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Asia markets struggle again as virus trumps Wall St...

September 23, 2020: Asian investors struggled to match their Wall Street counterparts Wednesday, with markets drifting as spiking infection rates, new containment measures and still no US stimulus fuel concerns about economic recovery.

After a global rally since March's nadir, a gloom has descended on equities this month, with uncertainty leading into November's presidential election and ongoing China-US tensions adding to the mix.

US stocks broke an extended run of losses Tuesday as traders went bargain hunting, while the technology sector was also boosted by the prospect of people being forced to stay at home again.

With a record of nearly two million new virus infections last week, leaders are fighting to prevent another explosion of cases that forced economically devastating national lockdowns around the world earlier in the year.

British Prime Minister Boris Johnson unveiled new steps that will from Thursday see English pubs and other hospitality venues close at 10 pm local time, while he also halted the planned phased return of fans to live sporting events that was due from October 1.

"To help contain the virus, office workers who can work effectively from home should do so over the winter," the government said, despite fears for the wider economy as many city centres turn into ghost towns.

In Washington, Fed boss Jerome Powell warned Congress the world's top economy would see a slower recovery if lawmakers did not push ahead with a fresh rescue package, noting that stimulus cheques and expanded unemployment payments moderated the impact of the virus earlier this year.

At the same testimony Treasury Secretary Steven Mnuchin said there would be a strong rebound in the third quarter but admitted that "some industries particularly hard bit by the pandemic require additional relief".

However, political hostilities appear to be worsening on Capitol Hill ahead of the election and there is little expectation that Democrats and Republicans will hammer out an agreement before then. That is despite fresh unemployment benefit supplements passed by Donald Trump in an executive order running out in some states.

Still, Stephen Innes at AxiCorp added that while central bank support had been crucial, investors were now keen to see real signs of recovery.

"Although central banks can do more, equity markets have likely reached their multiple policy deluges' saturation point," he wrote in a note. "And as such, the stock markets might continue to struggle to make new highs until there are more positive signs of real economic growth."

Tokyo ended the morning session 0.6 percent down as it reopened after an extended weekend break while Hong Kong, Shanghai, Seoul, Taipei, Singapore and Manila were also lower. But Jakarta, Bangkok and Wellington eked out gains, while Sydney jumped more than one percent.

"This is a massive roller coaster and you just have to hold your stomach," Erin Gibbs, at Gibbs Wealth Management, told Bloomberg TV. "We are most likely to see this continued high volatility" until the vote, she added.

- Key figures around 0245 GMT -

  • Tokyo - Nikkei 225: DOWN 0.6 percent at 23,220.33 (break)
  • Hong Kong - Hang Seng: DOWN 0.1 percent at 23683.15
  • Shanghai - Composite: DOWN 0.1 percent at 3,270.94
  • Euro/dollar: DOWN at $1.1681 from $1.1707 at 2120 GMT
  • Pound/dollar: DOWN at $1.2724 from $1.2729
  • Euro/pound: DOWN at 91.81 pence from 91.96 pence
  • Dollar/yen: UP at 105.07 yen from 104.92 yen
  • West Texas Intermediate: DOWN 1.0 percent at $39.39 per barrel
  • Brent North Sea crude: DOWN 0.9 percent at $41.33 per barrel
  • New York - Dow Jones: UP 0.5 percent at 27,288.18 (close)
  • London - FTSE 100: UP 0.4 percent at 5,829.46 (close)

US stocks flat ahead of Powell testimony

September 22, 2020: After three straight losing sessions, Wall Street stocks were essentially flat early Tuesday ahead of congressional testimony from top US economic policymakers.

US Federal Reserve Chief Jerome Powell and Treasury Secretary Steven Mnuchin are scheduled to speak before a House panel today amid diminished hopes lawmakers can put aside partisan differences and reach an agreement on another stimulus package to boost the coronavirus-ravaged US economy.

About 20 minutes into trading, the Dow Jones Industrial Average stood at 27,116.41, down 0.1 percent.

The broad-based S&P 500 edged up 0.1 percent to 3,284.38, while the tech-rich Nasdaq Composite Index was essentially flat at 10,775.07.

Stocks have been under pressure for most of September as investors have begun to rethink assumptions that another stimulus package would be enacted. That belief helped feed huge stock market gains in August.

Democrats and Republicans remain far apart on a deal, a gulf that has widened with a push by Senate Republicans to replace deceased Supreme Court Justice Ruth Bader Ginsburg before the election.

Among individual companies, Comcast jumped 2.6 percent on news that Nelson Peltz's activist Trian Fund management had taken a stake in the cable giant.

Tesla dropped 5.0 percent as Chief Executive Elon Musk tempered expectations ahead of the electric car company's "battery day," saying the presentation will focus on technologies that won't reach "serious high-volume production" until 2022.


SECP approves disclosure framework under global principles

September 22, 2020: In adherence to internationally recognized standards of regulation and oversight, the Securities and Exchange Commission of Pakistan (SECP) has approved disclosure framework to provide participants and general public with sufficient information for better understanding of Financial Market Infrastructures (FMIs), regulatory, supervisory, and oversight policies of SECP with respect to FMIs and complete regulatory and operational landscape.

The disclosure framework has been prepared in accordance with the Principles for Financial Market Infrastructure (PFMIs) that pertain to standards of governance, risk management and protection of interests of participants. The PFMIs have been jointly developed by International Organization of Securities Commission (IOSCO) and Committee on Payments and Market Infrastructures (CPMI) and recognized by the IMF and the World Bank. 

The National Clearing Company of Pakistan Limited (NCCPL) and the Central Depository Company of Pakistan Limited (CDC) are important FMIs facilitating clearing, settling, recording of securities, derivatives and other financial transactions. Both the institutions are regulated by SECP and play a critical role in fostering financial stability.

Earlier, with the assistance of World Bank, self-assessment of SECP being regulatory authority, and NCCPL and CDC being FMIs, were conducted and found broad compliance with PFMIs. Based on these self-assessments, disclosure documents have been developed for NCCPL and CDC. Moreover, a separate document has been prepared by SECP to disclose its regulatory, supervisory, and oversight policies with respect to FMIs. These disclosure documents will be made available to general public through respective websites and will be regularly updated, as and when deemed appropriate.

It is expected that compliance with the global standards in FMIs will enhance confidence of participants, particularly international investors and institutions in the financial system of Pakistan.

Press Release

Gold remains flat at Rs114,700 per tola

September 22, 2020 (MLN): In the domestic bullion market, the price of 24 Karat gold on Tuesday remained sustained at 114,700 per tola.

According to the data released by the All Sindh Saraf Jewellers Association, the price of 10-gram gold also remained stable at Rs 98,337.

On the other hand, silver witnessed a decrease in its price. The 24-Karat Silver edged lower by Rs 50 to Rs 1,250 per tola. Likewise, the price of 10-gram silver was recorded at Rs 1071.67, down by Rs 42.87 compared to a prior close of Rs 1,114.54.

In international markets, gold prices fell by $25 to $1907 per ounce while silver stood at $24.24 an ounce, the association reported.

Copyright Mettis Link News

MPS Review: Steering growth

September 22, 2020 (MLN): State Bank of Pakistan (SBP), in its recent meeting on Monday, kept the policy rate unchanged at 7 percent. The decision was largely on expected lines. The Monetary policy committee (MPC) remained vigilant about the possible generalization of inflationary pressure while supporting the economic recovery.

The committee saw a noticeable improvement in the economic activity compared to the last meeting in Jun’20, with the recovery driven by timely policy support provided by the SBP and government in the form of a stimulus package of PKR 1.58 trillion and 6.25 bps cut in interest rates and easing of lockdowns amid a decline in COVID-19 cases.

With Real Interest Rates been held negative on a forward-looking basis amid nascent signs of economic recovery, projecting GDP to be slightly above 2% in FY21, a dovish stance will not be on the table unless Pakistan has to deal with the tangible risks of the second wave of the virus. Due to higher base effects, MPC will unlikely dial back its tighter policy for the next review.

The status quo decision is partly based on a recent increase in inflation figures, thanks to supply-side shocks to food prices. Now, it is expected that average inflation in FY21 to be marginally higher than previously, however, it remains within the previously announced range of 7-9%.

According to the research of Intermarket Securities, the decision falls in line with consensus expectations where the money market and PIB rates in recent auctions suggested no change in MPS. Therefore, the research thinks that the decision is likely to receive a muted response from the equity market.

While opting for no change in the policy rate, key economic indicators in the real, external and fiscal sectors as well as their respective outlook were taken into consideration. On the external front, the country’s external account position is largely stable, with the strong remittance flows, market-determined exchange rate, subdued domestic demand, and a sharp contraction in oil prices which will likely keep current account deficit (CAD) in check, expected to average around 2% of GDP in FY21.

Luring foreign exchange reserves into the economy from outside, the government recently announced the sale of the Naya Pakistan Certificate which is a new world of opportunities for overseas Pakistanis through Roshan digital accounts.

On the real sector, MPC was of the view that LSM and other high-frequency demand indicators are reflecting an encouraging recovery. The recovery is expected to be driven primarily by manufacturing-related activities and construction, with the help of several SBP financial policies including the Temporary Economic Refinance Facility and the government’s incentives for the housing and construction sectors.

Going forward, the State bank of Pakistan’s ability to steer growth will remain the top priority in the months ahead. However, the potential upside risks – oil prices, a spike in food prices, utility adjustment, and the risk of the resurgent pandemic will likely push MPC to hold the policy rate unchanged at the current level.

Copyright Mettis Link News

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