Friday, 11 November 2022

Pakistan: E&P companies post windfall profit

According to a report by Pakistan’s leading brokerage house, AKD Securities, the Exploration & Production (E&P) sector has reported phenomenal earnings for 1QFY23. The sector’s profit after tax was reported at PKR100.8 billion—the highest in its history. 

The sector’s earnings grew 55%YoY, with favorable macros driving earnings growth this quarter.  Net sales were reported at PKR226.6 billion for the quarter, higher by 13%QoQ and 54%YoY. This despite a drop in Oil/Gas production, but a weak PKR fueled topline growth. 

Exploration expenses in the final quarter of last year were at PKR26.6 billion, with the giant’s share dropping in PPL’s lap, with the Company reporting PKR11 billion in dry well costs. In 1QFY23, the exploration expenses of the sector were stated at PKR9.2 billion, lower by 65%QoQ, due to the absence of any substantial dry wells. 

On a company wise basis, the greatest sequential growth in profitability was posted by PPL, with net profit growing rising to PKR26.3 billion for the quarter. Trade Debts of OGDC and PPL were reported at PKR491 billion and PKR401 billion at the end of the quarter, respectively, increasing by PKR34 billion and PKR35 billion from the earlier quarter. 

The E&P sector provides investors with an exchange rate hedge, with the prospects of the sector having been muddied by mounting trade debts for the larger companies. Hence, within the sector, analysts like MARI and POL due to the relatively low exposure to the circular debt menace.

Pakistan Stock Exchange index up 2.95%WoW

As the political noise in the country eased off considerably, the benchmark index of Pakistan Stock Exchange (PSX) posted a robust uptick. The index moved up by 1,237 points during the week ended on November 11, 2022 to close at 43,093 points, up 2.95%WoW.

The uptick in index was witnessed amid healthy participation with the weekly average daily traded
volumes also jumping by 8.8%WoW to settle around 306.4 million shares, as opposed to 281.5 million shares witnessed last week. Stability also returned in the foreign exchange market during the week with PKR holding its ground against US$ at 221.6, appreciating by 20bpsWoW.

The newfound stability in PKR came amid a hefty depletion in country's official foreign exchange reserves which declined by US$956 million as the country made repayments on its international debt.

Major news flows during the week were: 1) SBP taking various steps to contain foreign exchange outflow, 2) Cabinet approving US$900 million escrow account for Reko Diq in March next year, 3) Bank Alfalah expressing plan to buy back 200 million shares, 4) DFML to start assembling LCVs, 5) first quarter fiscal deficit soaring to one percent of GDP from 0.7% of GDP, 6) Cement, CNG, Fertilizer sectors to face gas shortage in winter and 7) FBR Chairman ruling out any new tax amnesty.

The top performing sectors were: Leasing, Vanaspati and Allied, E&Ps, Refineries and Technology, while the least favorite sectors were: Miscellaneous, Sugar, Textiles, Leather and Tanneries (-0.8%WoW) and Woollen.

Stock-wise, top performers in the KSE-100 Index were PGLC, TRG, FABL, PPL and BAFL, while laggards were: PSEL, SHFA, SCBPL, ILP and FFBL. To five volume leaders for the week were WTL, HASCOL, CNERGY, DFML and FFL.

Flow-wise, Mutual Funds and Banks were the largest buyers in the market during the week, with net buys of US$3.6 million and US$3.0 million respectively. While Foreigners and Insurance Companies were major sellers,
with the cumulative net sells of US$4.7 million and US$6.0 million respectively. The foreign outflow was largely concentrated in sectors namely Banks (US$5.31 million) and Technology (US$1.05 million).

After a relatively stable week for the currency, PKR may yet again come under pressure as foreign currency reserves posted a spectacular decline during the
week, while the inward remittances also slowed down significantly, falling by 9%YoY during October 2022.

On the political front, the things may start heating up once again as country's largest political party starts its
long march once again. Both these factors may yet again prove to be market dampeners and the resurgence that the market showed during this past week may fizzle out once again and the index may see a renewed selling pressure.

Investors are advised to maintain trading positions only and refrain from building and holding long positions in the market.

Thursday, 10 November 2022

Russia-China trade on the rise

Days before Putin ordered his troops into Ukraine, President Joe Biden and US allies warned that an invasion would result in devastating sanctions and crippling costs. By summer end, some 30 countries had imposed various forms of sanctions on Russia’s energy and financial sectors, as well as on Russia’s ability to import semiconductors and key technology components.

Despite Putin’s claims that Western economic restrictions and penalties have had little impact, evidence suggests otherwise. Making transactions has become more difficult, supplies of important goods have been much more limited, and the ability for many Russian businesses and businesspeople to move through overseas commercial centers, has become harder. Some 1,200 foreign companies have either sharply reduced operations in Russia or left there altogether.

But many other countries have chosen not to join the sanctions effort, and some seem to view the invasion—complete with atrocities and veiled threats of strategic nuclear weapons—as a business opportunity.

According to Chinese customs data, its bilateral trade with Moscow grew 31% in the first eight months of 2022. In July, China imported US$10 billion worth of goods from Russia, an increase of 49.3% from July 2021. China relies heavily on Russia for oil imports, with crude petroleum making up about 48.3% of total Russian imports to the country. Meanwhile, Russia primarily leans on China for electronics such as broadcasting equipment and computers, which make up about 14% of Chinese imports to Russia.

To be clear, close economic ties between Russia and China aren’t anything new. Since 2014, China (coincidentally, the year Russia illegally invaded and began occupying Crimea) China has remained Russia’s largest trading partner, while Russia is China’s fourteenth largest trading partner. China’s determination not to join in sanctions has amplified Russia’s dependence on what China’s markets and financial systems offer. 

When Xi and Putin met to discuss China-Russia relations on September 15, 2022 during the summit of the Shanghai Cooperation Organization, it was the first time the leaders met since they established a “no limits” relationship shortly before Putin’s invasion.

While China watchers noted Putin’s admission that China had questions about the war in Ukraine, he still exuded confidence in China-Russia relations as a strategic, comprehensive partnership with expectations for the alliance to deepen bilaterally and internationally.

With news of battlefield setbacks reaching domestic audiences in Russia, President Putin will likely be more sensitive than ever about any complaints by Russian citizens about food shortages or daily economic hardships.

If more countries were to join the US and its allies in imposing sanctions, one wonders how long Putin could maintain his current special military operation. Given Russia’s increased reliance on Chinese trade, what would happen if China were one of those countries?

 

What will Pelosi do now?

As speculation builds around what Speaker Nancy Pelosi will do next year, many Democrats say the party’s surprisingly strong performance in this week’s midterms yields a simple answer, whatever she wants.

Pelosi, who has served as the Democratic leader for the past two decades, has previously pledged to withdraw from the top of the party at the end of this term, clearing space for a younger crop of ambitious lawmakers to climb into the leadership ranks. And a number of Democrats intend to hold her to the promise.

Yet the unexpectedly strong turn for House Democrats in Tuesday’s elections has strengthened Pelosi’s hand as questions churn around her political fate, according to sources on and off of Capitol Hill. The party’s good night, many Democrats said afterwards, means Pelosi can remain the top leader — if she so chooses.

“She’s in the power position. We over performed, and the wave never materialized,” said Ashley Etienne, Pelosi’s former communications director. “So, the choice is hers to make.”

While Republicans remain the favorites to control the lower chamber next year, Democrats stunned the political world Tuesday by clinging to dozens of seats in tough battleground districts and deflecting the type of midterm wave that routinely hammers the party of the incumbent president.

The development has buoyed Democrats, who have been on the ropes for most of the cycle amid a volatile economy, and frustrated Republicans who were hoping a considerable majority would help them neutralize President Biden through the second half of his first term.

No single figure was more crucial to the Democrats’ defense than Pelosi, who had blanketed the country over the course of the cycle showering enormous amounts of campaign cash — from a massive haul of roughly US$276 million raised — onto vulnerable lawmakers.

As GOP leaders spent Wednesday sniping over what went wrong with their campaign strategy, Democrats were coming around to a more unified sentiment, Pelosi is now in a place to decide her own future, on her own terms.

“She will be asked to come back, and she will stay if she wants,” said a second former leadership aide, who spoke anonymously to discuss a sensitive topic.

A Democratic lawmaker delivered a similar assessment, noting that Pelosi’s ability to raise money for the party — more than US$1.2 billion since she entered leadership — is unprecedented in Congress, and gives her outsized leverage to decide her own political fate.

“She earned her ticket to stay 10 years ago when she was raising more money than any Speaker had ever raised before,” the lawmaker said on background. “In respect for all that she has been to the Democratic Caucus and how she has led … she needs to be able to make the decision when she wants to leave.”

Pelosi is famously guarded about her future, and this year has been no exception.

The Speaker has repeatedly deflected questions about whether she’ll seek to remain in power next year. And that reticence has continued even in the wake of the violent assault on her husband, Paul Pelosi, late last month.

The Speaker has said only that her decision will be affected by the attack. But that’s only fueled more conjecture, will she bow out of Congress to join her recovering husband? Or stay in place to send the message that no act of political violence can push her out?

“I’m sure that her decision is going to weigh the impacts on her family,” said the lawmaker, “but that would not be a reason for her to bail out.”

Heading into Tuesday’s elections, Democrats were not optimistic about their chances.

They have razor-thin margins in both chambers. Historical trends have predicted that the party of the president routinely loses seats in the midterms, frequently in wave numbers. Biden’s approval numbers have been below 50 percent for more than a year.

Economic anxieties, particularly surrounding inflation and gas prices, were expected to overshadow other issues on voters’ minds to the detriment of the Democrats, who control all levers of power in Washington.

However, Democrats defied most of the predictions for Tuesday, securing victories in battleground districts across the country and denying Republicans a huge majority if the House does change hands after all the outstanding races are decided.

On Wednesday — a day when Republicans hoped to be popping champagne, launching leadership races and sharpening plans to confront Biden on countless key issues next year — they were forced instead to ponder the reasons for their lackluster performance.

If Republicans had prevailed clearly and quickly Tuesday night, there would have been immediate pressure on the Speaker to announce her intentions for next year. Instead, she announced she was leaving the country for a climate summit in Egypt.

Pelosi is not guaranteed a leadership spot in the next Congress. The younger, restless lawmakers who want the chance to join the party brass, will likely revolt if she seeks another term at the top.

 “But the race for leader in the minority is very different from the contest for Speaker, requiring support from a majority of the party, not a majority of the full House — a much lower bar.

Whatever Pelosi decides, her supporters and detractors are in agreement on one thing: No one will know until

This really solidifies her legacy as the most accomplished Speaker in US history, by all measures — all measures. There’s no question,” Etienne said. “Two things I know about Pelosi though, the decision will be made on her terms, and she’s going to keep us guessing.”

Wednesday, 9 November 2022

Tracking turmoil in global trade

Optimism among US small businesses retreated in October 2022 for the first time in four months as the sales outlook worsened, but there were glimmers of hope that supply-chain disruptions showing more signs of subsiding.

That’s according to the latest economic trends report by the National Federation of Independent Business, released Tuesday. While 31% of owners reported that supply-chain disruptions have had a significant impact on their business and another 31% said the effect was moderate, that’s lower than in July and the three months before.

And for the first time since 2019, a net figure of zero owners viewed current inventory stocks as too low in October, after reporting depleted stockpiles for months on end owing to the pandemic-era snarls.

The survey’s metrics on inflation — a top issue in this year’s midterm elections — were mixed. (Read more about the US midterm election results and for Bloomberg’s US Election Risk Index.

The net share of owners rising prices ticked down for a fifth month to 50%, the lowest since September 2021 but still well-elevated. However, the share of firms planning to increase prices in the next three months rose for the first time since May, and about a third plan to raise compensation, the most this year.

A similar share see inflation as the single most important issue impacting small businesses, up from 30% in September 2022.

Labor remains the next biggest problem. Owners continued to report difficulty attracting qualified applicants and filling open positions. However, hiring plans retreated for the first time since June, though the figure remains elevated.

After setting records earlier in the year, retail shipments arriving at US container ports are set to keep slowing for the rest of 2022, the Global Port Tracker by the National Retail Federation and Hackett Association showed.

That’s because retailers stocked up far in advance of the holiday shopping season to avoid a repeat of pandemic-era port congestion and potential disruption from West Coast dockworker and US rail-employee talks, they said in a report.

They trimmed the forecast for container arrivals for November 2022 to 1.92 million 20-feet equivalent units, the first time imports may come in below 2 million since February 2021. For the year as a whole, 2022 arrivals may total 25.9 million units, which would just exceed last year’s record of 25.8 million.

Volumes for February 2023 are forecast at 1.71 million TEUs, 19% lower than the same month in 2022, when US ports were still congested.

Safety concerns mount over lithium-ion battery cargo fires

Growing volumes of lithium-ion (li-ion) battery shipments are a major hazard across all transport modes, but container ships and vehicle carriers are particularly vulnerable.

The UK P&I Club and the TT Club, both managed by insurance services group Thomas Miller, and its technical consultancy subsidiary, Brookes Bell, are the latest experts to focus on the dangers associated with the transport of li-ion batteries.

Battery-related fires are now shipping’s most expensive cause of loss, according to research undertaken earlier this year by Allianz Global Corporate & Specialty into claims in the marine sector.  

Larger vessels, rising demand for electric vehicles (EVs) and the rapidly increasing volume of battery shipments, are all contributory factors and are compounding the risks. In a new White Paper, Brookes Bell experts call for shipping to adopt a much more robust approach to li-ion battery-related risk management.

In many cases, however, ships’ crews have few options. Undeclared or mis-declared cargoes are one problem, but a fire in a container position low in a stack is, to all intents and purposes, completely inaccessible. Once a fire takes hold, the likelihood is that it could engulf the entire vessel.

When a li-ion battery fails, the consultants said, the speed of failure is almost immediate, producing significant quantities of toxic, corrosive and flammable gases, and intense heat of 450°C and more. Explosive atmospheres can be created but continue to be underestimated, Brookes Bell said.

Fire-fighting materials such as CO2 and foam, meanwhile, are entirely ineffective in fighting such fires. Large volumes of water are needed, although the risk of electrocution is a further concern. Smoke may contain highly toxic vapours and fumes and, the experts said, fire-fighters, if they do have access, are traditionally taught to ‘go in low’ but since the vapours may be heavier than air, this may well be the wrong approach. 

Tuesday, 8 November 2022

Unveiling the real face of United States

The United States has been involved in hundreds of wars, invasions, coups and conflicts around the globe, yet it claims to be the flag-bearer of the international fight for freedom, liberation and human rights.

Even a cursory look reveals that in addition to its crimes, atrocities and attempts to divide countries, Washington stands accused of seditious acts through a widespread social media campaign and its embassies around the globe have been censured for their role in destabilizing different regions of the world.

It is often alleged that the United States itself was founded on violence against the indigenous people of America and since then it has survived on instigating violence with its hegemonic dreams and hopes of global hegemony following the collapse of the British Empire.

Over the past two decades Washington has had its eyes on West Asia with the disastrous invasions of Afghanistan and Iraq, as well as its support for Takfiri terrorist groups in countries such as Syria and Libya and in particular Iran.

It has since expanded its warmongering approach towards Eastern Europe with the aim of containing rising superpowers such as Russia. It has also pinned its hopes on China’s domestic issues such as Taiwan, Hong Kong, Tibet, Xinjiang and elsewhere with the hope of containing the rising economic and military power of Beijing. In essence, what is very clear is that wherever there is a US presence, there is also insecurity and no stability in that part of the world.

President Joe Biden claims the US will free Iran. Speaking at a campaign speech in California recently, he said, "Don't worry, we're gonna free Iran". The reality is, as noted by Iranian President Ebrahim Raisi, Iran was freed from US captivity by toppling the Pahlavi regime. 

"I am telling Biden that Iran was freed 43 years ago," Raisi said in reference to the 1979 Islamic Revolution.

It is also important to note that the Iranian people were free in 1953 before the American CIA and British MI6 orchestrated a coup that toppled the democratically elected government of Prime Minister Mohammad Mossadeq and replaced it with a puppet regime to loot the country’s large oil and gas resources.

This is something both Washington and its Western allies publicly acknowledge. The reality is that the US has been trying to repeat the exact same scenario in Iran since the 1979 Islamic Revolution. It has no interest in freedom or the livelihoods of Iranian people. Experts say human rights are observed in Iran more than the United States where minority groups, including Black Americans, face systematic discrimination.

The US claims it wants to free the Iranian nation while at the same time it has imposed the harshest ever sanctions on Iranian people that have caused the majority of the country's population to suffer. American sanctions prevented and continue to prevent patients suffering from serious diseases, such as cancer or rare skin diseases, to gain access to vital medicines by banning money transfer from Iran. This is under the name of "US freedom".

American widespread support for riots in Iran over the past few weeks have also led to the brutal death of police forces. This is the freedom and human rights that America seeks to spread and preach about. 

The closer the United States approaches Iranian borders or any other border in West Asia and beyond, the more insecurity grows in that country. And the US has dozens of military bases surrounding Iranian borders but an independent Iran has proven it has the capability to prevent the Pentagon from toppling the Islamic Republic because of Tehran's military might.

The governments and kingdoms that have linked their own national security interests (knowingly or unknowingly, willingly or unwillingly) to the US have been toppled because of their lack of sovereignty.

In cases where they have not been toppled, the US is stirring sedition and divide nations. This policy of spreading instability helps American arms manufacturers make lucrative profits from weapons deliveries, as has been witnessed in many countries, such as Cuba and other Latin American countries and more recently to Syria, Libya, Ukraine, etc.  

The US State Department has demanded that North Korea refrain from taking any defensive measures to protect its territory, and instead engage in dialogue. This is while the United States has hundreds of warplanes buzzing around North Korean borders in joint war games that have been extended and which Pyongyang views as a rehearsal for an imminent invasion. North Korea has test-fired ballistic missiles in response to these war games and Pyongyang, unsurprisingly, has been denounced by Washington for stirring up trouble.

The US is allowed to hold the largest ever war games next to North Korea with the deployment of B-1B strategic bombers but the North is not allowed to test its own missiles to protect its territorial integrity.

The US Navy missile-guided destroyers and other warships including US warplane carriers and strike groups regularly sail in the South China Sea and expect China to remain silent, which by the way Beijing has exercised praiseworthy patience with its diplomatic approach to the US provocations. A reflection of how one country is not after seeking military confrontation and how another has a warmongering approach under the pretext of spreading freedom that nobody even requested in the first place.

Critics argue that the delusional idea that Washington can provide security guarantees for another country can’t be further from the truth. The fact of the matter is, as history has shown and proven, the US only looks after its own interests, makes lucrative profit from its military adventurism and once these America’s interests are gone, so are the alleged security guarantees that Washington once promised to provide for certain governments and rulers and kings.