February 23, 2017

Stable condition on cotton market.

Prices ruled steady on the domestic cotton market following increases in New York futures at midweek

where traders pointed to impressive export sales and also more enquiries in hand which boosted the fundamentals. Similarly, the Indian cotton market became positive following support from the international market and a weaker rupee.

 

Traders added from Karachi that prices for cotton in the U.S.A have gone up by about three cents per pound or more, while in India lint prices are reported to have increased by Rs 300 to Rs 400 per candy. Later it was stated that the New York cotton futures prices retracted marginally on Thursday.

 

On Thursday, the price of seed cotton (Kapas/Phutti) from Sindh was said to have ranged from Rs 2400 to Rs 3000 per 40 Kgs, according to the quality. In the Punjab, the seed cotton prices reportedly also ranged from Rs 2400 to Rs 3000 per 40 Kilogrammes in a steady market.

 

Lint prices in Sindh are said to have ranged from Rs 5600 to Rs 7200 per maund (37.32 Kgs), while in the Punjab the prices are said to have ranged from Rs 6000 to Rs 7200 per maund, as per quality.

 

However, the volume of trading was reported to be on the low side. This year (August 2017/July 2018) Pakistan is projected to reap about 11.6 million bales (155 Kgs) on an ex-gin basis.

 

Textile circles have stated that business is improving and some enquiries are coming up. However, some mills complained that good quality of cotton is becoming short in the domestic market.

 

The Textile Industry Associations of Punjab again appealed to the Chief Minister of Punjab, Shahbaz Sharif, to solve the long pending problems of duty drawback and energy tariff being faced by the industrial sector in Punjab. The Chairman of the All Pakistan Textile Mills Association (APTMA), Aamir Fayyaz, along with the representatives of Pakistan Ready Made Garments Association, Pakistan Hosiery Manufactures Association, Council of Pakistan Looms Association, Pakistan Textile Exporters Association and Pakistan Knitwear and Sweaters Exporters Association have impressed upon Chief Minister Shahbaz Sharif to play his role in ending the disparity of energy tariff for the industry of Punjab.

 

On the global economic and financial front, the topic of the day concerns the possible increase in interest rates by the United States Federal Reserve during the current calendar year (2018). The general impression in the business and banking circles is that the Federal Reserve will increase the interest rates three or four times during the year, but gradually. The Federal Reserve action to increase interest rates is said to be motivated by the presumption that the global markets are on a firm footing.

 

After reaching record levels on January 26, 2018, equity markets in New York became volatile over the past several weeks with the belief that the Federal Reserve may become more active in increasing the interest rates.

 

In this connection, the Chair of International Monetary Fund (IMF) Christine Lagarde alerted the global business community that the tax cuts recently announced in America by the Trump administration could push up the interest rates which in turn would pressurize the countries carrying high levels of debts.

 

Reporting from Paris, the AFP news agency quoted Christine Lagarde as observing that the IMF would remain "attentive to the consequences of the reform, which notably includes a sharply lower corporate tax rate--". The observations of the IMF chair created concerns in the global financial community which have been in turmoil in recent weeks.

 

Equities around the world tumbled to one-week low levels on Thursday following the confirmation by the American central bank that it would continue to raise interest several times this year. Financial circles in America believe that during the current year, viz. 2018, at least three interest rate increases are certain while some bankers are also talking of four interest rates rises.

 

Earlier in the week on Wednesday, besides sharp losses seen on Wall Street, equity prices also fell in Europe and Asia. Only time will tell if these declines on the sundry bourses around the world are "corrections" or were they bloated unreasonably.

 

While the steep rise in equity markets followed the legislation adopted by the American lawmakers to cut taxes by Dollars 1.5 trillions, the next event for the equity markets to see will be the decision of the European Central Bank pertaining to any decrease in the stimulus.