PSX daily trading volume declines 17%WoW

Pakistan Stock Exchange (PSX) remained volatile throughout the week, with the benchmark index losing 782 points or 0.95%WoW to close at 81,292 points on Friday, September 27, 2024.

Anticipation of the IMF’s board approval scheduled for September 25, briefly improved investors’ sentiment on Wednesday. However, the positive sentiments were overshadowed by continuation of foreign selling after rebalancing of FTSE Russell, political noise, and concerns regarding the potential termination of contracts with certain IPPs, inducing selling pressure in power sector heavyweights.

Consequently, power generation and distribution sector contributed the significant decline, eroding 800 points from the index during the week.

The FBR is expected to post a shortfall of PKR275 billion in 1QFY25, according to the news flows. In efforts to increase tax revenue, GoP plans to abolish non-filer status and take strict measures against tax frauds.

Average daily trading volumes declined by 17.1%WoW to 389.35 million shares, as compared to 469.45 million shares traded a week ago.

Foreign exchange reserves by State Bank of Pakistan (SBP) increased by US$24 million to US$9.53 billion as of September 20, 2024.

On the currency front, PKR largely remained stable against the greenback throughout the week, closing the week at 277.64 to US$.

Other major news inflow during the week included: 1) IMF distanced itself from Pakistan's decision to arrange a US$600 million commercial loan at 11% interest rate, 2) US Assistant Secretary of State Donald Lu praises 'deeper' ties with Shehbaz government, 3) GoP borrowing surged to record high, 4) Farmers to get 251 green tractors and 5) ADB may approve 3rd-party guarantee in case of Reko Diq.

Transport, Fertilizer, Inv. Banks/ INV. Cos/ Securities Cos., Leather & Tanneries and Pharmaceuticals were amongst the top performers, Power generation & Distribution, Leasing companies, Textile spinning, Engineering and Jute were amongst the worst performers.

Major net selling was recorded by Foreigners with a net sell of US$12.44 million, mostly absorbed by Mutual Funds with a net buy of US$16.21 million.

Top performing scrips of the week were: FFC, GLAXO, AKBL, FFBL, and THALL, while the laggards included: HUBC, PGLC, SML, MARI, and KEL.

Following the approval of the IMF’s executive board and the subsequent receipt of the first tranche of US$1.02 billion, the market sentiments are poised to improve.

Additionally, easing inflation with September 2024 CPI expected at 7.0%YoY, coupled with ongoing monetary easing, is expected to keep equities in focus.

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

 

Macron calls for a new international order

French President Emmanuel Macron on Sunday urged the need for “a new international order” following the ongoing war in Ukraine.

Speaking at the "Meeting for Peace" organized by the Catholic Sant'Egidio community in Paris, he called on European leaders to prepare for a post-war reality that reevaluates the continent's organizational framework.

"We must be imaginative enough to think about the peace of tomorrow, a peace in Europe in a new form," Macron stated, advocating for an inclusive vision that transcends the current structures of the EU and NATO.

He emphasized the importance of a broader approach to cooperation and peace building, particularly concerning the Balkans and Europe’s geographical realities.

Macron criticized existing institutions like the UN, World Bank, and International Monetary Fund (IMF) for not adequately reflecting the modern world.

"Our order today is incomplete and unjust. Many of the most populated countries did not exist when the seats were distributed," he remarked.

Addressing past criticisms of his approach to Russia, Macron reiterated the necessity of reconciling relations with the nation, albeit within a new organizational framework. He stressed that Europe needs to "rethink" its interactions with Russia in light of the ongoing conflict in Ukraine.

In May 2022, shortly after the war began, Macron faced backlash for stating that Russia should not be "humiliated." His recent hesitance to rule out sending French troops to Ukraine has also drawn Western criticism.

Looking ahead, Macron plans to present his concerns at the UN General Assembly, advocating for global reforms to create “fairer” and more inclusive international institutions. “I will come back to this this week at the UN,” he stated, highlighting the urgency of these reforms.

In addition to addressing European security, Macron commented on the escalating conflicts in the Middle East, particularly in Gaza. He stressed that peace must be rooted in “coexistence” and the recognition of all individuals' rights to live peacefully.

As the situation in Gaza deteriorates, Israel’s offensive has resulted in over 41,400 deaths, primarily among women and children, and more than 95,800 injuries, according to local health authorities.

The conflict has displaced nearly the entire population of the territory, exacerbated by a blockade leading to severe shortages of essential supplies. Israel faces a genocide case at the International Court of Justice for its actions in Gaza.

Pakistan: OGDC performance in FY24

Pakistan’s leading exploration player, Oil & Gas Development Company (OGDC) held its analyst briefing where in the management discussed the recently announced FY24 financial results with equity analysts.

Net sales of the company for the year under review rose to PKR463.7 billion, up 12%YoY, mainly due to higher wellhead prices. The average realized prices for crude oil slipped to US$68.7/bbl, down 4.3%YoY, while realized gas prices rose to PKR712.9/mmbtu, up 17%YoY.

Production activity during the year was reported at 33,100 bpd of crude oil (up 2%YoY), 717mmcfd of gas (down 6.1%YoY) and 717tpd of LPG (down 0.4%YoY), respectively.

Forced curtailments by SNGP and reduced intake by power companies led to fall in oil and gas output during the year.

Production was notably impacted in aging fields including Nashpa, Chanda, Dhok Hussain, and Uch, with output declining by 138,500 barrels of oil and 19,600 mmcf of gas, respectively.

Company operated in 54 Exploration Blocks (22 blocks with full ownership and 32 blocks as operated JVs), covering an area of 99.3k sq. km as at June end 2024.

On the drilling front, company spud 13 wells, with seven being exploratory and six developmental. This resulted in five discoveries during the year: Chak 214-1, Dars West-2, Kharo-01, Togh-2 and Nur West-1 (tight gas well), with combined daily production of 481 bpd of oil and 28mmcfd of gas, respectively.

With regards to 2D/3D seismic activities, company conducted 1,236/1,201 sq. kms of surveys during FY24.

Jhal Magsi development project has received approval for marginal gas pricing by the ECC. Significant construction milestones have been achieved, with commissioning expected during the current month.

Uch (requirement under GSA with UPL) and KPD-TAY (+100mmcfd) compression projects are presently in the detailed engineering phase, with completion expected by March 2026.

Opex were up 32%YoY during the year, with the primary reason being the lease expiry of three major fields. This led to additional payments to the GoP in form of an incremental charge of 15% of wellhead value.

Company's contract expenses were notably higher during the period, driven by various production optimization studies conducted across multiple fields.

Additionally, operations in sensitive areas resulted in increased security expenses as well.

Company also recognized PKR23 billion in impairment charges related to interest receivables from GoP’s TFCs.

Regarding the expected production profile and reserve size of the Abu Dhabi Block, management noted that the block is still in the appraisal stages. Regarding company's share in production, management stated that discussions with ‘ADNOC' are ongoing.

AKD Securities maintains its 'BUY' stance on the stock with a June 2025 target price of PKR180/ share, alongside a DY of 10% for FY25.

  

 

Remembering the day Saddam invaded Iran

On September 22, 1980, months after the victory of the Islamic Revolution in Iran, the army of the Iraqi Ba’athist regime led by Saddam Hussein invaded the Iranian border towns in the southwestern province of Khuzestan and launched a massive aerial bombardment on Iran, igniting an eight-year conflict with Iran.

The Iranians fought back to expel the invaders from their occupied soil. The Saddam regime, which received all-out support from the big powers, imposed the war on Iran that lasted until the summer of 1988.

Since the beginning of the war, Iran demanded that Iraq be officially declared as the initiator of the war. However, neither the Iraqi Ba’athist regime nor any of the major powers were willing to officially declare that the Saddam regime initiated the war against Iran.

The UN Security Council which has the primary responsibility for international peace and security failed to take any action to declare the Saddam regime as the aggressor and initiator of the war.

The Ba’athist regime committed crimes against the Iranian nation, using chemical weapons, firing missiles at civilian targets, bombarding cities and villages during the war, and other vicious acts.

Influenced by big powers, who armed the Saddam regime to the teeth, the Security Council refused to adopt an impartial stance in that regard during the eight years of war.

When Saddam tore up the 1975 Algiers Agreement in front of cameras and then started the war, the Security Council refused to say who started the war and which side violated the principle of non-invasion.

The Iraqi Ba’athist regime used to refer to border skirmishes that preceded the invasion as its pretext for starting the war. The regime claimed that it took action after a long history of border disputes.

The reality was that Saddam couldn't wait to tear up the Algiers agreement amid political instability and fast pace of developments in the post-revolution Iran. He might also have been pushed by hostile Western states that were angered by the victory of the Islamic Revolution.

Instead of the UN Security Council, it was UN Secretary General Javier Perez de Cuellar who declared Iraq as the aggressor and the initiator of the war in his report to the UN body in December 1991.

This action of the UN Secretary General to officially declare Iraq the initiator of war endorsed Iran’s right to self-defense.

The UN report naturally required Iraq to pay compensation to Iran, which was estimated at about one trillion dollars.

This action of the United Nations took place after the continuous political efforts of the Iranian authorities. It is considered a great victory for Iran because it proved Iran's right to self-defense against the aggressor.

This action took place while the propaganda apparatus of the Saddam regime and its backers were trying to manipulate public opinion in the world that Iran was the initiator of the war.

At the start of the war, Saddam was Iraq's undisputed political and military ruler and Iraq's national interests were his personal interests.

There had been border disputes and skirmishes before the start of the invasion which Saddam's regime sought to present as a pretext for attacking Iran. Saddam must have thought that amid instability and nascent revolution, it was the right time to materialize his malicious goal of seizing part of the Iranian territory.

The Iraqi dictator’s likely goal was to annex some parts of the oil-rich Khuzestan, which has a sizeable ethnic Arab population.

Border skirmishes preceded the invasion. Iraqi President Saddam Hussein claimed that Iran's Islamic government was trying to destabilize his country and the whole Middle East. But the then UN chief rejected that argument.

In a letter to the UN Security Council, Secretary-General Javier Perez de Cuellar in December 1991 Iran blamed Iraq for starting the war.

He rejected the Iraqi regime’s argument that border skirmishes pushed Iraq to invade Iran.

"Even if before the outbreak of the conflict there had been some encroachment by Iran on Iraqi territory, such encroachment did not justify Iraq's aggression against Iran -- which was followed by Iraq's continuous occupation of Iranian territory during the conflict," Javier Perez de Cuellar said.

Iran has always criticized the double standards of western states in dealing with the Iraqi war on Iran, especially the Security Council and Western powers were quick to take action against the regime after it invaded Kuwait on August 02, 1990.

Courtesy: Tehran Times

Israel getting desperate to attack Iran

Since October 07, 2023 Israeli citizens have been holding their collective breath, knowing that the ongoing war in the Gaza Strip and incessant fire exchanges on the northern border could escalate into a full-scale regional war at any moment.

The mysterious attack in Lebanon on Tuesday, in which thousands of pagers in the use of Hezbollah operatives exploded, apparently killing at least 11 and wounding thousands more, has made that possibility more likely than ever.

A war with the Iranian-backed militia to Israel’s north could quickly expand into war with Iran, which has yet to avenge the assassination of Hamas’s political leader Ismail Haniyeh in Tehran in late July, despite Islamic Republic leaders vowing a response.

Israel, in turn, stated it would exact a heavy price from the Iranian regime were it to carry out a significant attack against the Jewish state.

Maj-Gen. (res.) Itzhak Brik is adamant that war with Iran now would lead to Israel’s destruction.

Security expert Yair Ansbacher is convinced that war with Iran at this point is a must – to avoid Israel’s destruction.

This is the fork in the road that Israel faces today, 11 months after Hamas initiated the horrific October 07 attack, in which 1,200 Israelis and other nationals were murdered and 250 more were taken hostage.

Additional factors such as the apparent exhaustion of negotiations between Israel and Hamas for a ceasefire agreement, and the Israeli government’s decision earlier in the week to make the return of displaced northern residents an official war goal, have increased the likelihood of a regional war.

Speaking to The Jerusalem Post on the phone earlier in the week, Brik warned that Israel is not prepared for a multi-front war.

“Iran and its proxies have 250,000 missiles, rockets, and drones encircling Israel. Which means about 4,000 munitions hitting the Israeli home front on a daily basis, population centers, Haifa Bay, water and electricity facilities, gas fields [in the Mediterranean Sea], IDF bases, and strategic civilian infrastructure. A regional war can ruin the State of Israel,” he stressed.

Brik further warned that Israel would enter this all-out war alone, without the aid of the United States.

“Iran is backed by Russia, China, and North Korea, who don’t want to lose their [Iranian] asset,” he said, explaining that the US will avoid getting involved in a war that could develop into a world war.

What Israel should do, he advised, is build a strategic alliance with Western and moderate Arab nations that will form a “deterrence balance” against Iran and its partners. Trying to thwart the Islamic Republic’s nuclear capacity is futile, he added, which “is a development that can’t be stopped.”

Ansbacher views the situation differently. He is certain that now is the right time to strike Iran, before it makes its final nuclear breakthrough.

“If today the West has little success in taming the ayatollahs, it will have zero success when they obtain nuclear weapons,” he said via Zoom with the Post last week.

“Iran will provide a nuclear umbrella to terrorists across the globe. Imagine Hezbollah kidnaps [IDF] soldiers on [Israel’s] northern border, and before Israel launches a rescue operation, Hezbollah sends a message that this could result in a nonconventional missile attack. This is a scenario that we cannot accept,” Ansbacher stipulated.

In addition, the possibility of a hostile US administration come the November election, along with the inferior position Iran found itself in after the October 07 attack – exposing its plan to annihilate Israel – means that Jerusalem must now use this narrow opportunity to strike Iran, he noted.

“Tehran’s original plan was to attack Israel simultaneously [on all fronts], and that would have brought us to the brink of extinction. But their plan was disrupted when [Hamas head] Yahya Sinwar jumped the gun. This puts Iran in a weakened position. If the plan had fully worked, Israel would have been caught unawares, with all arms of the octopus around its neck. Then it’s checkmate. But the plan’s disadvantage was its extended period of implementation where many things could go wrong,” Ansbacher said.

Attacking Iran now is Israel’s last chance before it faces an existential threat of a nuclear Islamic Republic, he stressed. If Israel hits Iran in its two centers of power, Tehran and Qom, he added, the Iranian regime, largely unsupported by the nonreligious population, will very likely fall.

Who will be the next prime minister of Japan?

With nine candidates, Japan's ruling party holds its most crowded leadership race ever on September 27, 2024. Among those running for Liberal Democratic Party (LDP) president are two women. Many of the candidates have served as defense and foreign ministers as well as in other senior government and party positions. The winner will be rubber-stamped as Japanese prime minister when parliament reconvenes in early October.

A million local LDP supporters, representing less than 1% of the Japanese population, will have the same say as the LDP's 368 party legislators in the initial round of voting. But as no candidate is expected to secure a majority at that stage, the vote of the legislators will then gain much more weight in a runoff between the two frontrunners.

While the LDP sees the leadership race as a way to choose the face of the party ahead of an expected general election in coming weeks, other parties are not just standing by. The main opposition Constitutional Democratic Party has scheduled its own leadership election on September 23. In addition, LDP coalition partner Komeito recently changed its leader for the first time in 15 years.

Five of the LDP's six intraparty factions, which played an influential role in previous presidential elections, have decided to dissolve in the wake of a political funding scandal that came to light late last year. With factional control thus weakened, it has become easier for candidates to enter the leadership contest. The winner will succeed Fumio Kishida and be appointed Japan's 102nd prime minister at the Diet, where the party holds the most seats in both the upper and lower houses.

The result of the vote could bring a generational change. At 43, former environment minister Shinjiro Koizumi is a prominent candidate. As well as being the son of Junichiro Koizumi, one of Japan's best-known prime ministers internationally, Koizumi would become the country's youngest prime minister since the 19th century.

Japan could also have its first woman prime minister, with two female members of Kishida's cabinet standing, including Economic Security Minister Sanae Takaichi.

Former LDP Secretary-General Shigeru Ishiba is making fifth try for the top job, receives a lot of backing from local LDP supporters. 

Former defense minister Shigeru Ishiba ranked the best choice to lead the party, overtaking Shinjiro Koizumi in a recent opinion poll conducted after the nine candidates were confirmed. Hawkish Economic Security Minister Sanae Takaichi, who sees herself as an heir to former Prime Minister Shinzo Abe, ranked third among all survey respondents.

Sanae Takaichi is the most popular choice among stock market pros to become Japan's next leader, according to a monthly survey. Takaichi led the poll with 29% of responses, as market participants were hopeful the lawmaker would pursue economic policies similar to "Abenomics" -- those of former Prime Minister Shinzo Abe. 

Former Defense Minister Shigeru Ishiba proposed US military bases in Okinawa prefecture be managed jointly with Japanese forces, saying so in a public forum among all candidates. The security discussion comes as China ramps up military pressure on Taiwan and expands its maritime presence in the East and South China seas.

 Courtesy: Nikkei Asia

 

 

 

 

 

 

 

 

 

 

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