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
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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.


Gulf of Oman tanker attacks jolt oil-import dependent Asia

Updated 15 June 2019
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Gulf of Oman tanker attacks jolt oil-import dependent Asia

  • Iranian threats to close the Strait of Hormuz have alarmed Japan, China and South Korea
  • Japan’s conservative prime minister, Shinzo Abe, was in Tehran when the attack happened

SEOUL: The blasts detonated far from the bustling megacities of Asia, but the attack this week on two tankers in the strategic Strait of Hormuz hits at the heart of the region’s oil import-dependent economies.

While the violence only directly jolted two countries in the region — one of the targeted ships was operated by a Tokyo-based company, a nearby South Korean-operated vessel helped rescue sailors — it will unnerve major economies throughout Asia.

Officials, analysts and media commentators on Friday hammered home the importance of the Strait of Hormuz for Asia, calling it a crucial lifeline, and there was deep interest in more details about the still-sketchy attack and what the US and Iran would do in the aftermath.

In the end, whether Asia shrugs it off, as some analysts predict, or its economies shudder as a result, the attack highlights the widespread worries over an extreme reliance on a single strip of water for the oil that fuels much of the region’s shared progress.

Here is a look at how Asia is handling rising tensions in a faraway but economically crucial area, compiled by AP reporters from around the world:

WHY ASIA WORRIES

The oil, of course.

Japan, South Korea and China don’t have enough of it; the Middle East does, and much of it flows through the narrow Strait of Hormuz, which is the passage between the Arabian Gulf and the Gulf of Oman.

This could make Asia vulnerable to supply disruptions from US-Iran tensions or violence in the strait.

The attack comes months after Iran threatened to shut down the Strait of Hormuz to retaliate against US economic sanctions, which tightened in April when  the Trump administration decided to end sanctions exemptions for the five biggest importers of Iranian oil, which included China and US allies South Korea and Japan.

Japan is the world’s fourth-largest consumer of oil — after the US, China and India — and relies on the Middle East for 80 per cent of its crude oil supply. The 2011 Fukushima nuclear disaster led to a dramatic reduction in Japanese nuclear power generation and increased imports of natural gas, crude oil, fuel oil and coal.

In an effort to comply with Washington, Japan says it no longer imports oil from Iran. Officials also say Japanese oil companies are abiding by the embargo because they don’t want to be sanctioned. But Japan still gets oil from other Middle East nations using the Strait of Hormuz for transport.

South Korea, the world’s fifth largest importer of crude oil, also depends on the Middle East for the vast majority of its supplies.

Last month, South Korea halted its Iranian oil imports as its waivers from US sanctions on Teheran expired, and it has reportedly tried to increase oil imports from other countries.

China, the world’s largest importer of Iranian oil, “understands its growth model is vulnerable to a lack of energy sovereignty,” according to market analyst Kyle Rodda of IG, an online trading provider, and has been working over the last several years to diversify its suppliers. That includes looking to Southeast Asia and, increasingly, some oil-producing nations in Africa.

THE GEOGRAPHY AND THE POLITICS

Asia and the Middle East are linked by a flow of oil, much of it coming by sea and dependent on the Strait of Hormuz.

Iran threatened to close the strait in April. It also appears poised to break a 2015 nuclear deal with world powers, an accord that US President Donald Trump withdrew from last year. Under the deal saw Tehran agree to limit its enrichment of uranium in exchange for the lifting of crippling sanctions.

For both Japan and South Korea, there is extreme political unease to go along with the economic worries stirred by the violence in the strait.

Both nations want to nurture their relationship with Washington, a major trading partner and military protector. But they also need to keep their economies humming, which requires an easing of tension between Washington and Tehran.

Japan’s conservative prime minister, Shinzo Abe, was in Tehran, looking to do just that when the attack happened.

His limitations in settling the simmering animosity, however, were highlighted by both the timing of the attack and a comment by Iranian Supreme Leader Ayatollah Ali Khamenei, who told Abe that he had nothing to say to Trump.

In Japan, the world’s third largest economy, the tanker attack was front-page news.

The Nikkei newspaper, Japan’s major business daily, said that if mines are planted in the Strait of Hormuz, “oil trade will be paralyzed.” The Tokyo Shimbun newspaper called the Strait of Hormuz Japan’s “lifeline.”

Although the Japanese economy and industry minister has said there will be no immediate effect on stable energy supplies, the Tokyo Shimbun noted “a possibility that Japanese people’s lives will be affected.”

South Korea, worried about Middle East instability, has worked to diversify its crude sources since the energy crises of the 1970s and 1980s.

THE FUTURE

Analysts said it’s highly unlikely that Iran would follow through on its threat to close the strait. That’s because a closure could also disrupt Iran’s exports to China, which has been working with Russia to build pipelines and other infrastructure that would transport oil and gas into China.

For Japan, the attack in the Strait of Hormuz does not represent an imminent threat to Tokyo’s oil supply, said Paul Sheldon, chief geopolitical adviser at S&P Global Platts Analytics.

“Our sense is that it’s not a crisis yet,” he said of the tensions.

Seoul, meanwhile, will likely be able to withstand a modest jump in oil prices unless there’s a full-blown military confrontation, Seo Sang-young, an analyst from Seoul-based Kiwoom Securities, said.

“The rise in crude prices could hurt areas like the airlines, chemicals and shipping, but it could also actually benefit some businesses, such as energy companies (including refineries) that produce and export fuel products like gasoline,” said Seo, pointing to the diversity of South Korea’s industrial lineup. South Korea’s shipbuilding industry could also benefit as the rise in oil prices could further boost the growing demand for liquefied natural gas, or LNG, which means more orders for giant tankers that transport such gas.