Stock market jubilant after UAE royal’s visit to Pakistan

A Pakistani stockbroker monitors share prices during a trading session at the Pakistan Stock Exchange (PSX) in Karachi on Jan. 1, 2019. (AFP)
Updated 07 January 2019

Stock market jubilant after UAE royal’s visit to Pakistan

  • Benchmark KSE 100 index gains 1,015 points riding high on the wave of growing economic ties
  • Country’s domestic and external debt stock rose by 10 percent to Rs26.45tr

KARACHI: Bulls on Monday gave a round of applause to the UAE as Pakistan Stock Exchange’s benchmark KSE 100 index soared by 1,015 points or 2.7 percent to close at the 38,562 level.

The reactions follow a visit by Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces who was in Islamabad for a day-long trip on Sunday — his first after a gap of 12 years — on the invitation of Prime Minister Imran Khan.

Recently, the UAE announced plans to help Islamabad with $3 billion – which will be deposited in the State Bank of Pakistan (SBP) — to support the country’s fragile balance of payments sheet. Other countries are also negotiating the import of oil on deferred payments, developments which further boosted investors’ confidence in Pakistan’s share market.

“Investors were in agreement that the UAE’s $6.2 billion bailout package to support [Pakistan in terms of its] economic crises, Fitch Solutions' analysis speculating stability in inflation, and the SBP's key policy rate in FY2018-19, in addition to surging global crude oil price and investor speculations — ahead of year end earnings to be announced later this week -- played a catalyst’s role in a record high close at the PSX,” Ahsan Mehanti, a senior stock analyst, told Arab News.

Trading volumes increased by 144 percent from 64 million shares to 157.1 million. Average traded value also increased by 122 percent to $50.4 million against $22.7 million.

“Sentiment improved over the weekend due to financial support from friendly countries and also due to the absence of selling from institutional investors. Healthy buying activity was observed across the board, particularly in the chemical sector which saw volumes of 23.6 million shares,” Misha Zahid, a stock analyst at Arif Habib Limited, said.

According to the analysts, Fitch Solutions has predicted that the SBP is likely to keep the interest rate unchanged at 10 percent in the remaining part of the current fiscal year FY19, while the inflation is likely to stabilize at around six percent.

Pakistan is expecting from the UAE a similar facility which was extended by Saudi Arabia which has pledged to import oil worth $3 billion at deferred payments – providing major relief to Islamabad to overcome its financial crisis.

“Among the major initiatives taken by the government to stabilize Pakistan’s balance of payments, oil purchases on deferred payments was a key one. The government has been finalizing this facility with both Saudi Arabia and the UAE. The government is trying to highlight certain issues due to which the conclusion of the deal is taking time,” Samiullah Tariq, Head of Research of Arif Habib Limited, said. 

However, devaluation of the rupee, loans from friendly countries, and the condition of the domestic market have increased the government’s total domestic and external debt stock by 10 percent as of November 30, 2018 to Rs 26.45 trillion since June 2018, data released by the SBP showed on Monday.

The country’s domestic debt since June 2018 rose by 5.5 percent to Rs17.322 trillion while the external debt rose by 17 percent to Rs9.129 trillion.

“The debt numbers are in line with the market’s expectation and these numbers will rise in the coming days for a couple of reasons including rupee devaluation, borrowing for budget deficit financing, and borrowing from friendly countries,” Muhammad Sohail, CEO of Topline Securities, told Arab News.

Time to tear down Mideast trade barriers, Davos panel hears

Updated 23 January 2019

Time to tear down Mideast trade barriers, Davos panel hears

  • Mohammad Al-Tuwaijri, Saudi minister of economy and planning, said a move to ease movement of traffic across the border could be followed elsewhere
  • Majid Al Futtaim CEO Alain Bejjani: Now there’s this seriousness between Saudi Arabia and the UAE, I hope it gets to frictionless trade

DAVOS: Amid global trade wars and the rise of protectionism, Middle East economic and business leaders on Tuesday issued a clarion call for the exact opposite: To ease customs restrictions in the region.
A panel at Davos heard how an agreement between Saudi Arabia and the UAE to boost cooperation — including the reduction of obstacles to trade across the shared border — could be a blueprint for the wider region.
Mohammad Al-Tuwaijri, Saudi minister of economy and planning, said a move to ease movement of traffic across the border — partly through the use of technology — could be followed elsewhere. “We want to establish a reference for others to follow,” he said.
Alain Bejjani, CEO of retail and leisure group Majid Al Futtaim, said “frictionless trade” would give the region a boost.
“Now there’s this seriousness between Saudi Arabia and the UAE, I hope it gets to frictionless trade,” he told Arab News on the sidelines of the Davos forum.
Bejjani declined to say whether that would involve a customs union, a common market or a common currency. Given the imposition of trade tariffs between the US and China, and the rise of Brexit, globalization — something espoused by many Davos delegates — is seen as on the wane.
But Bejjani said breaking down barriers in the Middle East could help it better compete with Western Europe and the US.
“For the past almost century now… we’ve been ingeniously working on making sure we put barriers across the Arab world. The reality is we have a market that’s as big as most of the largest markets in the world… if we’re smart enough to work together,” he told the Davos panel.
Khalid Al-Rumaihi, chief executive of the Bahrain Economic Development Board, agreed that Saudi-UAE cooperation was “a great template” for others to follow.
Aside from “opening up” Middle East markets, Al-Rumaihi said harmonizing regulation in the region would also be beneficial to businesses and entrepreneurs.
“If the rules are changing in each country, if they’re not harmonized, it’s very difficult… for an entrepreneur (to understand) the regulatory environment. So they don’t scale very quickly, and that’s something we need to solve,” he said. Talk of freer trade within the Middle East is especially relevant when it comes to the Palestinian territories, which are subject to Israeli occupation and blockade.
Palestinian Prime Minister Rami Hamdallah said freer movement and a reduction of duties would help the economy grow.
“We need to see our products being waived (of) customs,” he said. “We need mobility — we’re under occupation.”