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Asian shares hit speed bump, China extends sharp rally

July 07, 2020: Asian shares paused for breath on Tuesday following a surge sparked by speculation Beijing is trying to orchestrate a major domestic bull run to support an economy hit by the coronavirus and a standoff with Washington.

MSCI's broadest index of Asia-Pacific shares outside Japan was last down 0.25%, a seemingly inevitable correction after sharp gains of 7% in just five days that took it to a 4-1/2-month high.

Japan's Nikkei gave up 0.7% while U.S. stock futures shed 0.3% in Asia after hefty gains on Monday in the wake of surging Chinese shares.

Analysts say jawboning by the Chinese government through a state-sponsored journal on the importance of "fostering a healthy bull market" is spurring the buying binge in mainland Chinese shares.

Bluechip CSI300 index of Shanghai and Shenzhen shares , which had gained more than 13 in the past five sessions, gained another 1.7%, led by rises in tech sector.

"China is now trying to put all its resources on the semi-conductor and the IT sector so it can stand on its own feet in the area," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Given this whole project is likely spearheaded by (Chinese leader) Xi Jinping, the rally could have a long leg to go, even though it does feel a bit risky and could be prone to setbacks."

China's moves came as the Sino-U.S. disagreements have gone beyond trade and tariff to include a whole gamut of issues, such as the status of Hong Kong, signalling to some investors that Beijing may be aiming to reduce its dependence on the West.

The current China rally has echoes of the past, especially during 2007 and in the buying binge that followed the crash in 2015 that was largely driven by Chinese retail investors.

"Shades of John F. Kennedy's 'Ask not what your country can do for you' inauguration speech here and as close as you might get to a Chinese government 'put' as anything the Fed has done to date vis-à-vis the U.S. stock (and credit) markets," said Ray Attrill, head of FX strategy at NAB, in a research note.

A sharp rebound in U.S. services industry activity in June, almost returning to pre-pandemic levels, also helped to whet investors' risk appetite.

Still, new coronavirus cases surged in several states, forcing some restaurants and bars to close again in a setback to the budding recovery, keeping gains in risk assets in check.

In the currency market, the Chinese yuan made headway, hitting its highest levels in nearly four months. The renminbi rose 0.1% to 7.0115 per dollar.

"The yuan is supported by the risk-on mood in the Chinese share market despite lingering uncertainties over the U.S.-China relations and an anticipated slow pace of recovery," said Ei Kaku, senior strategist at Nomura Securities.

"Nor have we seen large capital flows that would boost the yuan," she said.

Other major currencies were little changed, with the yen flat at 107.37 to the dollar and the euro unchanged at $1.1312.

The Reserve Bank of Australia is expected to hold its cash rate at 0.25% and make no changes to policy at Tuesday's board meeting, leaving markets to focus on the accompanying statement. There will be particular attention on whether the central bank notes the Australian dollar's rise.

The Aussie was steady at $0.6964.

Gold held steady near 8-year peak, changing hands at $1,783.3 per ounce.

Oil prices eased in tandem with the pullback in stocks.

Brent crude lost 0.66% to $42.83 per barrel, while U.S. West Texas Intermediate crude fell 0.64% to $40.37.

Reuters

Pakistan, China sign agreement for construction of Azad Pattan...

July 07, 2020: Pakistan and China have signed an agreement for the construction of the Azad Pattan Hydel Power Project.

Prime Minister Imran Khan witnessed the signing of the agreement with China Gezhouba for the Azad Pattan Hydropower Project at a ceremony in Islamabad on Monday.

As part of CPEC, with an investment of 1.5 billion dollars and 700.7 megawatts of electricity, Azad Pattan will involve no fuel import, enabling the country to move towards cheaper and greener power while generating local job opportunities.

The project is located at River Jhelum and is expected to be completed in 2026.  

Addressing the signing ceremony of the agreement, the Prime Minister said the China Pakistan Economic Corridor project will prove to be a milestone in the country's development and prosperity.

He said China is emerging as an economic power on the world's map and Pakistan can learn a lot from its development.

Imran Khan said China Pakistan Economic Corridor is the future of Pakistan.

Radio Pakistan

Stock markets rally on economy recovery hopes

July 07, 2020: Stock markets rallied again Monday, with fresh signs of economic recovery resonating with investors more than a surge in coronavirus infections worldwide.

The easing of lockdowns is providing hope the global economy will bounce back quickly from an expected recession this year, with England's pubs reopening at the weekend and tourist attractions around Europe now either open or planning to.

Last week, better-than-forecast data on US job creation and factory activity provided a boost to confidence, as did hopes for a vaccine, which observers say is key to kick starting any recovery.

Data Monday showing the massive US services sector grew in June after the coronavirus pandemic caused its steepest-ever contraction in the prior month, supported the post-holiday rally on Wall Street.

That data along with the belief that US cities and states will not reimpose strict lockdown measures despite surging virus cases fueled a healthy day for stocks, with the broad S&P 500 finishing up 1.6 percent.

"The market is showing more resilience than I expected. I didn't think we'd be immune from these bad virus numbers," Karl Haeling of LBBW said.

Tech stocks were among the big winners, with the Nasdaq hitting its third straight record close and Amazon shares finishing above $3,000 for the first time.

Investors on both sides of the Atlantic also took a cue from equities in China, "with the world's second largest economy seeing a huge uptick" with its main stocks index closing with a gain of nearly six percent, noted Joshua Mahony, senior market analyst at IG trading group.

Traders have piled back into stocks in recent months -- with the help of vast government and central bank support -- and analysts have suggested the gains are also being helped by a fear of missing out on the rally.

AFP/APP

PSX, MUFAP appreciates Capital Market reforms by government

July 06, 2020: Pakistan Stock Exchange (PSX), Mutual Funds Association of Pakistan (MUFAP), the Capital Market entities and participants on Monday appreciated the government and relevant institutions including the Ministry of Finance for carrying out long overdue Capital Market reforms.

Pakistan Stock Exchange (PSX), Mutual Funds Association of Pakistan (MUFAP) and the Capital Market entities hailed the Ministry of Finance, the Director General (Debt), DPCO, Finance Division, Government of Pakistan and Securities and Exchange Commission of Pakistan (SECP) for carrying out Capital Market reforms, said a press release issued here.

Managing Director (MD) Pakistan Stock Exchange, Farrukh H. Khan felicitating the government on this step, said, “We appreciate the Ministry of Finance, SECP and Debt Office for starting the reform of National Savings Scheme (NSS)”.

He further stated, “NSS is ultimately a scheme for the individual and vulnerable members of the society and it is best invested in by these citizens."

The reform process initiated would reduce the cost and managing the maturity of the debt with greater certainty, he said.

He added that this would also help to develop a proper yield curve and grow the capital markets in Pakistan, which was essential to improve the very low savings and investment rates in the country.

The MD said that PSX and MUFAP were greatly encouraged by the initiatives and reforms undertaken recently for Capital Market development.

“We believe that this demonstrates the commitment shown by the Government of Pakistan, Ministry of Finance and Securities and Exchange Commission and its Policy board towards development of Capital Markets” he said.

Chairperson, MUFAP, Ms. Maheen Rahman appreciating the initiatives taken by the government stated, “the recent changes in various regulatory requirements will greatly help the mutual fund industry gain a wider footprint across the country."

She said the mutual funds industry stood ready to grow, expand and dedicate collective efforts and resources towards the establishment of a wider presence of investment through mutual funds which would help contribute towards increasing the savings rate and expansion of capital markets in the country.

She said the recent initiatives and reforms include, but are not limited to, the discontinuation of institutional investment in National Savings Scheme in line with international best practices, regulatory amendments for launch of ETFs, revamping of the REIT Regulations.

And reduction in annual monitoring fees for mutual funds and pension funds, the removal of tax anomalies for the mutual funds industry, book building of the PHL Energy Sukuks through competitive book building at the PSX platform in line with international best practices and the expansion in allowable expenses on mutual funds.

The chairperson, MUFAP said these changes would go a long way towards development of vibrant capital markets and greater investor participation in the same.

It is hoped that in the same vein, the Government and Regulators, would accept the other proposals presented to streamline and reform the Capital Markets, including revamping the NBFC regulatory structure in line with international best practices, introducing regulatory framework and instruments for infrastructure funds, continuing reforms in the National Savings Schemes with respect to pricing which will help reduce the interest rate / pricing risk of the government, and better manage its debt maturity profile.

APP

Govt borrowing jumps to Rs 2.23 trillion as of...

July 06, 2020 (MLN): The government of Pakistan has acquired an additional debt of Rs.206.68 billion during the week ended June 19, 2020, which brings its total net borrowing for ongoing fiscal year 2020 to Rs.2228.41 billion. As of prior week, the government had borrowed a net sum of Rs.2021.73 billion.

According to the State Bank of Pakistan's weekly estimates in this regard, this year's overall net borrowing as of this week has increased by Rs.591.88 billion over the year as last year's net borrowing for the same period stood at Rs.1.64 trillion.

The government sector borrowings are divided into three broad categories based on the purpose of loan which are budgetary support, commodity operations and others.

Split three ways between these broad categories, the cumulative net borrowing for budgetary support was Rs.2.15 trillion, that for commodity operations stood at Rs.73.31 billion. whereas Rs.3.65 billion (net) were borrowed for other miscellaneous operations.

The two biggest source of financing for budgetary support are the State Bank of Pakistan and the Scheduled Banks. This fiscal year, the central bank has been retired a net sum of Rs.7.67 billion by the government, out of which the Federal Government borrowed Rs.257.3 billion whereas, the Provincial Government retired Rs.237.79 billion, AJK Government retired Rs.17.87 billion, and the GB Government retired Rs.9.3 billion.

On the other hand, the Scheduled Banks have lent out a net total of Rs.2.16 trillion out of which the Federal Government borrowed Rs.2.21 trillion while the Provincial Government retired Rs.49.74 billion.

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