Pakistan Economic Roundup: Rupee’s REER index decreased by 2.68 per cent in October

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LAHORE: In harmony with the universally declining trend observed in world markets, and in response to the State Bank of Pakistan’s decision to push up monetary policy by an aggressive 150 bps, the stock market in Pakistan remained volatile this past week, as the benchmark KSE 100 index made a net loss of over 1,800 points, slipping below the two touchstones of 40,000 points and 39,000 points. The index currently stands closed at 38,562 points.

On the other hand, Pakistani Rupee at the interbank market depreciated by over Rs2 over the week, currently standing at Rs139 against the US dollar.

However, official data released by State Bank of Pakistan (SBP) revealed that Pak Rupee’s Real Effective Exchange Rate index (REER) decreased by 2.68 per cent in October, falling to a value of 108.1450 from 111.1276 in September.

In response to this, Insight Securities Research Analyst Zeeshan Afzal believes that another 4 per cent devaluation in addition to the recent depreciation in the last few days, is required to bring the currency to its fair value.

Additionally, some other data released this week apprised that, the yearly inflation rate in November 2018 was 6.50 per cent compared to 6.78 per cent in October 2018 and 3.97 per cent in November 2017.

Moreover, the arrival of cotton at various ginneries in Pakistan fell short of last year’s quantity by 765 thousand bales, marking a year-on-year decrease of 7.55 per cent. As of December 1, 2018, the total arrival was recorded at 9.4 million bales.

In November the cement industry dispatched 3.899 million tonnes of cement that was one per cent less than 3.941 million tonnes of cement dispatched during the corresponding month of last year. Net sale of securities during the week ended November 30, 2018, has been recorded at Rs2.5 billion.

Weekly Sensitive Price Index (SPI) for the combined group, during the week ended December 6, 2018, has slipped by 0.55 per cent over the prior week, whereas compared to the corresponding week of last year, SPI has jumped up by 5.8 per cent.

Apart from this, on commerce ministry’s proposal relating to export of sugar, the Economic Coordination Committee (ECC) of the Cabinet Tuesday waived off the condition related to start of sugarcane crushing and directed to start crushing as soon as possible.

Moreover, ECC allowed allocation of up to 30 MMCFD gas from Zafir field, to Sui Southern Gas Company Limited, 66 MMCFD Mari Deep Gas to MPCL, and the augmentation of export quota by 0.1 million tonnes, bringing the total export quota to 1.1 million tonnes.

Gold and Oil started off the week by gaining value after both USA and China decided to put their trade hostilities on hold for at least 90 days. While Gold prices edged upwards throughout the week, the value of Oil on the other hand remained volatile owing to the decision by OPEC regarding a plausible supply cut along with growing US inventories and a plunge in global stock markets amidst concerns over the economic slowdown. At one point, Palladium outshined gold in becoming the most valuable metal with its prices soaring by around 50 per cent in less than four months to record levels. By the end of the week, Gold prices were on track for their best week since August, as the dollar weakened on a looming pause in the US Federal Reserve’s tightening cycle.