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Extraneous factors to keep Pakistan Stock Market volatile

Extraneous factors to keep Pakistan Stock Market volatile

According to CNBC, when the world was beginning to believe that Sino-US trade tensions were easing, Chinese officials cut short their US visit and President Donald Trump announced he doesn’t really need to pull together a trade deal before the 2020 election. The news didn’t lead to huge losses, but hampered the markets from its attempts over the week to reach new highs. It was also a reminder of how sensitive stock markets are to the news headlines.

With October to begin; Goldman Sachs predicts the month to be a wild one. Reportedly, stock markets remain calm in September, but on average emerge volatile in Octobers since 1928. It is difficult to predict that stock markets have reasons to stay around these levels without trade deal between the US and China, Brexit, peace in Arabian Peninsula, reduction in US-Iran hostility, cordial relationship between Pakistan and India and above all tranquility in the world.

Chinese officials changed their travel schedule and headed back earlier than planned. Nebraska department of agriculture also said the Chinese team called off a visit to farms in Nebraska. US Secretary of Agriculture Sonny Perdue confirmed the meetings were a way for China to build goodwill with American farmers. The cancellation put a damper on hopes that China would restart purchasing US agricultural goods, which it had halted in April in retaliation against imposition of tariffs on Chinese goods by President Donald Trump.

President Donald Trump on Friday said he doesn’t think he needs to strike a trade deal with China before the 2020 presidential election. “I think people know that we’re doing a great job,” Trump said, referring to his administration’s work on the economy and the military. “China’s being affected very badly, we’re not, we’re not being affected,” he said.

The New York Federal Reserve will continue overnight repurchase operations through mid-October. The process will involve three operations involving US$30 billion as well as continued overnight operations of at least US$75 billion each. The repo market provides banks the short-term funding they rely on to operate.

“Hostility between Iran and Saudi Arabia is likely to escalate further on open accusations of Iran for the attacks on Saudi oil facilities. Any loans to Iran or engagement by the international community represent appeasement,” Saudi Minister of State for Foreign Affairs Adel al-Jubeir said. He asked the international community to reigning in what he called Iran’s aggressive behavior. Iranian Foreign Minister Javad Zarif said in an interview Friday that he hoped to avoid conflict, but that Iran was prepared for all-out war in the event of attack by Saudi Arabia or US forces.



When asked about next steps, the minister asserted that Saudi Arabia was responsible for its own defenses, which were criticized as having failed to effectively counter the drone and missile attacks. “It is our responsibility to protect our borders, our people, our infrastructure, but the world also has responsibility to make sure Iran isn’t allowed to get away with murder, to ensure freedom of navigation in the Gulf and Arabian Sea so global energy supply isn’t disrupted,” he said.

In early September this year, US President had abruptly called off his government’s talks with the Taliban, even though the two sides were on the cusp of a US troop withdrawal deal. With talks off, the Trump administration has vowed to intensify its fight against the Taliban, with the hope that increasing battlefield pressure will compel the insurgents to come back to the negotiating table and make concessions, leading to a new deal on better terms for the US. The problem is that this strategy has been attempted many times before and has never succeeded.

It is believed that India has not been engaging with Pakistan since an attack on its Air Force base at Pathankot in January of 2016, maintaining that talks and terror cannot go together. Early this year, tensions flared up between India and Pakistan after killing of 40 CRPF personnel in Kashmir’s Pulwama district. Amid mounting outrage, the Indian Air Force attacked Balakot. The next day, Pakistan Air Force retaliated and downed a MiG-21 in aerial combat and captured Indian pilot, who was later on handed over to India. The tension between India and Pakistan recently escalated after New Delhi revoked Jammu and Kashmir’s special status. Reacting to India’s move on Kashmir, Pakistan downgraded diplomatic ties with New Delhi and expelled the Indian High Commissioner.

The added but more serious threat is declaration of Pakistan’s fate by Financial Action Task Force (FATF). In August, Asia Pacific Group adopted Pakistan’s third mutual evaluation report, which identified a number of areas where further action was required to strengthen anti-money laundering (AML) and combating the financing of terrorism framework (CFT). It will make the final decision on whether to keep Pakistan on its grey list in October. Being on the grey list doesn’t come with any sanctions, but if Pakistan remains on this list; it faces the risk of being put on the black list. Being on the black list means Pakistan’s banking system will be regarded as one with poor controls over AML and CFT standards will cause problem in sending money to Pakistan by expatriates and traders’ cost of business will increase because Pakistani banks will face higher scrutiny in international payments and foreign banks might not even do business with Pakistani banks. The government, too, will find it difficult to raise funds from international markets.

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