Sri Lankan go to crucial poll today

Sri Lankans are going to the polls to elect a president today (Saturday), at a time when the country is struggling to emerge from the worst economic crisis it has faced since gaining independence in 1948.

Sri Lankans have suffered a turbulent few years. Fed up with severe shortages of essentials such as food and medicines, and lengthy power cuts, they took to the streets for months in 2022. Those protests culminated in the storming of the presidential palace in July that year, forcing former President Gotabaya Rajapaksa to flee the country.

United National Party's Ranil Wickremesinghe assumed the presidency then and is standing as an independent now. He faces three other main competitors -- National People's Power (NPP) candidate Anura Kumara Dissanayake, Samagi Jana Balawegaya's (SJB) Sajith Premadasa and Sri Lanka Podujana Peramuna's Namal Rajapaksa, scion of the powerful family that had dominated the nation's politics for over two decades.

Here are four things to know about the election:

What is the key issue on voters' minds?

Top of voters' concerns is economic stability and growth. The 17.1 million registered voters want to know how to improve their financial health and the plans the next government has to target the corruption they blame for their misery. Although shortages have eased, Sri Lankans still face high costs of living and a squeeze on public spending as the Wickremesinghe administration restructures the country's debt to meet conditions laid out by the International Monetary Fund (IMF) for a bailout. Sri Lankans largely blame the Rajapaksas for the state of the economy. The Supreme Court ruled late last year that Gotabaya and Mahinda Rajapaksa were among 13 former leaders guilty of economic mismanagement that led to the crisis.

Who are the main candidates?

A total of 38 candidates have entered the race, although there are only four main contenders. Antiestablishment opposition parliamentarian Dissanayake, leader of NPP, an alliance of left-leaning groups, has captured the imagination of many voters.

Competing with him is another parliamentary opposition leader, Premadasa, leader of SJB, a center-left alliance.

The main candidates have assured voters they will not tear up the IMF's economic recovery blueprint, but voters are wary of the austerity measures required for Sri Lanka's US$3 billion bailout. As such, many are leaning toward positions offered by Dissanayake and Premadasa to tweak the IMF's benchmarks to provide economic relief to impoverished millions.

Premadasa told The Associated Press that his party was already in discussions with the IMF to ease the tax burden on the poor.

Trailing them are two candidates who are considered pillars of the status quo and seemingly out of step with the public: the incumbent Wickremesinghe and Namal Rajapaksa, nephew of Gotabaya and son of another former president, Mahinda.

Some, however, credit Wickremesinghe for stabilizing and even growing the economy. Sri Lanka reported on September 13 that its economy expanded 4.7% year-on-year in the April quarter.

Saturday's election will also bring Sri Lanka's strategic location into sharp focus, as Asian rivals India and China have stakes in the outcome.

A victory for Dissanayake, whose main constituent party has Marxist and revolutionary roots, is expected to pave the way for Beijing to regain some of the foothold it has lost to New Delhi during the Wickremesinghe presidency.

India, according to Colombo-based diplomatic sources, prefers a Premadasa presidency.

How will the winner be decided?

Voter turnout for presidential elections typically hovers in the healthy 70% range, sometimes higher. Traditionally, voters choose one of two main candidates. The candidate with the majority of votes -- 50% plus one vote -- will be named president. This time, though, there are four main competitors, meaning a scenario could arise in which no one candidate reaches the majority threshold. As such, voters are asked in this election to mark the numbers 1, 2 and 3 against their top three choices. In the event no one wins a majority, the election will go to a second round, which only involves an additional count. The two candidates with the most votes in the first round will be pitted against each other. Ballots that had either one of them as their second or/and third choices will be added to their tallies. The one with the highest total will win the election. There is no time limit for the second round.

Why is there anxiety about the transition of power?

Concerns about a smooth transition of power have once again emerged, as they did after previous polls. Sri Lankans are worried that any period of political uncertainty after a potential second round could leave room for exploitation by political opportunists within the incumbent government.

Courtesy: Nikkei Asia

 

 

 

PSX benchmark index up 3.5%WoW

Pakistan Stock Exchange (PSX) continued its positive momentum, buoyed by last week’s key catalysts of interest rate cut and Pakistan’s inclusion on the IMF executive board agenda. Consequently, the benchmark index reached an all-time high, closing at 82,074 points with a weekly gain of 2,741 points, up 3.5%WoW.

Overall, the bullish sentiment was predominantly driven by high-dividend-yielding sectors including Banks, E&P, and Fertilizers, as falling fixed-income yields led to a rerating of these sectors.

Current account balance for August 2024 posted a surplus of US$75 million, largely underpinned by a 40%YoY increase in remittances. Additionally, exports also remained higher during the month, with growth largely supported by an annual increase of 13% in Textile and 40% in Food exports.

Subsequently, LSMI activity also rose by 2.4%YoY in July 2924, with Textiles and Food driving output expansion.

The GoP reduced POL prices for the fourth consecutive time, lowering these by over PKR80/liter compared to same period last year. This consistent decline in POL prices is expected to further alleviate inflationary pressures.

The rejection of all bids in recent T-Bills auction and the less-than-target acceptance in the PIB auction, along with declining yields, would potentially shift liquidity toward equities.

On the international front, the US Federal Reserve cut interest rates after four years by 50bps.

Market participation declined by 22.6%WoW, with the average daily traded volume dropping to 469 million shares from 607 million shares in the earlier week.

On the currency front, PKR largely remained stable against the greenback, closing the week at 277.8/US$.

Other major news flows during the week included: 1) ADB assures Pakistan US$2 billion annually in loans, 2) FDI rises to US$350 million in first two months of the current financial year, 3) Power demand slumps 17%YoY in August, and 4) In PIBs auction PKR111 billion was raised against PKR200 billion target.

Top performing sectors were Pharmaceuticals, Commercial Banks, and Fertilizer, while Woollen, Cable & Electrical Goods, and Engineering were amongst the laggards.

Major net selling was recorded by Foreigners with a net sell of US$23.2 million. Mutual Funds absorbed most of the selling with a net buy of US$15.5 million.

Top performing scrips of the week were: MARI, SHFA, HBL, MEBL, and MCB, while laggards included: SML, YOUW, WFUG, TGL, and PIBTL.

IMF Executive Board’s approval, along with continued monetary easing would keep equities in focus, with the market trading at an attractive P/E of 3.7x and a DY of 13.2%. The completion of the FTSE rebalancing would further boost investor confidence.

AKD Securities recommends sectors benefiting from monetary easing and structural reforms, particularly high-dividend-yielding stocks, which are expected to relate as yields align with fixed-income returns.

Israel claims destroying over 1000 ready-to-launch rockets in Southern Lebanon

IDF fighter jets struck hundreds of rockets that were ready for immediate launch into Israeli territory, the IDF announced on Thursday night.

Starting on Thursday afternoon, a total of about 100 rocket launchers and other military infrastructure were attacked, including about 1,000 rockets that were ready for immediate launch, the IDF said. 

Three Lebanese security officials told Reuters that these were "the heaviest aerial strikes since the conflict began in October last year."

According to reports in Lebanese media, cited in Israeli media, the number of attacks ranged from about fifty to seventy throughout Lebanon in only about twenty minutes. 

These strikes come only days after the far-reaching Hezbollah communications explosion, spanning two days, wounding thousands and killing at least 30 people.

Hezbollah threatened to respond, with leader Hassan Nasrallah live streaming a speech on Thursday in which he goaded Israel, daring it to attack.

"We are waiting for you to enter Lebanese territory. We are waiting for your tanks and will see this as a historic opportunity.”

Nasrallah's speech was dripping with symbolism with references to Surah Al-Hajj, verse 39, which permits Muslims to fight defensive wars, to the red background symbolizing revenge.

These strikes, in combination with the explosions, are only the latest series of defeats that pose serious questions for the organization.

Fuad Shukr, one of the most senior Hezbollah commanders, was assassinated in July, for which Hezbollah threatened vengeance.

Hezbollah's planned retaliation at the end of August was thwarted by an IDF preemptive strike involving more than 100 strikes across the south of the country.

 

Israeli Cyber Attacks Cripple Hezbollah

In unprecedented covert operations, Israel triggered explosions on thousands of pagers and hundreds of walkie-talkies used by Hezbollah fighters and followers in back-to-back attacks on September 17 and 18, 2024.

Both attacks targeted Hezbollah in at least three strongholds—Beirut, the eastern Bekaa Valley and southern Lebanon. Some pagers also detonated in neighboring Syria. In a speech on September 19, Hezbollah leader Hassan Nasrallah warned that "retribution will come."

The escalation was the single largest blow to the Lebanese militia, which is Iran’s most important ally in the Middle East. It also signaled Israel’s growing shift from the Gaza war in the south to the tense 49–mile northern front with Hezbollah—and potentially a turning point for war in the wider Middle East.

Shortly before the pagers exploded on September 17, Israel announced that the Security Cabinet had decided to expand its military focus.

“The center of gravity is shifting northward, meaning that we are increasingly diverting forces, resources, and energy towards the North,” Israeli Defense Minister Yoav Gallant said on September 18.

Military strikes along the northern border have intensified since the outbreak of the Gaza War on October 07, 2023, as Hezbollah fired rockets almost daily on northern Israel.

Some 70,000 fled Israeli towns, farms and kibbutzim with long-term impact on the economy, schooling, and security. Israeli strikes on southern Lebanon have led some 112,000 residents to flee villages, town and farms.

The Israel operations seriously degraded Hezbollah’s ability to communicate with its fighters as Israel mobilized forces closer to the northern border. The pager attacks:

·         Injured almost 3,000 Lebanese

·         Killed at least 12, including two children

·         Injured Mojtaba Amani, Iran’s ambassador to Lebanon, who reportedly lost one eye and injured the other

·         Overwhelmed Lebanese hospitals

Arab news outlets reported that the explosives were pre-planted in the AR-924 pagers, which were produced in Hungary on a license from Gold Apollo, a Taiwanese company. Hezbollah pledged retaliation for the “sinful assault, both in ways that are expected and unexpected.”

The walkie-talkie attack the next day was smaller in scale but a further humiliating blow to Hezbollah and, potentially, its military capabilities. The walkie-talkie operation:

·         Injured at least 608

·         Killed at least 25

·         Sparked fires in Beirut’s southern suburbs as well as the Bekaa Valley

·         Added to stress on Lebanese health facilities

The United States and the European Union expressed alarm about the operations. In Cairo, Secretary of State Antony Blinken warned all parties against actions that would intensify regional hostilities.

“We remain very clear about the importance of all parties avoiding any steps that could further escalate the conflict that we’re trying to resolve in Gaza to see it spread to other fronts.  It’s clearly not in the interest of anyone involved to see that happen,” he said at a joint press conference with Egyptian Foreign Minister Badr Abdelatty. “It’s imperative that all parties refrain from any actions that could escalate the conflict.”

European Union foreign policy chief Josep Borrell condemned the operations for endangering Lebanon’s stability and increasing the risk of regional escalation. 

“Even if the attacks seem to have been targeted, they had heavy, indiscriminate collateral damages among civilians, including children among the victims,” he said in a statement after meeting with the Lebanese foreign minister on Sept. 18, 2024. “I consider this situation extremely worrying.”

In contrast, President Masoud Pezeshkian condemned the use of pagers as tools for “assassination and annihilation.” The attack “once again showed that western nations and Americans fully support crime, killings, and blind assassinations by the Zionist regime,” he said in a cabinet meeting on September 18, according to the presidential website.

Israel has pledged to continue military operations against Hezbollah, the most experienced and well-armed non-state actor in the world, until it withdraws from the border and ends rocket and missile strikes.

Hezbollah, in turn, has vowed not to stop until the Gaza war ends. Between October 2023 and mid-September 2024:

·         Hezbollah launched more than 8,000 rockets and more than 450 drones at Israel.

·         Israel carried out more than 7,000 strikes in Lebanon.             

Both sides have suffered deaths and casualties. At least 25 Israeli civilians and 21 soldiers have been killed in Hezbollah attacks.

Israel had already been linked to the deaths of at least 48 senior Hezbollah commanders and more than 430 operatives between October 08, 2023 and September 17, 2024.

Israel killed Fuad Shukr, one of Hezbollah’s most senior commander and a close advisor to Nasrallah, on July 30. At least 137 civilians in Lebanon have reportedly been killed in Israeli strikes.

 

Courtesy: United States Institute of Peace

UN General Assembly demands Israel ends occupation of Palestinian territories

The UN General Assembly has adopted a Palestinian-drafted, non-binding resolution demanding Israel end "its unlawful presence in the Occupied Palestinian Territory" within 12 months.

There were 124 votes in favor and 14 against, including Israel, along with 43 abstentions. As a non-member observer state, Palestine could not vote.

The resolution is based on a July advisory opinion from the UN's highest court that said Israel was occupying the West Bank, East Jerusalem and the Gaza Strip against international law.

The Palestinian ambassador called the vote a turning point “in our struggle for freedom and justice”. But his Israeli counterpart denounced it as “diplomatic terrorism”.

Although the General Assembly’s resolutions are not binding, they carry symbolic and political weight given they reflect the positions of all 193 member states of the UN.

It comes after almost a year of war in Gaza, which began when Hamas gunmen attacked Israel on October 07, 2024, killing about 1,200 people and taking 251 others as hostages.

More than 41,110 people have been killed in Gaza since then, according to the territory's Hamas-run health ministry.

There has also been a spike in violence in the West Bank over the same period, in which the UN says more than 680 Palestinians and 22 Israelis have been killed.

The advisory opinion from the International Court of Justice (ICJ) - which was also not legally binding - said a 15-judge panel had found that "Israel's continued presence in the Occupied Palestinian Territory is unlawful” and that the country was “under an obligation to bring to an end its unlawful presence... as rapidly as possible”.

The court also said Israel should “evacuate all settlers from the Occupied Palestinian Territory” and “make reparation for the damage caused to all the natural or legal persons concerned”.

Israel has built about 160 settlements housing some 700,000 Jews in the West Bank and East Jerusalem since 1967.

The court said the settlements “have been established and are being maintained in violation of international law”, which Israel has consistently disputed.

Israel's prime minister said at the time that the court had made a "decision of lies" and insisted that “the Jewish people are not occupiers in their own land”.

Wednesday’s General Assembly resolution welcomed the ICJ’s declaration. It demands that Israel “brings to an end without delay its unlawful presence in the Occupied Palestinian Territory... and do so no later than 12 months”, and “comply without delay with all its legal obligations under international law”.

The West Bank-based Palestinian Authority’s foreign ministry described its passing as a “pivotal and historic moment for the Palestinian cause and international law”.

The support of almost two-thirds of UN member states reflected “a global consensus that the occupation must end and its crimes must cease”, and that it “reaffirmed the Palestinian people’s inalienable right to self-determination”.

Israel’s foreign ministry called the resolution “a distorted decision that is disconnected from reality, encourages terrorism and harms the chances for peace”, adding, “This is what cynical international politics looks like.”

It said the resolution “bolsters and strengthens the Hamas terrorist organization” and “sends a message that terrorism pays off and yields international resolutions”.

It also accused the Palestinian Authority of “conducting a campaign whose goal is not to resolve the conflict but to harm Israel” and vowed to respond.

The US, which voted against the resolution, warned beforehand that the text was “one-sided” and “selectively interprets the substance of the ICJ’s opinion”.

“There is no path forward or hope offered through this resolution today. Its adoption will not save Palestinian lives, bring the hostages home, end Israeli settlements, or reinvigorate the peace process,” Ambassador Linda Thomas-Greenfield said.

The UK’s ambassador, Barbara Woodward, explained that it had abstained “not because we do not support the central findings of the ICJ's advisory opinion, but rather because the resolution does not provide sufficient clarity to effectively advance our shared aim of a peace premised on a negotiated two-state solution”.

Israel claims thwarting Iranian plot to assassinate Netanyahu and others

Iran plotted to assassinate Prime Minister Benjamin Netanyahu, Defense Minister Yoav Gallant, and Shin Bet Director Ronen Bar, the Shin Bet announced on Thursday, reports The Jerusalem Post.

Iranian efforts were particularly intense following the assassination of Hamas political chief Ismail Haniyeh in Tehran, which most of the world has attributed to Mossad. However, Israel has made sure not to take any credit for it.

In addition, the Islamic Republic, at a somewhat more vague level, explored assassinating former Prime Minister Naftali Bennett and other top Israeli defense officials.

The plot was to use an Israeli businessman, named by Israeli media as Moti Mqman, 73 years old from Ashkelon, who spent extensive time living in Turkey and had financial dealings with both Turkish and Iranian persons to develop assassination plans in Israel.

To effectuate the plan, in April of this year, Turkish citizens Andrei Farouk Aslan and Guneid Aslan contacted the Israeli businessman to conduct financial transactions, inviting him to the Turkish city of Samandag to meet with two representatives of a rich Iranian named Edi. In May, the meeting was held.

But when he was told that Edi could not leave Iran for Turkey, he agreed to have himself smuggled by car from Turkey into Iran, where he met Edi and a member of the Iranian security establishment named Haj.

The Israeli businessman initially had requested one million dollars before undertaking any activities.

The Israeli businessman later visited Iran a second time in August and received 5,000 Euros as part of the start of his undertaking financial, logistics, and weapons-related actions for accomplishing the plot, including potentially converting a Mossad agent into a double agent.

During the second visit to Iran in August, he was smuggled again into Iran from Turkey, this time in a truck, and met again with Edi, though this time also with multiple other unidentified Iranian security officials. During this meeting, they asked him to assist with the assassination plots.

The Israeli businessman was also requested to take videos of certain Israeli sites for surveillance and intelligence gathering purposes as well as to deliver threats to Israeli citizens who Iran had contacted to carry out missions that were not complying with Iranian directives.

Also, during the second visit to Iran, the Iranians asked the businessman if he would be able to recruit Russians and Americans who could be used to kill Iranian figures opposed to the regime who live in Europe and the US.

The Shin Bet did not provide any indications that the Israeli businessman made any significant progress toward any of the terror activities. Still, it did stress that any involvement with hostile Iranians, let alone in Iranian territory itself, during a time of war, was viewed as a very serious security crime.

Further, the Shin Bet said that Iran appeared to be continuing a hard push for such terror activities, such that uncovering this one plot did not bring an end to the danger.

The businessman was indicted on Thursday.

It was unclear why the Shin Bet published the disclosure on Thursday, two days after it published the attempt by Hezbollah to assassinate former defense minister Moshe Yaalon.

In addition, it was unclear if there was any coordination between Iran and Hezbollah regarding the various plots or a delineation of who would target who.

Questioned about the timing, the Shin Bet initially responded that the cases were published based on when the indictments were being filed and when the relevant courts lifted the gag order relating to them.

The Jerusalem Post noted that the Shin Bet and law enforcement have significant control over the timing of filing indictments and requesting lifting gag orders, and as such the initial answer did not really answer the question. The Post is still waiting for further clarifications.

Questioned about whether Turkish authorities are cooperating with Israel against its citizens involved in the plot - which it has sometimes in the past - the Shin Bet had not yet responded.

Issues of cooperation between Israel and Turkish authorities are extremely sensitive, though Ankara has publicized some such cooperation in the past when Iran tried to kill Jews inside Turkey, and the Mossad helped Turkish authorities thwart the plot.

 

 

United States: Fed cuts interest rates

The US Federal Reserve has cut interest rates by 50 basis points, signaling the central bank’s confidence that its war against inflation is coming to an end. How far and how fast the Fed cuts rates moving forward remains to be seen.

Fed Chair Jerome Powell told lawmakers earlier this year that the era of near-zero interest rates is likely over, the central bank projected in June that the median interest rate would drop to 4.1% in 2025 and 3.1%in 2026.

The Fed further lowered its median rate forecast Wednesday to 3.4% next year and 2.9% in 2026, as well as in the long run, according to new economic projections.

“This would only be the first cut of a rate-cutting cycle. The size and frequency of future cuts will give us a better understanding of whether the Fed believes they are behind, or ahead of, ‘the curve,’” said Jonathan Ernest, an economics professor at Case Western Reserve University.

The jobless rate ticked up to 4.3% in July and clocked at 4.2% last month. That’s relatively low by historical standards but still a sign of labor market “cooling” the Fed had been watching for as it waited to cut rates.

While some economists believe the Fed could have started cutting rates in July, the next few months are critical as the central bank attempts to bring the economy in for a “soft landing,” maintaining its dual mandate of low inflation and maximum employment as it brings down rates.