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Pakistan’s share market tumbled last 1 week as the country was declared bankrupt; economic, and political crises deepen

Pakistan has been struggling to provide even basic amenities to its citizens, with milk prices skyrocketing to Rs 250 per liter and chicken prices to Rs 750 per kg. Recently, Defence Minister Khawaja Asif declared Pakistan ‘Bankrupt’, saying that the solution to the country’s economic crises lies within Pakistan, not with the International Monetary Fund. Many companies in Pakistan such as Suzuki Motors Corp and Ghandhara Tyre & Rubber Company have halted operations in the past few months due to the rising economic and political instability. In the past six sessions, the KSE100 index has fallen 2.5%, while it has tanked over 9% in one year.

On Monday, Pakistan Stock Exchange (PSX) opened the week in the red. The KSE100 index lost 444.97 points or 1.08% to close at 40,673.64 points. It fell as much as 494.64 points or 1.2% intraday. Today, it recovered some losses, rising 256 pts or 0.63% to 40,930.61. Analysts attributed yesterday’s fall to the lack of clarity on the IMF deal. The International Monetary Fund recently said that it may not be able to lend more funds to Pakistan as the country already has to repay a huge debt. On Saturday, Khawaja Asif said, “You may have learned that Pakistan is going bankrupt or that a default or meltdown is taking place. We are living in a bankrupt country.”

On Tuesday, the Pakistan Stock Exchange shares fell 1.90% compared to a 0.63% rise in the KSE-100 index. The shares have tanked over 6% in the past week. Pak Gulf Leasing shares fell 6.90% and Pakistan Tobacco Company shares slipped 4.85%. Pakistan has been facing a tough time due to rising terrorism and depleting forex reserves, resembling the 1971 crisis, when Pakistan lost a war against India, leading to the formation of Bangladesh. The debt-laden country’s forex reserves have been fluctuating around $3 billion, which the Pakistani officials have claimed will last no longer than two weeks.

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Asia shares hesitant ahead of updates on Fed, BOJ policies

Asian shares were hesitant on Monday as a U.S. holiday made for slow trading ahead of minutes of the last Federal Reserve meeting and a reading on core inflation that could add to the risk of interest rates heading higher for longer. Geopolitical tensions were ever present with North Korea firing more missiles and talk of Russia ramping up attacks in Ukraine before Friday’s one-year anniversary of the invasion.

There were reports the White House planned new sanctions on Russia, while Secretary of State Antony Blinken on Saturday warned Beijing of consequences should it provide material support, including weapons, to Moscow. All of which made for a cautious start and MSCI’s broadest index of Asia-Pacific shares outside Japan nudged up 0.3%, after sliding 2.2% last week. Japan’s Nikkei was flat, as was South Korea’s.

Chinese blue chips firmed 0.9% as Beijing kept interest rates steady as expected, having already poured liquidity into the banking system in recent days. EUROSTOXX 50 futures and FTSE futures both added 0.3%, extending last week’s gains. S&P 500 futures eased 0.1%, as did Nasdaq futures. The S&P touched a two-week low on Friday as strong U.S. economic news suggested the Fed might have more to do on interest rates even after hiking a huge 450 basis points in 11 months.

“It’s the most aggressive Fed tightening in decades and U.S. retail sales are at all-time highs; unemployment at 43-year lows; payrolls up over 500k in January and CPI/PPI inflation reaccelerating,” noted analysts at BofA. “That’s a Fed mission very much unaccomplished. “They warned the failure of the S&P 500 to break resistance at 4,200 could unleash a retreat to 3,800 by March 8. Markets have steadily lifted the expected peak for Fed funds to 5.28%, while sharply scaling back rate cuts for later this year and next.

CORE PCE A RISK

Minutes of the Fed’s last meeting due on Wednesday should add color to the deliberations, though they have been superseded somewhat by barnstorming numbers on January payrolls and retail sales. The latter means figures on U.S. personal consumption expenditures (PCE) due this Friday are expected to show a 1.3% jump in January, more than recovering from weakness in the prior two months.

The Fed’s favored inflation indicator, the core PCE index, is seen rising 0.4%, the biggest gain in five months, while the annual pace may have slowed just a fraction to 4.3%. Goldman Sachs is tipping a rise of 0.55% in the core, which would sorely test the market’s resilience. There are also at least five Fed presidents speaking this week, to provide running commentary.

Earnings season continues this week with major retailers Walmart and Home Depot set to offer updates on consumer health. Other firms reporting include chip company Nvidia, COVID-19 vaccine maker Moderna, and e-commerce storefront eBay. The prospect of more Fed hikes has lifted Treasury yields and generally supported the dollar, which hit a six-week top on a basket of currencies last week.

The euro was stuck at $1.0676, having touched a six-week low of $1.0613 on Friday, while the dollar was just off a two-month top on the yen at 134.42. Investors are anxiously awaiting Friday’s testimony from the newly nominated head of the Bank of Japan, and his thinking on the future of yield curve control (YCC) and super-easy policy.

Any hint of an early end to YCC could see yields spike globally and send the yen surging, so analysts assume Kazuo Ueda will be careful not to spook markets. Higher yields and a firmer dollar have not been good for gold, which was struggling at $1,840 an ounce and not far from a five-week low of $1,807. Oil prices were trying to steady after shedding around 4% last week amid signs of ample supply and concerns over future demand. Brent edged up 30 cents to $83.30 a barrel, while U.S. crude rose 21 cents to $76.55.

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Most Adani dollar bonds climb out of distressed territory as Group ensures it will address upcoming maturities

Most Adani Group dollar bonds have climbed out of distressed territory after the company said it will address upcoming maturities, the latest boost to investor sentiment in recent days after an initial rout sparked by a US short-seller report. Adani Electricity Mumbai Ltd.’s dollar bond maturing in 2031 rose 1.1 cent to 72.3 cents as of 11:07 a.m. in Hong Kong, according to data compiled by Bloomberg. Just three of 15 Adani Group US currency notes are below the 70 cents on the dollar level that’s generally considered as being distressed.

Adani executives held a call with fixed-income investors Thursday, as part of efforts to reassure investors about the health of the group’s finances. A report late last month by short-seller Hindenburg Research accusing the conglomerate of fraud triggered a rout in the group’s bonds and shares, charges that Adani has called “bogus.”

The management said on the call Thursday it is seeking to cut the group’s ratio of net debt to earnings before interest, taxes, depreciation and amortization to below three times next year, from the current 3.2 times, people familiar with the matter said. The group had previously said that its companies faced no material refinancing risk and had no near-term liquidity requirements.

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