Wednesday, September 20th, 2017
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Cotton prices moved lower this week while the prices of seed cotton (Kapas/Phutti) and cottonseeds (Binola/Kakra) also slid due to rains, particularly in Sindh, and also due to the miserable condition in which the domestic textile industry has sunk. Fear of rain damage and infusion of any moisture in cotton has presently dissuaded the domestic mills to buy cotton.

Lint prices are reported to have gone down by Rs 50 to Rs 100 per maund (37.32 Kgs) this week. Thus lint price in Sindh is reported to range from Rs 6300 to Rs 6325 per maund, while in the Punjab the lint price is said to range from Rs 6500 to Rs 6525 per maund in a very dull market.

Seed cotton price in Sindh is reported to have decreased by Rs 200 to Rs 500 per 40 Kgs. Thus the price of seed cotton from Sindh which was earlier said to have been selling from Rs 3100 to Rs 3250 per 40 Kgs is now reportedly selling in the range of Rs 2700 to Rs 3050 per 40 kilogrammes. Punjab seed cotton which was selling at Rs 3000 to Rs 3350 per 40 Kgs is now selling at Rs 2800 to Rs 3100 per 40 Kilogrammes. Some rain-damaged seed cotton from Sindh also sold at Rs 2500 to Rs 2600 per 40 Kilogrammes. Cottonseed (Binola/Kakra) from Sindh which was selling at Rs 1525 to Rs 1550 per maund later sold at Rs 1325 to Rs 1350 per maund due to being rain-damaged.

As a result of the rains the domestic cotton market is subdued even though the arrivals have decreased. If the rains decrease gradually and do not inflict any damage henceforth, Pakistan could still reap a crop of 12.5 to 13 million bales (155 Kgs) during 2017/2018. Domestic mills are projected to consume between 14 to 14.5 million bales during 2017/2018 (155 Kgs) if they revive from their current malaise soon enough.

However, presently the domestic textile industry is in deep trouble and claims that it has been woefully neglected by the government. According to the claims of the All Pakistan Textile Mills Association (APTMA), about 35 to 40 percent capacity has been closed down and more than a million workers have become unemployed. Thus the condition of the domestic textile industry has become serious. Besides the one million workers who have become jobless, the country's exports are suffering to which the domestic textile industry has been a leading and major contributory. The textile industry also claims that a very large portion of its refunds lying with the government has not been released. It is now nearly three to four years since the domestic textile industry is suffering and its problems need urgent redressel.

On the global economic and financial front, several countries have recently seen their equity markets rising upwards in a sustained manner. In the United States, some people believe that the unconventional political approach of President Donald Trump whose popularity rating has gone down to 35 percent, would send equity markets plunging and business floundering. However, the bourses in America, and indeed in many parts of the world, have presently seen equity prices at record high levels.

Ashutosh R. Shyam of Economic Times has observed that "the total market capitalization of global equities has surged to a record Dollars 77 trillion, more than four times the U.S. GDP of Dollars 18.5 trillion". Ashutosh added that the rush into equity markets is being prompted by the liberal policy of several central banks in the advanced economies and what is being perceived as a record low volatility of risky assets.

In fact, not only the United States stocks have ended at record levels at midweek, they have shown the way to other equity markets around the world which have also risen sharply. Indeed on Wednesday it was reported that all the three leading shares indices rose to fresh records due to solid earnings and rising oil prices. In this regard, AFP has reported from New York that on July 19, 2017 "The Dow, Standard and Poor's and Nasdaq all ended at new peaks as investors shrugged off worries about Washington, where President Donald Trump's agenda has languished amid opposition to his health care reform proposal". Indeed the equities markets in Tokyo, Hong Kong and Shanghai have also risen commensurately.

In other news, the Eurozone interest rates are reported to have been kept unchanged with the benchmark rate having been retained at zero percent. However, the markets will be keenly awaiting the comments of the president of the European Central Bank Mario Draghi whether he would announce any change in the stimulus policies of the European Central Banks (ECB).

Encouraging economic news from several markets helped investor confidence to remain buoyant. Whereas the consumer goods sector in Britain pushed FTSE to higher levels on Wednesday technology shares reportedly enjoyed its best day in ten months as earnings drove up the European shares. In China robust economic growth data pushed blue chips to 18-month high levels. Hong Kong shares hit two-year high levels, while Tokyo shares moved up on bargain hunting. It appears that despite the constitutional wrangling in America, business sentiment remains bullish, at least for now.

Copyright Business Recorder, 2017

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