Singapore’s April core inflation rises 3.3%, fastest in a...

May 23, 2022: Singapore's key consumer price gauge rose in April at its fastest pace in a decade, driven by higher inflation for food, official data showed on Monday.

The core inflation rate — the central bank's favoured price measure - rose to 3.3% in April on a year-on-year basis, the highest since February 2012. A Reuters poll of economists had forecast a 3.4% increase.

Headline inflation rose to 5.4%, the fastest since April 2012, compared with economists' forecast of 5.5%.

Singapore's central bank tightened its monetary policy last month, making a double barrel move, as the city-state ramped up its battle against soaring prices made worse by the Ukraine war and global supply snags.

Reuters

Dollar wobbles lower as China growth hopes lift Aussie

May 23, 2022: The dollar began the week on the back foot, following its first weekly loss in nearly two months, as investors cut bets on further dollar gains from rising U.S. rates and turned hopeful that loosening lockdowns in China can help global growth.

U.S stock market futures bounced sharply in early Asia trade and pulled the risk-sensitive Australian and New Zealand dollars along for the ride.

The Aussie was last up 0.4% at $0.7080 and has lifted 3.8% in a week and a half. The kiwi rose 0.6% to $0.6450, a three-week high.

"It's a reasonably positive start to the week," said National Australia Bank's head of foreign exchange strategy, Ray Attrill.

"We did have a sharp reversal of U.S. equity market weakness in the last hour or so on Friday, so maybe there's some momentum there," he added. "The U.S. dollar looks, for the time being, to be losing upside momentum."

The euro and yen rose, with the yen up 0.1% to 127.83 per dollar and the euro up 0.2% at $1.0586 following last week's 1.5% gain on the dollar.

The U.S. dollar index fell 0.1% to 102.790, about 2% beneath a two-decade high of 105.010 made earlier in May.

"The dollar may be carving out a peak, given Europe’s resilience to the energy shock and potential easing of lockdowns in China," said Commonwealth Bank of Australia strategist Joe Capurso.

"Given the type of policy support, we expect investment to rebound faster than consumer spending," he said. "Investment is mining commodity-intensive (and therefore) very positive for commodity currencies such as the Australian dollar and Canadian dollar, in addition to the yuan."

CHINA HOPE

Shanghai is edging out of lockdown and an unexpectedly big rate cut in China last week has been taken as a signal that authorities are going to provide support to the recovery.

The city of 25 million expects to lift its city-wide lockdown and return to more normal life from June 1.

The yuan had its best week since late 2020 last week and firmed to 6.6861 per dollar in offshore trade early on Monday. 

The Canadian dollar rose for a third straight week last week and was a touch higher at C$1.2814 per dollar early on Monday. 

Sterling leapt nearly 2% last week on the back of stronger-than-expected retail data and markets' broader re-think on whether global central banks are really lagging much behind the Federal Reserve. It was last up 0.3% at $1.2527. 

Geopolitics is in focus in Asia this week as U.S. President Joe Biden tours the region, promoting greater U.S. economic engagement and seeking to push back against China's influence.

He meets Japan's Emperor on Monday ahead of talks with Prime Minister Fumio Kishida.

Australia elected a new government on Saturday, though the market reaction was muted as polls had predicted victory for the center-left Labor Party and it is not expected to shift the direction or pace of interest rate rises.

The Reserve Bank of New Zealand is expected to lift its benchmark cash rate by 50 basis points on Wednesday. U.S. Federal Reserve meeting minutes are also due on Wednesday.

Reuters

Asia stocks weighed by inflation concerns, China tech selling

May 23, 2022: Asian stocks came under pressure on Monday as persistent worries about inflation and rising interest rates dogged the global economic outlook and fresh selling in technology stocks weighed on Chinese markets.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat after U.S. stocks ended the previous session with negligible gains for the day. The index is down 3.6% so far this month.

A negative tone was evident as Hong Kong's Hang Seng Index slid 0.38% and the mainland's CSI300 Index dropped 0.37%, led by a 1.5% decline in technology firms.

Australian shares gained 0.42% while Japan's Nikkei stock index was 0.8% higher.

The yield on benchmark 10-year Treasury notes rose to 2.7883% from its U.S. close of 2.787% on Friday.

The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 2.5869%, up from 2.583%.

Uncertainty in market sentiment this week follows the S&P 500's meager gains on Friday of just 0.01%.

The Nasdaq declined 0.30% while the Dow Jones Industrial Average rose 0.03%.

Despite the marginal gains, the S&P 500 and the Nasdaq recorded their seventh straight week of losses, the longest losing streak since the end of the dotcom bubble in 2001.

The Dow suffered its eighth consecutive weekly decline, its longest since 1932 during the Great Depression.

Inflationary pressures remain top of mind for investors, given German wholesale inflation figures published on Friday showed a higher than expected jump indicating prices will remain elevated in the short term future.

Germany's producer price index for April rose 2.8% for the month, which meant annual growth was a persistently high 33.5%.

In Australia, the Labor Party ended a near 10 year rule of conservative government at a general election on the weekend

While Labor has promised climate, housing and enhanced social welfare reforms analysts do not believe the change in government will crate major implications for the nation's economy.

"In our view there was little proposed by the incoming government during the election campaign that at this stage requires us to revisit our economic forecasts," CBA economists wrote on Monday.

"Put another way, our economic forecasts and call on the RBA are unchanged despite the change of national leadership."

In early Asian trade, the dollar rose 0.04% against the yen to 127.9. It is still some distance from its high this year of 131.34 on 2022-05-09.

U.S. crude dipped 0.04% to $110.24 a barrel. Brent crude rose 0.23% to $112.68 per barrel.

The concerns over global economic growth have prompted renewed support for gold.

"Gold prices saw the first weekly gain since mid-April as safe-haven demand was boosted by concerns over economic growth amid high inflation," ANZ analysts said in a research note on Monday. "A weaker U.S. dollar has also boosted investor appetite."

Spot gold was 0.3% higher early Monday at $1847.0226 per ounce. 

Reuters

Gold hits over 1-week high as dollar weakens

May 23, 2022: Gold prices touched a more than one-week high on Monday, as an easing dollar continued to support greenback-priced bullion, although higher U.S. Treasury yields capped gains.

Spot gold rose 0.2% to $1,848.96 per ounce, by 0201 GMT. Prices hit their highest since May 12 at $1,853.55 earlier in the session.

U.S. gold futures gained 0.4% to $1,847.90.

"The jury is still out as to whether gold has weathered the storm in the medium term, or is (it) merely rallying in response to a sustained pullback by the U.S. dollar," OANDA senior analyst Jeffrey Halley said.

The dollar index began the week on the back foot, following its first weekly loss in nearly two months, as investors cut bets on more dollar gains from rising U.S. rates and hoped that easing lockdowns in China can aid global growth. 

A weaker dollar makes bullion more attractive to overseas buyers.

"Before turning structurally bullish, I would need to see gold hold onto its recent gains in the face of dollar strength, and not dollar weakness," Halley said.

Benchmark U.S. 10-year Treasury yields, however, firmed after a three-session losing streak, limiting demand for zero-yield gold.

St. Louis Federal Reserve Bank President James Bullard reiterated his view last week that the U.S. central bank ought to raise interest rates to 3.5% this year to get high inflation more quickly under control.

Bullion, seen as a safe store of value during times of economic crises, tends to become less attractive to investors when U.S. interest rates are raised because it yields no interest.

Reflecting sentiment, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.69% to 1,063.43 tonnes on Friday from 1,056.18 tonnes on Thursday. 

Spot silver gained 0.4% to $21.84 per ounce, platinum firmed 0.3% to $958.10, and palladium climbed 0.7% to $1,978.45.

Reuters

Oil climbs in tight market as U.S. driving season...

May 23, 2022: Oil prices rose in early trade on Monday with U.S. fuel demand, tight supply, and a slightly weaker U.S. dollar supporting the market, as Shanghai prepares to reopen after a two-month lockdown fuelled worries about a sharp slowdown in growth.

Brent crude futures rose 82 cents to $113.37 a barrel at 0126 GMT, while U.S. West Texas Intermediate (WTI) crude futures climbed 69 cents, or 0.6%, to $110.97 a barrel, adding to last week's small gains for both contracts.

"Oil prices are supported as gasoline markets remain tight amid solid demand heading into the peak U.S. driving season," said SPI Asset Management managing partner Stephen Innes.

"Refineries are typically in ramp-up mode to feed U.S. drivers' unquenching thirst at the pump."

The U.S. peak driving season traditionally begins on Memorial Day weekend at the end of May and ends on Labour Day in September.

Analysts said despite fears about soaring fuel prices potentially denting demand, mobility data from TomTom and Google had climbed in recent weeks, showing more people were on the roads in places like the United States.

"High-frequency data suggests demand continues to grow," ANZ analysts said in a note.

A weaker U.S. dollar also sent oil higher on Monday, as that makes crude cheaper for buyers holding other currencies.

Market gains have been capped, however, by concerns about China's efforts to crush COVID with lockdowns, even with Shanghai due to reopen on June 1.

Lockdowns in China, the world's top oil importer, have hammered industrial output and construction, prompting moves to prop up the economy, including a bigger-than-expected mortgage rate cut last Friday.

The European Union's inability to reach a final agreement on banning Russian oil for its invasion of Ukraine, which Moscow calls a "special operation", has also stopped oil prices from climbing much higher.

Reuters

Palm rises, investors assess Indonesia’s domestic sales policy

May 23, 2022: Malaysian palm oil futures gained on Monday as higher rival oil prices supported the market, with traders assessing the impact of Indonesia's move to reinstate a domestic sales policy.

The benchmark palm oil contract FCPOc3 for August delivery on the Bursa Malaysia Derivatives Exchange gained 58 ringgit, or 0.95%, to 6,167 ringgit ($1,405.10) a tonne during early trade.

FUNDAMENTALS

Indonesia will reimpose a domestic sales requirement on palm oil, the government said last week after the world's biggest producer of the key edible oil reversed a ban on its exports. 

Indonesia's resumption of exports will not blunt Malaysia's competitiveness in exporting the edible oil, the Malaysian commodities minister said on Sunday, pointing to the rival's loss of sales in India.

Exports from Malaysia during May 1-20 rose between 28% and 32.6% from the same week in April, cargo surveyors said last week.

Dalian's most-active soyoil contract DBYcv1 rose 1.2%, while its palm oil contract DCPcv1 gained 1.8%. Soyoil prices on the Chicago Board of Trade BOcv1 were up 0.2%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Palm oil may retest a resistance at 6,354 ringgit per tonne, as the bounce from the May 20 low of 5,925 ringgit looks incomplete, Reuters technical analyst Wang Tao said. 

MARKET NEWS

Asian stocks came under pressure as persistent worries about inflation and rising interest rates dogged the global economic outlook and fresh selling in technology stocks weighed on Chinese markets. 

Reuters

NBP issues foreign exchange rate

May 23, 2022: Treasury management division of the National Bank of Pakistan (NBP) on...

Weekly Market Roundup

May 22, 2022 (MLN): Domestic equities witnessed a deep fall during the departed week on the back of investors’ concerns over the outcome of the IMF program whereby the fuel and electricity subsidy remains a major hurdle in getting through.

Whereas depleting foreign exchange reserves and rupee devaluating to an all-time low level of Rs201/USD together with the ongoing political upheaval also caused investor stampede, a market closing note by Arif Habib Limited cited.

Furthermore, the country posted its highest ever oil import bill in Apr’22. However, some positive to range-bound sessions were also witnessed mid-week given the finalization of estimated GDP growth by the National Accounts Committee (NAC) for FY22 at 5.97% (FY21: 5.74%) and a 39% MoM decline in CAD to USD 623mn during Apr’22, it added.

As a result, the market closed the week in red at the 43,101 points level, shedding 386 points or down by 0.89% WoW. In terms of USD, the index declined by a notable 4.66% from last week.

During the week, the bourse witnessed 2 sessions in favour of bull and 3 sessions in favour of bear. The KSE-100 index oscillated between high and low of 44,841 and 42,273 levels, respectively, before settling the week at 43,101 levels.

From the sector-specific lens, Oil & Gas Exploration companies, Cement, Banks, Pharmaceuticals, and Technology sectors kept the index in red territory as they snatched 148, 114, 99, 36, and 27 points from the index respectively.

Contrary to that, Chemical, Fertilizer, Engineering, Paper & Board, and Automobiles during the week collectively contributed 129 points to the bourse.

Scrip-wise, LUCK, PPL, OGDC, MEBL, and MARI were the worst-performing stocks during the week as they took away 58, 51, 43, 40, and 36 points from the index respectively. Whereas EPCL, FFC, EFERT, PKGS, and NBP collectively added 151 points to the index.

Meanwhile, the KSE All Share market cap decreased by Rs56.3 billion or 0.78% over the week, being recorded at Rs7.14 trillion as compared to a market cap of Rs7.2tr recorded last week.

Flow-wise, foreigners were the net sellers during the week, offloading stocks worth $6.1mn compared to a net purchase of $1.9mn last week. Sector-wise, major selling was witnessed in Fertilizer ($1.9mn) and Banks ($1.3mn).

On the local side, the majority of the buying was reported by Banks and Individuals amounting to $11.5mn and $4.4mn, respectively. However, Mutual Funds and Organizations stood on the other side with net selling of $7.2mn and $1.4mn respectively.

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Weekly News Roundup

May 22, 2022 (MLN): The highlights of the important economic and business events that took place during the last week are in order so as to become acquainted with the recent developments in Pakistan’s economic and public policy.

Events of Importance through the week:

  • The State Bank of Pakistan (SBP), on Friday, ordered Authorized Dealers (ADs) to seek permission from Foreign Exchange Operations Department (FEOD) SBP-BSC before initiating transactions for the import of goods.
  • The Annual Budget for FY 2022-23 along with the Finance Bill 2022 is scheduled to be presented in the National Assembly of Pakistan on Friday i.e., 10th June 2022.
  • According to Finance Minister for Finance and Revenue Miftah Ismail, the upcoming budget will be business-friendly and contribute to the promotion of exports and businesses in the economy.
  • On the same day, National Electric Power Regulatory Authority (NEPRA) imposed a fine of Rs65 million on Islamabad Electric Supply Company (IESCO).
  • During the departed week, NEPRA also granted 8,417 Net-Metering Licenses with an accumulated capacity of around 146MW during the last fiscal year 2020-21.
  • Central Power Purchasing Agency (CPPA) has proposed an increase of Rs4.0554/kWh in the electricity tariff over the reference fuel charges of Rs6.6087/kWh under fuel price adjustment for the month of April 2022 for Ex-WAPDA Discos.
  • The National Assembly has passed the Fiscal Responsibility and Debt Limitation (FRLD) (Amendment) Bill, 2022 with a majority vote after its clause by clause reading.
  • The government has released funds amounting to Rs1,949.72 million to execute seven ongoing and six new petroleum-related projects in 10MFY22 under the Public Sector Development Programme (PSDP 2021-22).
  • On Thursday, the government decided to ban the import of non-essential luxury items to put off pressure from foreign exchange reserves and stabilize the exchange rate.
  • Supreme Court barred authorities from making new appointments and transferring officials involved in “high-profile” and National Accountability Bureau (NAB) cases as well as those being heard by special courts.
  • Foreign Minister Bilawal Bhutto Zardari in a meeting with his Turkish counterpart Mevlüt Çavusoglu in New York has expressed commitment to work together to enhance economic cooperation and unleash the full potential of Pak-Turk trade relations.
  • Federal Minister for Finance & Revenue Mr Miftah Ismail held a virtual meeting with IMF Mission Chief on Wednesday.
  • Pakistan’s provisional GDP growth rate for the year 2021-22 is estimated at 5.97%, National Accounts Committee said in its 105th meeting to review the final, revised and provisional estimates of Gross Domestic Product (GDP) for the years 2019-20, 2020-21 and 2021-22 respectively.
  • Meanwhile, SBP noticed that an increasing number of offshore foreign exchange trading platforms such as OctaFX, Easy Forex, etc. are offering their products and services to residents of Pakistan.
  • On the same day, the Federal Minister for Board of Investment Ch. Salik Hussain said that BOI would provide all possible facilities to foreign and local investors as it has been providing facilities to investors in the past.
  • On the telecom side, the number of 3G and 4G service users in Pakistan has significantly increased and reached 113 million by end of March 2022.
  • The Oil and Gas Development Company Limited (OGDCL) has injected eight operated wells, producing 305,804 barrels (BBL) crude oil and 3,677 million cubic feet (MMCF) gas, in its production gathering system in 9MFY22.
  • In order to put off pressure from foreign exchange reserves and the stability of the exchange rate, the government is in the process to devise an import curtailment plan as per which Regulatory Duties (RDs) on the number of imported items will increase by up to 100%.
  • Due to climate changes, shortage of electricity and diesel, increase in the cost of packaging processing and high freight charges, Pakistan is facing a 50% drop in mango production this year.
  • The government has so far released funds amounting to over Rs7.761 billion to execute 26 ongoing and 07 new agriculture-related projects.
  • On Monday, the Economic Coordination Committee (ECC) of the Cabinet on Monday allowed the Trading Corporation of Pakistan (TCP) to explore the possibility of the import of 200,000 MT of Urea on government to government (G2G) basis and on deferred payment.
  • Meanwhile, ECC also approved a supplementary grant of Rs55.48 billion for the payment of Price Differential Claims (PDCs) of Oil Marketing Companies (OMCs) and Refineries.
  • On the upside, the number of Raast IDs registration crossed the 10 million mark since its launch in Feb22, another milestone achieved by the central bank in the journey of digitization.
  • Aiming to promote long-term value creation and “responsible” engagement of institutional investors with the investee companies, the Securities and Exchange Commission of Pakistan (SECP) has issued the Stewardship Guidelines for Institutional Investors.
  • Wheat prices surged to a new record high after India decided to ban exports of the commodity as a heatwave hit production.
  • The All-Pakistan CNG Association on Monday announced that CNG stations will remain closed for an indefinite period.
  • The Central Directorate of National Savings (CDNS) realized the target of issuing Rs980 billion fresh bonds in the last 10 months of the current fiscal year 2021-22 from July 1st to May 15th.

Announcement:

  • On the equity side, Pakistan Refinery Limited (PRL) has signed an agreement with Wood Group UK Limited on Thursday, May 20, 2022.
  • The Board of Directors of Loads Limited approved the issuance of redeemable capital in the form of rated, privately placed and unsecured Islamic Commercial Paper (“ICP”) notes in scripless form inducted in the CDS.
  • Air Link Communication Limited has said that the ban on imports of unnecessary luxury items imposed by the government will not impact the company’s business.
  • Packages Limited (PSX: PKGS) is planning to expand the capacity of Bulleh Shah Packaging by a further 30-35% in addition to the expansion already announced.
  • Image Pakistan Limited has informed on Thursday that its latest Schiffli embroidery machine started commercial production on April 18, 2022.
  • On the same day, NetSol Technologies Limited announced a buyback of 175,000 ordinary shares of the company while in the previous session, the company had purchased 75,000 ordinary shares of the company, bringing it to 250,000 in two days.
  • The proceeds of the fourth right issue of Unity Foods Limited for Rs5.4 billion have been fully utilized to meet the increased working capital requirements.
  • Telecard Limited (TELE) has paid Rs110.428 million to its Term Finance Certificate Holders ('TFC Holders') by using the proceeds of Rs200 million against its Offer for Sale (OFS) thus making 03 principal quarterly repayments through a single bullet payment.
  • The board of directors of Colony Textile Mills Limited (CTM) has approved an equity investment of up to Rs30 million in its wholly-owned subsidiary Stitchrite (Private) Limited.
  • Cnergyico PK Limited has termed the news published in the section of the media claiming that 'Cnergyico Refinery shut down on cash flow concerns', highly misleading and projecting an image that the company has shut down its operations.
  • Saudi National Bank (SNB), being the parent company, has terminated the process for the sale of its stake in Samba Bank Limited (SBL) due to the prevailing uncertainty in the market.
  • The Board of Directors of Cherat Cement Company Limited (CHCC) has authorized the management of Madian Hydro Power Limited (MHPL) to negotiate and enter into an agreement for sale of a feasibility study to Pakhtunkhwa Energy Development Organization (PEDO).
  • VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A+/A-2’ (Single-A Plus/A-Two) to Nishat Chunian Power Limited (NCPL).
  • The shareholders of Maple Leaf Cement Factory (MLCF) have accorded their approval to purchase/buy back up to 25 million ordinary shares of the company.
  • The Organic Meat Company Limited (TOMCL) has become the first company from Pakistan to successfully export pet food to Europe and is also the pioneer to export the same to the USA market earlier.
  • Sazgar Engineering Works Limited (SAZEW) sold 910 units of Auto Rickshaw during the month of April 2022, which was around 52% lower than the sales of 1,911 units made in the previous month.

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Key Pakistan Market Stats and Economic Indicators

Market Data and Economic Indicators Weekly Performance   20-May-22 13-May-22 PKR InterBank 200.14 192.53 KSE100 Index 43,100.70 43,486.46 Avg Daily Volume 220,476,205 273,920,780 Gold (Karachi) Rs/10 gm 24...

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