US troops to stay in Afghanistan forever

I started writing blogs under Geo politics in South Asia and MENA about five years back. The objective was to share my views with global readers, particularly the Think Tanks operating in the US. Most of the topics I picked up over the years were: 1) proxy wars in Afghanistan, Iraq and Syria, 2) imposition of economic sanctions on Iran for decades, 3) use of crude oil as weapon, 4) melodramas in the name of change of regime, 5) creations of phantoms like Taliban, Al Qaeda and ISIS and 6) dishonest western media.

The title of one of my second blog written in August 2012 was Will US pull troops out of Afghanistan? Despite having little knowledge about international relations or geopolitics at that time, my conclusion was that the US will never pull its troops out of Afghanistan. My conclusion was based on the fact that presence of the US troops in Afghanistan provides it a safe haven for undertaking cross border actions in Pakistan, Iran, China and some of the energy rich Central Asian countries.

I had deliberately avoided mentioning drug as one of the prime reasons for the US troops for occupying Afghanistan, but one of the readers of my blog was prompt in raising this point. If one thinks with a cool head this may be the key reason because it gives control on drug trade and also the money to be paid to militants for killing the innocents ruthlessly and to keep the world permanently under fear. It may also be said that Afghanistan has become a nursery for growing mercenaries and people from around the world get training in the rugged mountains of Afghanistan. They are also paid from the money earned from cultivation of poppy.

Having born and grown in war-ridden Afghanistan, the locals have become ‘blood thirsty’ and suffer from restlessness unless they kill a few people every day. Ironically they not only kill their own countrymen but also go to places where conflicts have been created by the super powers to satisfy their lust.

The conclusion of my today’s blog is that after fighting two world wars, super power have decided to fight proxy wars, sell arms to the governments where rebel groups have been created by them, use income from drugs and oil for buying arms. The job becomes easier through propagation of regime change mantra.

These super powers are among the sponsors of the UN, created for restoring peace in the world. However, now the only role of Security Council is to grant permission for attacking a country chosen for the proxy war. Two of the worst examples are Afghanistan and Iraq and many other countries are also the victim of super powers. Usually the military dictators are made head of state and often the drama of sham democracy is also staged.

Pakistan stock market witnesses decline in volume traded

In a long due correction, Pakistan Stock Exchange (PSX) took a breather during the week ended 23^rd December 2016. The benchmark index closed flat at 46,634 levels. Key event for the week was completion of bidding process for the sale of 40% shares of PSX, where Chinese‐led consortium emerged as the highest bidder with Rs28/share. Volumes dipped during the week with average daily turnover at 336.6 million shares, down by 5.8%WoW.

Major news flows during the week were: 1) Prime Minister Nawaz Sharif brought five key regulatory bodies including OGRA and NEPRA under the administrative control of relevant divisions/ministries, 2) Current Account Deficit for November’16 rising to a hefty US$839 million as compared to US$381 million in October’16, taking 5MFY17 deficit to US$2.6 billion, up 91%YoY, 3) GoP raised Rs149.9 billion in MTB auction where cut off yields for 3 and 6 month moved up, 4) PSMC confirmed plans to launch the standard model of Suzuki Celerio in March’17 that will replace it Cultus model, 5) Competition Appellate Tribunal has dismissed an appeal filed by HASCOL to prevent PSO from acquiring SHEL’s shares in Pakistan Refinery and 6) NEPRA granted power generation license to Maple Leaf Power Limited, clearing the way for setting up an imported coal‐fired plant of 40MW at an estimated cost of Rs5.5 billion. Market leaders for the week were: HMB, EPCL, AICL, PSMC and ABL. Laggards during the week were: MEBL, LOTCHEM, SSGC, HASCOL and ASTL. Foreign participation continued its negative trend with US$45.5 million outflows compared to US$46.7 million in the last week.

The market is likely to largely continue its positive trend over the near term, however room for volatility in the next week remains where risks could emerge in the form of: 1) any swing international oil price on potential concerns on rising US inventories and 2) and political developments gaining prominence. Possible announcement of anticipated exports incentive policy in the near term remains a key trigger for price performance in the textile sector.

Shifting of policy stances (gas price curtailment, privatizations), incidence of higher taxation (super tax continuation, real‐estate) and sector specific packages (auto policy, incentives for textile exports) add up to a 'hit‐or‐miss' policy environment for domestic industry. Sectors bearing the brunt of policy actions include: 1) Textiles through zero‐status scheme granted to all export‐oriented sectors and accompanying DLTL and ERF incentives, 2) Autos from the introduction of AIDP‐II and accompanying incentives shifting long term competitive dynamics in the sector, 3) Fertilizer on support from GST reduction, cash subsidies and reduced feedstock prices in April’16, and 4) Cements, as they faced higher FED, difficulty in approval for coal expansions and blowback from real estate taxes. For CY17, analysts expect regulation pertaining to export competitiveness to continue, while expansion projects with FDI elements (foreign ownership) to continue remaining in favor. Moreover, as election year approaches, targeted subsidies for agri‐linked sectors, consumer cyclical (Autos, Consumer Goods) from widely accepted populist policies, are expected to gain steam.

Balance of payment metrics in November'16 has remained unimpressive. While exports for the month marked slight recovery with 6.2% sequential rise, they remain flat on YoY basis which coupled with 6.0%MoM/10.8%YoY rise in imports has pushed the trade deficit 10.5% MoM/14.3%YoY higher. While remittances improved 3.3%YoY for the month to US$1.61 billion, dip in flows from GCC region at 0.8%YoY still remains a concern. Foreign investment inflows netted at US$87.2 million in November'16, down 41%YoY, where FDI stood at US$143.7 million (down 37% YoY) as inflows from China have been slow this fiscal year (China's share in 5MFY17 down to 34% from 45% as compared during the same period last year). Going forward, Balance of Payment trends are expected to worsen; with little room for fast paced recovery in exports. Analysts see FY17 trade deficit expanding by 14%YoY which coupled with flattish remittance flows should keep the deficit high.

Chinese consortium submits highest bid to acquire 40 percent shares of Pakistan Stock Exchange

The consortium consisting of China Futures Exchange, Shanghai Stock Exchange, Shenzhen Stock Exchange, Pak-China Investment Company (PCIC) and Habib Bank (HBL) have reportedly submitted the highest bid of PkR28/share for the 40% strategic stake (321 million shares) of the Pakistan Stock Exchange (PSX). In the consortium, China Futures Exchange, Shanghai Stock Exchange and Shenzhen Stock Exchange would be allotted an aggregate stake of 30% while PCIC and HBL would each be allotted 5% of the strategic stake post regulatory approvals.

At the onset, this should be positive for the Pakistan market as it should enhance the brokers’ capacity to trade (opportunity to enhance net capital balance). In this regard, the transaction should result in an inflow of PkR 8.9 billion  (US$86 million) for around 200 owners of the PSX. Leading Brokerage house, AKD Securities believes that cash proceeds from this transaction can take up to two months to move out of the escrow account.

Other benefits to accrue in the medium to long term include: 1) increase in investor base, 2) up-gradation of technological infrastructure / technology transfer, 3) liquidity inflow from the launch of new products and 4) cross listings and market access for Pakistani companies.

Analysts remain positive on the Pakistan market as the current 21% valuation discount to MSCI Asia Pacific ex-Japan Index is expected to narrow on the back of enhanced liquidity present in the market coupled with formal inclusion in the EM space in 2017 and improving growth rates.

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.