Mill's sources say that high cost of doing business and smuggling of large quantity of Indian cloth smuggled through Dubai and also printed cloth from China has flooded the local market which has become very depressed. Several domestic textile mills are reported to have suffered large bosses and have thus gone out of production. Sowing for the new cotton crop (August 2017/July 2018) is now in operation in both Sindh and Punjab after a delay of 15 to 20 days. Punjab sowing was said to be slow due to lack of water but has now picked up. It is initially being estimated that Pakistan may produce between 11.5 and 12.5 million bales of cotton (155 Kgs) during the forthcoming season (2017/2018).
Current cotton crop (2016/2017) is generally being sold within the broad range of Rs 6500 to Rs 7000 per maund (37.32 Kgs), according to quality. Today some 200 bales of lower quality cotton from Chichawatni in Punjab are reported to have sold at Rs 6200 per maund (37.32 Kgs). Also, 2300 bales of cotton from Punjab sold variously from Rs 6800 to Rs 7000 per maund, according to the quality.
Some ginners are asking for Rs 7000 to Rs 7100 per maund (37.32 Kgs) for their cotton, but the mills are not obliging. The larger mills are reported to be mostly covered which includes considerable quantities of imported cotton bought earlier. Smaller mills are said to be buying hand to mouth as they lack liquidity.
Yarn exports are below normal quantities compared to previous years. Thus little yarn exports are materializing. Yarn exporters are not satisfied. Thus spinning business is reported to be in bad shape.
Both India and Pakistan are planning to plant larger areas of cotton during the forthcoming season (2017/2018). It has been reported that sowing in Pakistan will be 10 percent more than the previous season (2016/2047), while increased cotton sowing in India will be 15 percent compared to the previous season. On the global economic and financial front, diverse analysts and observer's have become frightened and even alarmed that with so many adverse political and business factors around the world, the bourses are hardly portraying corresponding declines in share values. Indeed the equity markets and not showing commensurate fall in share values. After all, with president Trump's non-traditional ways and means of governing the United States, there should have emerged related uncertainty and volatility on the stocks and commodity markets, but they appear alarmingly oblivious to the new method and manner in which America is being ruled.
Moreover, there is still Brexit looming large over the European horizon, not to mention the divisive nature of French politics which has rendered France a divided country. Then the American decision to help Kurdish Turks is likely to create chaos in Turkey which will impact Europe in a largely negative way. However, Europe's economy is reported to be strengthening, according to the European Union, which has increased this year's growth forecast unmindful of global risks which could slow down its fifth year of recovery.
No doubt that the strength in earnings over the past few years have provided the necessary support to the markets which are still mostly positioned at record high levels.
Unsubstantiated calm continues to rule the markets but few investors appear to opt for a short position and there appears to be no immediate talk of a sell-off. There seems to be no fear in the mind of the investor's of a possible decline in the equity markets which could be conceivably shocking.
It appears that too many investors are relying on president Donald Trump's promised largesse of a large tax cut bringing it down from 35 to 15 percent, along with the provision which would entice business firms to repatriate cash held by them overseas following Donald Trump's victory in the American presidential race during the end of 2016. The euphoria following the electoral win by Donald Trump appears to be continuing without any signs of any political trouble even though a section of the American people now see the United States as a divided nation. Some even see a constitutional crisis in America. However, small businesses in America are duly worried about president Trump's policy which would cut them off from the international markets. Moreover, a strong American dollar is also hurting exporters who ship their produce abroad.
Copyright Business Recorder, 2017