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LAHORE: The local cotton market on Tuesday remained dull while the trading volume remained low. Cotton Analyst Naseem Usman told that the rate of cotton in Punjab and Sindh is in between Rs 18000 to Rs 20,000 per maund. 1350 bales of cotton of Khairpur were sold at Rs 21100 per maund.

The businessmen panel of Pakistan’s apex trade body has said that the political uncertainty has dented the confidence of foreign investors.

The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has said political uncertainty has rattled the Pakistan economy, hitting the stock market constantly, as the country has witnessed the capital outflow of around $1.5 billion during the ongoing fiscal year, with major foreign investment outflows from Pakistan Investment Bonds (PIBs) despite high-yields returns on them.

The BMP chairman and FPCCI former president Mian Anjum Nisar observed that the uncertainty at the political front and parliament moving closer to the vote of confidence motion dented investors’ confidence, resulting into the investment outflow of at least $400 million from the country just in a single month of March.

He said that country-to-country inflows reflect the changing situation on external fronts of the economy, as the FDI inflows from China has dropped to $384 million during Jul-Feb FY22 compared to $522 million in 8MFY21. In spite of good relations with China, Pakistan is unable to attract Chinese investors for any vital change in the economy. China is the biggest trade partner of the country but the balance is largely in favour of China.

Quoting the figures of the central bank, he said that foreign direct investment (FDI) fell by 33 per cent in February 2022 compared to preceding month of January, as the second half of the current fiscal has been facing several negative impacts including political instability, the war in Ukraine and a hike in oil prices in the international markets.

The record increase in oil prices as well as in other commodities rates has widened the trade deficit. Though the country reported a positive growth of FDI inflows by 6 per cent during July-February 2021-22 (8MFY22) but this growth is far lower than the $11.6 billion current account deficit confronting the country.

Mina Anjum Nisar said that the returns on the treasury bills and PIBs are highly attractive for foreign investors, as such high rates on government-guaranteed risk-free bonds are unprecedented but unfortunately the outflows from PIBs reached $353 million in March.

In the same way, the yields on the treasury bills rose to 11.99 percent for three-month papers, 12.5 percent for six months, and 12.7 percent for 12 months.

During the ongoing fiscal year, the total outflows from equity, PIBs, and treasury bills stand at $1.558 billion against total inflows of $654.3 million. The cumulative net flow during the nine months through March 2022 comes in at $904.36 million.

The single-day outflow on 24 March was $91.3 million against an inflow of $2.3 million in equity. The outflows from the PIBs and treasury bills were $50 million and $34.8 million, respectively, during the same day, the report shows.

During the current fiscal year, the total PIB inflows stood at $104.3 million so far, and inflows have remained at just $0.15 million during this month.

The total inflows of the PIBs and treasury bills during March stand at $0.15 million, while outflows of the two domestic bonds are $352 million. If the outflows from equity are counted, the total outflows of foreign investment were $402.35 million, while the cumulative net flow was $378.3 million. The inflows in equity during March stand at $23.9 million.

Poor investment climate hit the FDI inflows which noted a sharp decline of 50pc to $110 million in January this year from $218.7m in December 2021.

Real change was noted in January since the first half of the current fiscal year (1HFY22) witnessed a growth of 20pc in FDI. The inflow in December 2021 was much higher at $218.7m – showing a jump of 29pc – compared to $169.4m in December 2020.

The declining trend of last two months could eliminate the positive growth trend of 20pc growth during 1HFY22.

Though exports showed growth of 25pc but the amount is still not enough to mitigate the impact of the huge import bill. The only positive news was the inflow of remittances which kept its pace of growth during 8MFY22.

The SBP data showed FDI inflow in February this year was $90.8m compared to $137m during the same month in FY21; a decline of 33.6pc.

Portfolio investment during July-Feb FY22 showed that the outflow was higher at $314m compared to an outflow of $253m in 8MFY21.

ICE cotton futures rose 3% on Monday, bolstered by strong demand and supply shortfalls due to worsening drought conditions in key growing areas.

The most active May cotton contract on ICE futures was up 4.03 cents, or 3%, at 138.58 cents per lb at 11:01 a.m. ET.

“Pretty good demand was uncovered and the continued forecast of dry weather is helping the pries,” said Rogers Varner, president of Varner Brokerage in Cleveland, Mississippi.

Cotton also follow these other markets like grains and energy, which are also offering support, Varner added. Oil jumped over 3% as the release of strategic reserves by consuming nations failed to eliminate supply fears arising from Russia’s invasion of Ukraine and the lack of an Iranian nuclear deal.O/R

Higher oil prices make polyester, a substitute for cotton, more expensive.

US wheat, soybean and corn also rose on fears that the conflict in Ukraine will continue to disrupt supplies of Black Sea grains and oilseeds to world markets.

“Domestically, the drought across West Texas, Oklahoma and Kansas continues to worsen even as portions of these areas received trace amounts of rain over the last week,” Louis Rose of Tennessee-based Rose Commodity Group said in a note.

Last week, the U.S. Department of Agriculture released weekly export sales data which showed net sales of 234,000 running bales of cotton for 2021/2022.

“Data regarding U.S. cotton exports indicate the logistics situation is improving worldwide... the U.S. has capabilities that many other countries don’t so the rest of the world might recover more slowly,” International Cotton Advisory Committee (ICAC) said in a report dated Friday.

Total futures market volume fell by 19,349 to 13,849 lots. Data showed total open interest gained 1,443 to 228,605 contracts in the previous session.

The Spot Rate remained unchanged at Rs 20,500 per maund. Polyester Fiber was available at Rs 290 per kg.

Copyright Business Recorder, 2022

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