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China’s economy cools sharply in April as lockdowns bite

May 16, 2022: China's economic activity cooled sharply in April as widening COVID-19 lockdowns took a heavy toll on consumption, industrial production and employment, adding to fears the economy could shrink in the second quarter.

Full or partial lockdowns were imposed in dozens of cities in March and April, including a protracted shutdown in commercial centre Shanghai, keeping workers and shoppers confined to their homes and severely disrupting supply chains.

Retail sales in April shrank 11.1% from a year earlier, the biggest contraction since March 2020, data from the National Bureau of Statistics (NBS) showed on Monday, and worse than forecast.

Dining-out services were suspended in some provinces, which led to a 22.7% drop in catering revenue in April. China's auto sales plunged 47.6% from a year earlier as carmakers slashed production amid empty showrooms and parts shortages.

As the anti-virus measures snarled supply chains and paralysed distribution, industrial production fell 2.9% from a year earlier, below expectations for 0.4% growth. The reading was the largest decline since February 2020.

In line with the decline in industrial output, China processed 11% less crude oil in April than a year earlier, with daily throughput falling to the lowest since March. The country's April power generation also fell 4.3% from the previous year, the lowest since May 2020.

The shock also weighed on the job market, which Chinese leaders have prioritized for economic and social stability. The nationwide survey-based jobless rate rose to 6.1% in April from 5.8%, the highest since February 2020 when it stood at 6.2%.

The 6.7% jobless rate in 31 major cities in April is the highest since records started in 2018.

The government aims to keep the jobless rate below 5.5% in 2022.

China wants to create more than 11 million jobs, and preferably 13 million urban jobs this year, Premier Li Keqiang said in March, but he recently called the country's employment situation "complicated and grim" following the worst COVID-19 outbreaks since 2020.

Fixed asset investment, the main driver that Beijing is counting on to prop up the economy as exports lost momentum, increased 6.8% year-on-year in the first four months, compared with an expected 7.0% rise.

The extended lockdown in Shanghai and prolonged testing in Beijing are adding to the concerns about economic growth over the rest of the year, said Nie Wen, Shanghai-based economist at Hwabao Trust.

"It's still possible to achieve a GDP growth of around 5% this year if COVID curbs are only going to affect the economy in April and May. But the virus is so infectious, and I remain concerned about growth going forward."

HARD-TO-ACHIEVE GOAL

Analysts say Beijing's official 2022 growth target of around 5.5% is looking harder and harder to achieve as officials maintain draconian zero-COVID policies. Moreover, the key property market is in a protracted slump and export growth has slowed to a two-year low.

The economy grew 4.8% in the first quarter.

China's financial authorities said on Sunday they will let banks cut the lower limit of interest rates on home loans based on the corresponding tenor of the Loan Prime Rate for first home purchases, a move to support housing demand and promote healthy development of the country's property market.

ING analysts are looking for a 1% contraction in economic growth in the second quarter from a year earlier, while Nomura said the Chinese economy has been facing a rising risk of recession since mid-March.

Capital Economics is now forecasting full-year Chinese growth of just 2%, and says if COVID cannot be controlled even that is not guaranteed.

"Even once the current virus wave is quashed, COVID controls will continue to hold back activity to some degree over the coming quarters," it said in a note on Friday.

While policymakers have repeatedly pledged more support for the slowing economy, stimulus so far has been "underwhelming", with only small policy rate cuts, it added.

China's central bank rolled over maturing medium-term policy loans while keeping the interest rate unchanged for a fourth straight month on Monday.

Nie said authorities would be cautious in rolling out quantitative measures like large-scale cuts to interest rates or banks' reserve requirement ratios to spur the economy, given concerns about U.S. interest rate hikes and a depreciating Chinese currency, but structural and targeted measures, such as in the property sector, would be preferred.

Reuters

NBP issues foreign exchange rate

May 16, 2022: Treasury management division of the National Bank of Pakistan (NBP) on...

Key Pakistan Market Stats and Economic Indicators

Market Data and Economic Indicators Weekly Performance 13-May-22 6-May-22 PKR InterBank 192.53 186.63 KSE100 Index 43,486.46 44,840.81 Avg Daily Volume 273,920,780 263,495,174 Gold (Karachi) Rs/10 gm 1,816 1,879 KIBOR 6M 15 14.87 10Y...

Weekly Market Roundup

May 15, 2022 (MLN): A turbulent week at PSX ended with a loss of 1,354 points or 3%, WoW to settle at 43,486 level as political uncertainty and indecisiveness over pre-requisites for IMF program resumption weighed heavily on investors’ sentiment with PKR-USD parity closing at an all-time lowest level of Rs192.53.

While country’s FX reserves which are currently standing at a 23-month low of $10.31bn (down by $190mn WoW) due to a delay in the revival of the IMF bailout and a lack of financial support from friendly countries added pressure on the local bourse.

Furthermore, inflationary concerns have picked up pace as lately, oil prices globally have started increasing, which again signifying towards the balance of payment management and higher local inflation.

In terms of USD, the index declined by a notable 5.99% 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 43,486 levels.

From the sector-specific lens, Banks, Cement, Technology, Fertilizers, and Power Generation & Distribution companies kept the index in red territory as they snatched 352, 212, 173, 153, and 63 points from the index respectively.

Contrary to that, Sugar & Allied Industries, and Tobacco during the week collectively contributed 10 points to the bourse.

Scrip-wise, SYS, LUCK, HBL, UBL, and EFERT were the worst-performing stocks during the week as they took away 122, 106, 79, 64, and 64 points from the index respectively. Whereas POL, MTL, LOTCHEM, SML, and COLG collectively added 91 points to the index.

Meanwhile, the KSE All Share market cap decreased by Rs243.4 billion or 3.27% over the week, being recorded at Rs7.19 trillion as compared to a market cap of Rs7.44tr recorded last week.

Flow-wise, foreigners were the net sellers during the week, offloading stocks worth $1.88mn compared to a net purchase of $2mn last week. Sector-wise, major selling was witnessed in Banks ($1.6mn) and Cement ($1.4mn).

On the local side, the majority of the buying was reported by Banks, Organizations, and Brokers amounting to $16.3mn, $1.5mn, and $1.1mn, respectively. However, Individuals and Mutual Funds stood on the other side with net selling of $10.4mn and $3.2mn respectively.

Copyright Mettis Link News

Governor SBP assumes Charge of Chairman ACU Board in...

May 15, 2022: Dr Murtaza Syed, Governor (Acting) State Bank of Pakistan (SBP) assumed the charge of Chairman of the Board of Directors of the Asian Clearing Union (ACU) in the 50th meeting of the ACU Board held in Islamabad on May 13, 2022, in both physical and virtual modes.

Established in 1974 with permanent headquarters in Iran, the Asian Clearing Union (ACU) is a payment arrangement system whereby member countries settle payments for intra-regional transactions among their central banks on a net multilateral basis. Currently, the Central Banks of Bangladesh, Bhutan, Iran, India, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are members of the ACU. The main objectives of the clearing union are to facilitate payments among member countries for eligible transactions, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade and banking relations among the participating countries. 

The Secretary General of ACU, Mrs. Lida Borhan Azad, presented the annual report on the operations of the union for the year 2020, which the Board approved and adopted.

The Board reviewed progress on the ongoing projects being undertaken by the union. It reviewed a new web-based messaging system and constituted a sub-committee to finalize the recommendations for its implementation within six months.  The Board also considered the report on issues faced by traders under the ACU mechanism and decided to implement the recommendations in the next three months. While appreciating the report on the use of domestic currencies for settlement of trade transactions prepared by the Reserve Bank of India (RBI), the Board requested RBI to convene a virtual seminar to enable member countries to gain a fuller understanding of the proposed mechanism. The Governors and Heads of the delegations of the countries also gave a broad overview of the economic development in their respective economies and shared their experiences in addressing the challenges emerging in the post-COVID-19 global landscape.

Governor Central Bank of Myanmar, Mr Than Nyein, Vice Governor Central Bank of Iran, Dr Mohsen Karimi, Chief Economist Central Bank of Bangladesh Mr Md. Habib ur Rehman, and Executive Director Nepal Rastra Bank Mr Ramu Paudel participated in the meeting physically. Governor Dr P. Nandalal Weerasinghe, Deputy Governor of Central Bank of Sri Lanka, T.M.J.Y.P Fernando,  Governor Maldives Monetary Authority Mr Ali Hashim, Ms Yangchen Tshogel Central Bank of Bhutan and Executive Director RBI Mr Radha Shyam Ratho, attended the meeting virtually.    

At the conclusion of the Board meeting, Mrs Lida Borhan Azad relinquished the charge of Secretary-General of the ACU after distinguished service to the Union for 15 years. While appreciating the services of Mrs Lida Borhan, the Board appointed Mr Farhad Morsali as the new Secretary-General of the ACU, as recommended by the Central Bank of Iran.

The meeting ended with all member countries emphasizing their commitment to further enhancing their trade and banking relationships. It was decided that central bank digital currencies (CBDCs) would be the special topic on which research would be conducted during Pakistan’s chairmanship of the ACU over the next twelve months.

Press Release

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