Pakistan Stock Exchange benchmark index closes almost flat

The week ending on March 22, 2024 started on a positive note, witnessed uncertainty over interest rate cuts erasing some gains from the initial days. Overall the benchmark index closed at 65,152 points, with a gain of 335 points or 0.5%WoW.

On Monday, State Bank of Pakistan (SBP) decided to maintain the interest rate at 22%, the decision did not impact the stock market as it was already expected and priced-in.

The talks with the IMF mission on the SBA’s second review concluded on Tuesday with staff-level agreement, resulting in infused positivity into the equity market and international investors as well with appreciation in dollar bonds and Pakistan Stock Exchange benchmark index.

As discussions progressed, prerequisites for the next medium-term programs have surfaced, primarily focusing on broadening the tax base. News has circulated about a new plan to collect taxes from retailers through electricity bills, which has been shared with the IMF.

Additionally, IMF has recommended eliminating GST exemptions on petroleum products and other taxes, whereby, despite a easing weekly inflation, an increase in gas price (as sought by Sui twins) and implementation of 18%GST on POL products pose risks to the inflation outlook.

On the economic front, current account for February 2024 turned positive, with a surplus of US$128 million, bringing 8MFY24 CAD below the US$1.0 billion mark.

With a controlled current account balance, SBP’s reserve position also improved by US$105 million WoW to reach US$8.0 billion as of March 15, 2024.

With the IMF's smooth review, market participation improved by 13%WoW, with the daily traded volume averaging at 323 million shares as compared to 287 million shares a week ago.

Other major news flows during the week included: 1) During first eight months of the current financial year the GoP borrowed US$6.678 billion from multiple sources, 2) FDI dropped over 17% to US$820.6 million during these eight months, 3) IT exports raised by 32% to US$257 million during February, and 4) the Supreme Court ordered NBP National Bank of Pakistan to pay PKR60 billion in pensions to retired employees.

The top performing sectors of the week were Transport, Inv. banks/ securities cos. and Tobacco, while Synthetic & Rayon, Cement, and Refinery were amongst the worst performers.

Major selling was recorded by companies with a net sell of US$9.0 million. Insurance absorbed most of the selling with a net buy of US$24.1 million.

Top performing scrips of the week were: Company-wise, top performers during the week were: NBP, DAWH, PTC, CEPB, and MEBL, while laggards included: NRL, PIOC, CNERGY, HCAR, FCCL.

With the aforementioned tax reforms, price increases, particularly with the imposition of GST on POL products, could pose a risk to the CPI outlook and potential delay in interest rate cuts, resulting in restrained market performance. However, successful implementation of tax reforms would have a positive impact on long-term economic stability.

Additionally, with SBP REER increasing to 102.2 in February 2024, there is a risk of PKR depreciation, especially in case of increased smuggling or imports.

Investors are advised to remain cautious and maintain positions in strong valuation main board stocks, particularly those offering attractive dividend yields.

 

 

Gold price tops US$2,200 an ounce

Gold finally surpassed US$2,200 an ounce for the first time on Thursday after the US Federal Reserve indicated that it would press ahead with three rate cuts in 2024 despite elevated inflation.

Spot gold set a new record of US$2,222.39 during the early hours of trading, before retreating to US$2,206.10. US gold futures soared 2.4% to US$2,208.20.

Gold’s latest rally, which started mid-February, is underpinned by longstanding tailwinds including heightened geopolitical risks and increased central bank buying. During March 2024 alone, the safe-haven metal hit new highs on five occasions.

Its rapid ascent, according to Bloomberg columnists has surprised many seasoned market observers, as there hasn’t been a clear catalyst. What has been partially driving bullion is expectations for looser monetary policy in the United States, and that has now been reaffirmed by the Fed.

On Wednesday, Fed chair Jerome Powell continued to highlight officials would like to see more evidence that prices are coming down, but it’s still likely in most people’s view that we will achieve that confidence and there will be rate cuts, he said.

“What we saw last night was the green light really for gold traders to come back in,” said Chris Weston, head of research for Pepperstone Group.

“The Fed have said that right now they’re tolerant of the inflation that we’ve seen, they’re tolerant that the labor market strength is not going to be the impediment,” Weston told Bloomberg.

Speculation around the timing of the Fed’s long-anticipated pivot may have provided the trigger for recent gains, with data showing that traders boosted their net long positions on gold in the week through March 05 by the most since 2019.

The metal stands to benefit even more when US interest rates actually do come down, as bullion-backed exchange traded funds look likely to increase their holdings, according to UBS Group.

On the geopolitical front, there are a number of risks boosting gold’s allure as a haven asset, Russia appears to be gaining the upper hand in its war in Ukraine, the Israel-Hamas conflict continues unabated and has led to a re-routing of global shipping, while the US presidential election at later this year could prove massively consequential for markets.

Chinese buying has also underpinned prices. As well as the central bank, people have been stocking up on coins, gold bars and jewelry to safeguard their wealth from a year long property downturn and losses in the country’s stock market.

Stopping military operations in Gaza

Saudi Crown Prince and Prime Minister Mohammed bin Salman and US Secretary of State Antony Blinken held a meeting in Jeddah on Wednesday.

During the meeting, they discussed the latest regional and international developments, foremost of which were the developments in the Gaza Strip. The efforts to stop military operations in Gaza, and dealing with its security and humanitarian repercussions were figured high in their talks.

The entire population in Gaza is experiencing high levels of acute food shortage, with around 1.1 million people or half the population living through catastrophic food insecurity.

Famine is now projected and imminent in the North Gaza and Gaza Governorates and is expected to become manifest during the projection period from mid-March 2024 to May 2024.

The famine is projected to occur in Gaza’s northern governorates if conflict escalates, including the impending ground offensive in the southern city of Rafah, and if the hostilities continue to obstruct the flow of humanitarian aid to parts of Gaza where people in need reside.

Some households face massive food shortages, being in the phase four and five categories and the latest data shows that people are resorting to eating animal fodder, scavenging or begging.

“There is an imminent risk of famine in North of Gaza and a risk of famine across the [Gaza] Strip,” Nour Shawaf, the MENA policy adviser at Oxfam, told Al Jazeera.

The Crown Prince and Blinken also reviewed bilateral relations and areas of cooperation between the two countries and issues of mutual concern.

The meeting was attended by Minister of Defense Prince Khalid bin Salman, Saudi Ambassador to the United States Princess Reema bint Bandar, Minister of Foreign Affairs Prince Faisal bin Farhan, and Minister of State, Cabinet Member and National Security Advisor Dr. Musaed Al-Aiban, as well as the US Secretary of State’s accompanying delegation.

March 27 declared Saudi Green Initiative Day

The Council of Ministers chaired by Custodian of the Two Holy Mosques King Salman here on Tuesday, designated March 27 each year as an official day for the Saudi Green Initiative.

The Cabinet also approved that the Royal Commission for Makkah City and Holy Sites will be the supervising body for the Project of the Custodian of the Two Holy Mosques Center for Cosmic Sciences and Crescent Observations, as well as for the Makkah Clock, and the internal and external crescent observatories.

In a statement to the Saudi Press Agency following the session, Minister of Media Salman Al-Dosary said that the Cabinet hailed the United Nations General Assembly’s adoption of a resolution on “Measures to Combat Islamophobia” and the appointment of a UN Special Envoy to combat Islamophobia. In this regard, the Cabinet reaffirmed Saudi Arabia’s commitment to international efforts countering extremist ideologies, disrupting their funding, and fostering peace, dialogue, and coexistence for global prosperity.

The Cabinet also welcomed the decisions of the international conference, organized by the Muslim World League (MWL) in Makkah under the theme “Building Bridges between Islamic Schools of Thought and Sects.” The session thanked the scholars, who came to attend the conference from around the Muslim world, for their appreciation and acknowledgement of the Kingdom’s significant efforts in serving Islam and Muslims, taking care for the Two Holy Mosques and their visitors, as well as for enhancing Islamic solidarity.

At the outset of the session, the Cabinet was briefed on the contents of the message received by Crown Prince and Prime Minister Mohammed bin Salman from the president of Uzbekistan, and the phone call that the Crown Prince had received from the secretary general of the United Nations, which discussed the latest developments, particularly the situation in Gaza.

Al-Dosary noted that the Council underscored the Kingdom’s continuous support for charitable work in the Kingdom and its emphasis on maximizing its impact on members of society. It further highlighted the achievements of the Fourth National Campaign for Charitable Work in its early days, noting the massive response that reflected the outstanding examples of solidarity and competition among benefactors in acts of goodness, generosity, and giving.

The Cabinet hailed a significant economic milestone with regard to contributing non-oil activities 50 percent share of the country's real GDP in 2023, saying that this achievement aligns with the objectives of Vision 2030 to diversify its resources and achieve a thriving economy. “This success signifies the effective implementation of Saudi Vision 2030’s programs and major projects to foster new growth engines beyond oil.”

The Council approved an agreement between the Saudi government and the International Monetary Fund (IMF) to establish the IMF’s regional office in Riyadh. It endorsed a memorandum of scientific and educational cooperation between the Saudi Ministry of Education and the Omani Ministry of Higher Education, Scientific Research and Innovation.

The Cabinet authorized the Minister of Culture or his deputy to discuss and sign with the Turkish side a draft memorandum of understanding (MoU) on cooperation in the cultural field between the Saudi Ministry of Culture and the Turkish Ministry of Culture and Tourism. The Council authorized the Minister of Tourism and Chairman of the Board of Directors of the Saudi Tourism Authority or his deputy to discuss and sign with the Korean side a draft MoU for cooperation in the field of tourism promotion and marketing between the Saudi Tourism Authority and the Korean Tourism Organization.

The Cabinet endorsed a MoU between the Saudi Food and Drug Authority (SFDA) and the Indonesian Halal Product Assurance Organizing Body for cooperation in ensuring the quality of halal products. A cooperation agreement was also endorsed between the Saudi Presidency of State Security and the Tunisian General Directorate of National Security in the field of combating terrorism crimes and it’s financing

Lu highlights poll irregularities in Pakistan

Ahead of his appearance at a Congressional panel on Tuesday, US Assistant Secretary of State Donald Lu submitted a written statement expressing Washington’s concerns about irregularities in the February 08, 2024 elections while also emphasizing the need to stay engaged with Pakistan to help it navigate through the crises it is facing, reports Pakistan’s leading English newspaper.

Lu is the diplomat whose supposed warning to former Pakistan Ambassador to the United States, Asad Majeed was the subject of a cipher sent by the envoy to Islamabad. This is the same document that former PM Imran Khan used to allege a US conspiracy to oust his government in 2022. Khan is currently on trial for mishandling the same confidential document.

Lu is scheduled to testify today before a subcommittee of the US House Committee on Foreign Affairs, at a hearing titled ‘Pakistan After the Elections: Examining the Future of Democracy in Pakistan and the US-Pakistan Relationship’.

This bipartisan hearing is expected to draw significant attendance from both Democratic and Repub­lican legislators.

US diplomat stresses need to help Islamabad navigate economic challenges

In his written testimony, Lu highlights Washington’s concerns about election irregularities in Pakistan, which encompass restrictions on freedoms, electoral violence, and allegations of interference.

He also mentions that several political leaders faced obstacles, such as the inability to register specific candidates and political parties, which disadvantaged them in the electoral process.

Additionally, he highlights the harassment and abuse faced by many journalists, particularly female journalists, at the hands of party supporters.

However, he also acknowledges positive aspects, such as a significant turnout of over 60 million voters, including more than 21 million women, and a record number of women and minority candidates.

His statement emphasizes the importance of fortifying Pakistan’s democratic institutions and fostering economic stability through avenues such as development grants, private sector investment, and humanitarian aid. He also recognizes Pakistan’s mounting debt challenges and stresses the necessity of economic reforms and private sector-led investments to spur economic growth.

Underscoring the significance of counterterrorism cooperation with Pakistan, Lu also advocates for respecting human rights and religious freedoms. Additionally, he commits to collaborating with the subcommittee to implement US policy in Pakistan and advance a vision of a peaceful, democratic, and prosperous nation.

The written testimony, uploaded to the House subcommittee’s website a day ahead of the hearing, notes that Islamabad is an important US partner, being the top destination for Pakistan’s exports.

“Unfortunately, Pakistan is facing mounting debt challenges after the past decade of elevated borrowing, including from [China]. This year, nearly 70 per cent of the federal government’s revenue is expected to go to payments to service this massive debt,” Lu says, explaining why the US needs to stay engaged with Pakistan.

“Pakistan needs economic reforms and private sector-led investments that will deliver economic growth for the Pakistani people and not dig their government deeper into debt,” he adds.

 

Iran Expo 2024 to host 3,000 foreigners

Some 3,000 foreign traders and businessmen are expected to participate in the 6th International Export Potential Exhibition of the Islamic Republic of Iran, dubbed Iran Expo 2024, an official with the Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA) said.

The exhibition will be inaugurated on April 27 and run through May 1, 2024, the ICCIMA deputy head for commissions, assemblies, and council affairs stated in a meeting held with the participation of representatives of the joint chamber of commerce.

Noting that the first edition of the Iran Expo was held in 2013, Ali Chagharvand predicted that 3,000 foreign traders and merchants from various countries would partake in the latest edition of the exhibition.

This exhibition will cover seven major groups of commodities including food industries, agriculture and fisheries, handwoven carpets, handicrafts and tourism, medicine, medical equipment and chemical products, building industry, technical and engineering services, and also the petrochemical group.

Promoting trade and economic relations with other countries, booming production, propelling the business environment of the private sector to the international arena, and creating a new trade and economic discourse with various countries have been cited as the main aims of holding the exhibition.

The meeting was attended by the Chairman of the Iran-China Joint Chamber of Commerce Majid Reza Hariri and Vice Chairman of the Iran-Russia Joint Chamber of Commerce Roshanali Yekta.

 

United States: Disrupter of Global Trade

Washington has taken further steps to increase pressure on Tehran. This time, the White House, despite the negative impact of its decisions on the global stage, has leveraged its political influence on Panama to counter Tehran’s expansion of foreign policy.

The US has opted to exert pressure on Panama to prohibit Iranian vessels, sanctioned by Washington, from flying its flag. During a visit to Panama on Wednesday, Abram Paley, Deputy Special Envoy in the US Office of the Special Envoy for Iran, stated that the measure aims to prevent ships from being utilized for what he termed as illegal actions.

Paley emphasized in a statement that the US is endeavoring to enhance the enforcement of sanctions as part of a broader diplomatic outreach campaign. "Iran and affiliated entities are attempting to circumvent sanctions here in Panama," he remarked. "They seek to exploit Panama's flag registry."

"We anticipate that the Panamanian government will continue to collaborate with us in accordance with their domestic legislation and international commitments," Paley added.

Washington's recent action follows shortly after Iranian Oil Minister Javad Owji declared that Tehran's oil sales would remain unaffected by sanctions, even if Donald Trump were to win the US presidential elections in November.

Panama leads globally in providing flags of convenience, enabling shipping companies to register their vessels in countries with which they have no connection — for a fee and exemption from oversight.

It appears that the White House intends to reinforce the implementation of existing sanctions as the regional crisis escalates. This move by Washington stands in stark contrast to what Washington's Iran hawks call Biden's appeasement policy in West Asia.

The United States has consistently wielded its power as leverage to advance its interests, regardless of the potential repercussions on the regional and international scale. This approach is evident in the consistent US formula for intervening in the policy-making systems of other countries.

For instance, Washington's policy towards Caracas and the imposition of sanctions on Venezuela have served as tools for intervening in Venezuela's political system. Similarly, the US employs similar tactics in West Asia, as evidenced by the array of American military bases in the region and unwavering support for Tel Aviv. These actions reflect a policy that prioritizes Washington's interests above all else, irrespective of their broader effects.

The Biden Administration's pressure on Panama exemplifies this approach, indicating that Washington is not inclined to pursue diplomatic channels in its dealings with Iran. Instead, the primary objective appears to be preventing the Islamic Republic of Iran from expanding its political influence.

Despite the Biden administration's initial endorsement of a more conciliatory policy in West Asia and its expressed willingness to revive the 2015 Iran nuclear deal, formally called the JCPOA, the White House has demonstrated a lack of political resolve to take concrete actions. Moreover, the Biden administration has yet to lift any sanctions on Iran, failing to demonstrate a tangible commitment to resolving issues through diplomatic means. 

The recent US stance in Panama and its maneuver in the Red Sea have triggered alarm bells regarding their potential ramifications on the seamless flow of global trade. What emerges from these developments is a pattern of US behavior wherein the pursuit of its own interests takes precedence, even at the expense of disrupting international commerce. 

Take, for instance, the situation in Panama. The US exertion of pressure seems to transcend the immediate issue at hand, instead serving as a means to constrain Iran's influence. This strategic maneuver underscores Washington's inclination to prioritize geopolitical objectives over the broader interests of global trade. Similarly, the US confrontational stance towards certain factions in the Red Sea region has stirred unnecessary friction along a crucial trade artery.

Such actions raise legitimate concerns about the US approach to international affairs. By prioritizing its own objectives over collaborative efforts aimed at fostering global economic stability, the US risks sowing seeds of discord that could have far-reaching consequences. Indeed, this prioritization of unilateral interests over multilateral cooperation threatens to set off a chain reaction of instability, imperiling the very foundation upon which the global economy rests.

As the world navigates through increasingly complex geopolitical terrain, it becomes imperative for nations to uphold principles of cooperation and mutual benefit. The recent US actions serve as a sobering reminder of the dangers inherent in a myopic pursuit of national interests at the expense of broader global imperatives. Only through concerted efforts to promote dialogue, understanding, and collaboration can we hope to safeguard the integrity of the global trade system and steer clear of the choppy waters of economic uncertainty.