil price per barrel to less than US$35 from US$ 147. Even at present price is hovering around US$ 50 because of Saudi Arab led OPEC effort to cut output but US is taking full advantage of the prevailing situation.

If one looks at the US mania to topple Syrian President Assad, the only conclusion that could be drawn is US war mania. The history also shows that the US initiated war in various countries; an example of distant past is Vietnam and recent past are Afghanistan and Iraq. The irony is that the US never accepts its defeat and never declares that war is over. It continues to support various rebel groups in war-torn countries and the most notorious examples are Afghanistan, Iraq, Syria and Libya.

One may wonder, why should the US initiate war? My reply is simple, it has to sell its arms and to conclude huge transactions first it creates rebel groups and then sells arms to the incumbent groups. The most notorious groups of present time supported by the US are Taliban and ISIS; other groups may also be working in different countries.

Kindly allow be to refer to Saudi Arabia that lately emerged as the biggest buyer of arms in the recent past. The US supported it by taking price of crude oil to US$147/barrel. In the meantime the US also increased its rig count to above 1900 to attain self sufficiency in indigenous crude production.  To the viability of indigenous producers, the US funds plunged crude price to US$35/barrel.

The US not only caused huge economic losses to Saudi Arabia but has lately withheld supply of arms on the please that these are being used in Yemen. I may laugh at the US acts because over the years it was fully aware that arms were being used by Saudi Arabia in Yemen. It concluded the deals, took the money and now not honoring its commitments.

Pakistan stock market witnesses bullish trend despite selling by foreigners

Pakistan Stock Exchange (PSX) continued its upward move during the week ended 16^th December 2016. This bullish performance was led by calming political uncertainty over Panama paper and strong oil prices post Saudi Arab led deal, resulting in higher crude oil prices. This propelled gains in the index heavy Oil & Gas sector. However, activity at the bourse tapered 9%WoW with average daily volume at 357.6 million shares and volume leaders being second tier scrips like PIBTL, ASL, BOP, TRG and EPCL.

Key news flows during the week included: 1) US Fed increased interest by 25bps to and also hinted towards further increase in next calendar year, 2) a Chinese firm showed interest in participating Nishat Energy Limited (NEL) plan of setting up a 660MW power plant on imported coal, 3) ECC of the cabinet reversed its earlier decision to reduce the gas sale price for industrial sector to Rs400/mmbtu. However, it approved reduction in price for power stations and IPPs from Rs613/mmbtu to Rs400/mmbtu, 4) PSMC linked its US$460 million investment in a new Greenfield project with a steep cut in import duties and 5) Fecto cement decided to participate in bidding for Dewan Cement.

Performance leaders during the week were: POL, PPL, MEBL and SNGP; while laggards included:  AGTL, FATIMA, FFBL and LUCK. Foreigners remained net sellers for the week, where outflows stood higher at US$46.8 million as compared to US$24.8 million last week.

Oil stocks will likely remain in limelight, following the OPEC and Non‐OPEC members’ decision to cut output and manage supply. Moreover, expected announcement of the textile policy next week will keep the sector in focus. On the political front, easing noise after Supreme Courts adjournment of Panama Leaks case hearing till January’16 is likely to remain positive for the market.

Beating expectations of analysts, Habib Bank (HBL) posted hefty increase in 3QCY16 earnings of 40%QoQ took 9MCY16 earnings to Rs17.47/share. The focal point was improvement in asset quality that came under considerable stress following the slowdown in GCC economies in CY15 raising concerns on further infection of its international exposure. However, with provisions going down by a substantial 67%YoY in 9MCY16 on the back of Rs336 million reversal in 3QCY16 (first after 2QCY14), analysts are now more optimistic on the bank's asset quality metrics. HBL's price performance has been driven by a confluence of factors such as: 1) Pakistan's inclusion into MSCI EM space, 2) interest rate cycle reversal drawing close and 3) a resilient earnings profile.

Recently released data by Pakistan Automotive Manufacturers Association (PAMA), Pakistan's total industry sales for November'16 grew by almost 12%MoM to 17,858 units, still below 19,029 units sold in November'15 – thanks to unchecked import of used cars. Car and LCV sales rose to 16,018 and 1,840 units respectively, up 10.8/19.9%MoM but down 2.9%/36%YoY pointing to the continued influence of the Rozgar scheme on industry sales growth. Taken as a whole, 11MCY16 sales showed a tepid decline of 9% YoY to 187,591 units sold under all segments. Cars/Tractors posted minor falls of 2.9/3.0%YoY to 163,339/39,170 units sold over 11MCY16, while LCV sales dipped 36%YoY to 24,252units. Three major OEMs remained within their seasonal trends, where HCAR was an outlier, with sales growth of 3.2%MoM/103.3%YoY (unit sales of 3,096units during November'16) driven by the new Civic. Additionally segment‐wise growth showcases a burgeoning demand side scenario for the 1000CC segment where cumulative sales for 11MCY16 were 26,128units up 28%YoY, while the 1,300CC and above segment sales of 84,769units experienced a slowdown, recording growth of 3%YoY as against 40%YoY growth experienced in the same period last year. 800 and below 1000cc segment experienced a decline of 20%YoY selling 52,442units during the period. Citing the launch of Revo/Fortuner variants, followed by resilience of the Corolla, superior operations and hedging of currency risk (60% localization, active hedging of order book).

In line with the broader textile sector that has been in limelight on account of the 1) upcoming textile policy, 2) inclusion in the zero‐rated tax regime and 3) implementation of new efficient refund mechanism, Nishat Mills (NML) remained in focus. Pakistan’s leading brokerage house, AKD Securities has lowered the portfolio discount to 40% (from 50%) on the back of improved trading volumes and betas of portfolio companies that face lower volatility, while improving the liquidity of NML's portfolio. The earnings profile remains encouraging with earnings growth of 26%YoY in FY16. Going forward, brokerage house expect profitability to remain strong that includes 22%YoY growth in FY17 underpinned by: 1) marked improvement in core operations on expected improvement in gross margin on account of improved production efficiencies and grant of zero‐rated regime, along with 2% growth in topline and 2) substantial growth in dividend income (up 12%YoY) on expectation of continuation of strong dividend payouts by associate companies.