Cotton crop (August 2015 / July 2016) is going through a steady phase and some arrivals from Sindh were being delayed awaiting proper opening of the bolls. Seedcotton (Kapas / Phutti) equivalent to 25,000 lint bales (155 Kgs) is reportedly arriving into the ginning factories daily. The quality of lint from Sindh is reported to be good while the Punjab quality is also said to be improving.
Generally speaking, the seedcotton prices in Sindh reportedly ranged from Rs 2300 to Rs 2450 per 40 Kgs, according to the quality. In the Punjab, they reportedly ranged from Rs 2200 to Rs 2350 per 40 Kgs in a steady market. Lint prices in Sindh are said to have ranged from Rs 4550 to Rs 4600 per maund (37.32 Kgs), according to the quality. In the Punjab, lint prices also reportedly ranged from Rs 4550 to Rs 4600 per maund.
Generally speaking, the textile mills are not doing well and yarn prices are also subdued. A plethora of problems continues to plague the Pakistan textile industry ranging from gas and power shortages to unnecessary taxation and delay in return of eligible taxes refund money. The new crop cotton is said to be mostly developing well but some delay in arrivals has been reported in Sindh due to a Hindu festival which should be over after about the week or ten days, traders said in Karachi.
The output of the ongoing cotton crop (2015 / 2016) may range from 14 to 15 million bales (155 Kgs), while the domestic mills may need anywhere from 14.75 to 15.25 million bales. Mills may import around one million bales of cotton, while the exporters may ship nearly 750,000 bales. International prices of cotton are weak as reported from China, India and the United States, traders said. The negative influence from this week's turmoil in the financial markets also influenced the cotton market accordingly.
In the ready cotton sales on Thursday, 400 bales of cotton from Shahdadpur in Sindh reportedly sold at Rs 4575 to Rs 4600 per maund (37.32 Kgs) while 200 bales from Sultanabad sold at Rs 4600 per maund. In the Punjab, 200 bales of cotton from Vihari sold at Rs 4560 per maund, 200 bales from Khanewal sold at Rs 4575 per maund, while 600 bales from Harunabad and 1,000 bales from Burewala sold at Rs 4600 per maund in a steady market.
The Chairman of Karachi Cotton Association, Amin Hashwani, has said that the government's consideration to buy one million cotton bales at high prices from the cotton market would be counter productive. Hashwani said that intervention by the government / public sector organization in the cotton market would create distortions which would adversely effect cotton exports, allied industries and the economy in general. Till now, a free trade policy has been very successful. He feared that government intervention would create large distortions in the entire economy besides incurring large losses to the public exchequer.
Gohar Ejaz group has won the annual election of the All Pakistan Textile Mills Association (APTMA) unopposed. This is the seventh consecutive year that he has won the APTMA election unopposed. On the global economic and financial front, last Monday made history when Chinese stock markets fell sharply is an unprecedented manner upon which fall in equity values followed around the globe in a brutal manner. Thus on "Black Monday" and following on the subsequent couple of days share values fell dramatically as never before. The trigger was applied when China's Central Bank devalued the country's currency Yuan a couple of weeks ago. The devaluation of Yuan prompted the investors to believe that the slowdown in the Chinese economy is worst than was originally feared.
Thing cue from the Chinese economic and equity market fiasco prices, sundry currencies and commodities fell sharply because several countries rely heavily on trade with China and the dramatic decline in Chinese equity values went viral and adversely influenced the global business confidence. The plunge in equity values was the biggest slide in eight years as many countries worried about the effect on the exports of their goods to China fearing a sizeable disadvantage in their competitiveness.
Thus the biggest one day plunge in equities in China in nearly eight years gave the jitters in economic circles around the globe fearing a massive economic slowdown. Last Friday China had released data indicating that the country underwent its worst manufacturing performance since the global financial crisis. These reports and their ramifications originating from China were enough material to send all the equity markets crashing precipitously. The prices of crude oil and all other commodities slid sharply hitting Australia, Brazil, Russia, the Middle East, Indonesia and Venezuela ferociously. Thus the emerging markets as well as the Gulf markets also underwent a fair quantum of turmoil, which in turn threatened Africa. Brazil's jobless rate has hit a five year high level.
Thus anxiety regarding the Chinese slowdown in the economy resulted in the global rout in the commodity and equity markets which is a phenomenon occurring rarely in a century or so. Some analysts started to believe at Chinese economy is fragile and has started to crack up. Thus many markets around the world started losing faith in equity markets and scrambled to find newer safe havens.
Moreover, comparisons of the current fiasco starting on Black Monday (24 August, 2015) most countries were said to be "grasping for growth and floundering in the swamp of stagnation." To mollify and mitigate these colossal economic disturbances and the drastic fall in equity values, China decided to inject massive amount of funds into the economy. Besides a devaluation, it has also decided to divert pension funds into the financial system and thus flood the economy with cash. China's central bank thus cut the benchmark interest rates and lowered the bank's reserve requirement ratios. On Thursday at the approaching of the weekend, however, some consoling and positive news started appearing and several equity markets moved to the positive side. Thus faith of the observers, analysts and investors led to gains on the equity markets. Indeed the US economy was reported to have expanded at 3.7 percent in the second quarter, a higher pace than what was projected initially.
On Thursday the panic in the global markets started easing. Thus gains followed the earlier Wall Street rise in equity values and reportedly started trading higher on Thursday. Moreover, the US Federal Reserve also did not feel compelled to raise interest rates at this juncture. Thus China's Shanghai composite was said to have closed with a 5.3 percent gain while the Shenzhen composite settled higher at 3.3 percent rise ending a five day losing streak. Markets in Japan, Hong Kong, Australia and Korea also posted increases in their levels. Crude oil prices also reportedly rose on Thursday. All these developments appear likely to stabilise the global markets during the weeks and months ahead of us.
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