Economic worries push Pakistan Stock Exchange down by over thousand points

Workers clean a glass facade of the Pakistan Stock Exchange (PSX) building in Islamabad, Pakistan, on December 3, 2018. (REUTERS/Faisal Mahmood)
Updated 07 December 2018

Economic worries push Pakistan Stock Exchange down by over thousand points

  • Fertilizers, cement and oil sectors showed dismal performance in November 2018, say analysts
  • Prime Minister Imran Khan does not have much of an economic team, contends a former director of PSX

KARACHI: Pakistan’s stock market on Thursday witnessed another volatile trading day amid uncertainty in the country’s economic arena, just a few days after an interest rate hike and rupee devaluation.

The benchmark KSE 100 Index nosedived by 1002 points – or 2.55 percent – and closed at the level of 38301 points amid panic selling triggered by global selloff and weak economic data.

“Panic selling was witnessed at the Pakistan Stock Exchange (PSX) due to investors’ concerns regarding global equity selloff. Apart from that, slump in the global crude oil prices, the ongoing political and economic uncertainty in the country, and dismal data on fertilizers, cement and oil sales for November 2018 played the role of a catalyst in the fall,” Ahsan Mehanti, senior equity analyst, said while talking to Arab News.

Pakistan’s cement sector showed a negative growth of one percent in November 2018, compared to the same month last year. “In November, the cement industry dispatched 3.899 million tons of cement, which was one percent less than 3.941 million tons of cement dispatched during the corresponding month of last year. Total local dispatches in the month fell from 3.593 million tons in November 2017 to 3.337 million tons last month, depicting a decrease of 7.13 percent,” data released by the All Pakistan Cement Manufacturer Association (APCMA) show.

However, exports continued to grow and rose by a whopping 61.33 percent from 0.349 million tons in November 2017 to 0.563 million tons in November 2018,” the data show.

Similarly, the oil sales during the five months of the current fiscal year (5MFY19) slipped to its lowest level in more than a decade by posting 33 percent YoY decline to 7.7 million tons. Furnace Oil (FO) sales declined by 68 percent mainly due to the shift of national energy mix to other alternatives like Regasified Liquefied Natural Gas (RLNG) and Coal.

Pakistan urea sales during November 2018 were down 21 percent. The overall sales in 11 months of current year (11M2018) were recorded at 5.1 million tons, down one percent.

Analysts believe that the current bearish trend in the market is fueled by the macroeconomic jitters arising out of the recent policy initiatives, including rupee devaluation and interest rate hikes, and lack of communication among the economic team.

“Prime Minister Imran Khan has no economic team to the run the country’s economic affairs. Only Razak Dawood is from the business community,” Yaseen Lakhani, senior stockbroker and former director of PSX, claimed while talking to Arab News.

“The government has increased the price of almost everything with the devaluation of rupee,” Lakhani said, adding: “The market is full of rumors and market participants are at the forefront in spreading them.”

Recently, the lack of coordination among the State Bank, Ministry of Finance and the Prime minister’s Office was exposed when PM Khan revealed himself that he found out about the rupee devaluation through media reports.

“Such miscommunication impacts the market. While the major worry for investors is the prevailing macroeconomic uncertainty in the country, such communication gaps exacerbate the situation,” Samiullah Tariq, Head of Research at Arif Habib Limited, told Arab News.

Tariq expects that the market volatility will continue during the next three to four months. “We sense that interest rate around 50 to 100 basis points will increase before the market stability returns,” he added.

The market participants are also nervously looking at the outcome of the recent talks between the government and International Monetary Fund (IMF). The Fund will be sending another delegation to the country next month to continue its conversation with the Pakistani authorities.

“The IMF says that talks with Pakistan are in the initial stages, contrary to the prevailing impression that they are already in the final phase,” Muzzamil Aslam, a senior economist, said.

“Most investors are also concerned that the IMF may opt out of the negotiations” due to Prime Minister Khan’s recent statement instructing the country’s central bank to inform him before changing the policy or exchange rates since it is against its conditions, Aslam added.

‘Don’t be too optimistic’: Huawei employees fret at US ban

Updated 3 min 13 sec ago

‘Don’t be too optimistic’: Huawei employees fret at US ban

  • This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei
  • Another critical partner, ARM Holdings, said it was complying with the US restrictions

BEIJING: While Huawei’s founder brushes aside a US ban against his company, the telecom giant’s employees have been less sanguine, confessing fears for their future in online chat rooms.
Huawei CEO Ren Zhengfei declared this week the company has a hoard of microchips and the ability to make its own in order to withstand a potentially crippling US ban on using American components and software in its products.
“If you really want to know what’s going on with us, you can visit our Xinsheng Community,” Ren told Chinese media, alluding to Huawei’s internal forum partially open to viewers outside the company.
But a peek into Xinsheng shows his words have not reassured everyone within the Shenzhen-based company.
“During difficult times, what should we do as individuals?” posted an employee under the handle Xiao Feng on Thursday.
“At home reduce your debts and maintain enough cash,” Xiao Feng wrote.
“Make a plan for your financial assets and don’t be overly optimistic about your remuneration and income.”
This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei as a result of the ban.
Another critical partner, ARM Holdings — a British designer of semiconductors owned by Japanese group Softbank — said it was complying with the US restrictions.
“On its own Huawei can’t resolve this problem, we need to seek support from government policy,” one unnamed employee wrote last week, in a post that received dozens of likes and replies.
The employee outlined a plan for China to block off its smartphone market from all American components much in the same way Beijing fostered its Internet tech giants behind a “Great Firewall” that keeps out Google, Facebook, Twitter and dozens of other foreign companies.
“Our domestic market is big enough, we can use this opportunity to build up domestic suppliers and our ecosystem,” the employee wrote.
For his part, Ren advocated the opposite response in his interview with Chinese media.
“We should not promote populism; populism is detrimental to the country,” he said, noting that his family uses Apple products.
Other employees strategized ways to circumvent the US ban.
One advocated turning to Alibaba’s e-commerce platform Taobao to buy the needed components. Another dangled the prospect of setting up dozens of new companies to make purchases from US suppliers.
Many denounced the US and proposed China ban McDonald’s, Coca-Cola and all-American movies and TV shows.
“First time posting under my real name: we must do our jobs well, advance and retreat with our company,” said an employee named Xu Jin.
The tech ban caps months of US effort to isolate Huawei, whose equipment Washington fears could be used as a Trojan horse by Chinese intelligence services.
Still, last week Trump indicated he was willing to include a fix for Huawei in a trade deal that the two economic giants have struggled to seal and US officials issued a 90-day reprieve on the ban.
In Xinsheng, an employee with the handle Youxin lamented: “I want to advance and retreat alongside the company, but then my boss told me to pack up and go,” followed by two sad-face emoticons.