By admin       2018-02-09

Within about a fortnight, cotton prices tumbled by nearly Rs 1000 per maund (37.32 Kgs) on the ready market. Even the seed cotton (Kapas/Phutti) prices in both Sindh and Punjab suffered a decline which is reported to have ranged from Rs 200 to Rs 250 per 40 Kgs kilogrammes. Presently, the seed cotton prices both in Sindh and Punjab are said to be ranging from Rs 2600 to Rs 3200 per 40 Kgs 40 kilogrammes. Lint prices in both Sindh and the Punjab reportedly ranged fromRs 6200 to Rs 7000 per maund (37.32 Kgs) on an ex-gin basis. The current tendency for both seed cotton and lint is projected to remain weak. Textile industry is also facing depressing times so that turnover on the market has been very low even as ginners are said to have become eager sellers. Textile circles from Faisalabad have informed that more looms are closing down due to competition from India and China as unconfirmed reports even claim that unauthorized fabric imports from India and China routed through Dubai are reaching Pakistan. During the next cotton season (August 2018/July 2019) Punjab government has banned sowing of cotton in the province before the first of April, 2018 to improve the quality of cotton. Reports also indicate that some cotton growers have switched to sowing sugarcane which reportedly provides better gains than cotton. According to brokers in Karachi, 1300 bales of cotton from Rohri in Sindh sold on Thursday at Rs 6050 per maund (37.32 Kgs), which appears to be a very low price. It could be of much lower quality compared to standard grades. Another sale of 600 bales of cotton was reported from Fakirwali in Punjab at Rs 6400 per maund (37.32 Kgs) on an ex-gin basis. Ginners were reported to be eager sellers but not many mills were ready buyers so that turnover of cotton sales appeared low on Thursday. Not only in Pakistan, but in China, India and America also the cotton markets were reported to be significantly weak since several weeks. As the cotton prices are weak locally and the sellers appear frustrated, the mills in Pakistan are anticipating further decline in prices and are not buying anxiously. On the global economic and financial front, we had witnessed the previous calendar year viz 2017 as having been consistently showing increasing progress in many parts of the world. Indeed, the solid economic growth and progress even continued into the first month of this year, namely January 2018. Besides the solid and sustained economic growth in America, we also learnt that the Eurozone growth had hit a ten year high in 2017 recording its fastest pace of growth in a decade. These positive developments in the United States and the European Union became reasons to believe that the global economic condition has also picked up the pace for economic improvement. Besides the economic improvement on both sides of the Atlantic regions, even the European Central Bank had increased its growth projections for the Eurozone at 2.3 percent in 2018 which has been increased from an earlier figure of 1.8 percent. On its part, the International Monetary Fund (IMF) reportedly put the prospects of global economic improvement more positively by increasing the growth to 3.9 percent both during 2018 and 2019. Thus these institutions and several independent analysts had foreseen a solid growth in both America and the European Union, which in turn would keep the global economy on a rising track. Within this background, however, several analysts and investors did mull over the prospects that the federal banks in America and Europe may increase the interest rates at a quicker pace which could make borrowing rates higher during the foreseeable future. The central bankers in the United States and particularly the European Union see the "long term economic fundamentals to remain exceptional strong". Therefore, as per their sundry pronouncements, the central banks have indicated in clear terms that they intend to henceforth increase the interest rates quite regularly and steadily. The sell-off on the American stock markets began on last Friday (2 February 2018), when the announcement of the employment figures were made by the U.S. Labour Department showing a greater growth in wages than it was earlier presumed. The stock market sell-off indicated that rise in jobs and wages in America during January 2018 became a catalyst to induce investors to get out of their investment in stocks and in its place put the investment in bonds which would provide safer and higher interest rates. They foresee rise in bank interest rates. These developments have bred high level of volatility on the bourses after the plunge in equity values not only in America but globally. However, the present plunge in share values could only be a correction and may not necessarily lead to a recession.

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