Business

How 2022 shocked, rocked and rolled global markets

Published

1 year ago

Farwa

World stocks down 20% in worst year since financial crisis.
Wild swings in commodity and FX due to rate rises and war.
Crypto crashes and defaults have added to volatility.

LONDON: Trillions of dollars wiped off world stocks, bond market tantrums, whip-sawing currency and commodities and the collapse of a few crypto empires — 2022 has been perhaps the most turbulent year investors have ever seen, and for good reason.

Tallying the final numbers is useful but doesn’t even come close to telling the whole story.

Yes, global equities are down $14 trillion and heading for their second worst year on record, but there have been nearly 300 interest rate hikes and a trio of 10%-plus rallies in that time making the volatility freakish.

The main drivers have been the war in Ukraine, combined with rampant inflation as global economies broke out of the pandemic, but China remained shackled by it.

US Treasuries and German bonds, the benchmarks of global borrowing markets and traditional go-to assets in troubled times, lost 16% and 24% respectively in dollar terms.

DoubleLine Capital’s Jeffery Gundlach, dubbed the ‘Bond King’ in the markets, says conditions got so ugly at points that his team found it almost impossible to trade for days at a time.

“There has been a buyer’s strike,” he said. “And understandably so because prices have just been going down until recently.”

How 2022 shocked, rocked and rolled global markets

Drama kicked in as soon as it became clear that COVID was not going to shutter the global economy again and the world’s most influential central bank, the US Federal Reserve, was serious about raising interest rates.

Ten-year Treasury yields jumped to 1.8% from less than 1.5%, knocking 5% off MSCI’s world stocks index in January alone.

That yield is now at 3.68%, stocks are down 20% while oil prices surged 80% before giving it all up. The Fed has delivered 400bps of hikes and the European Central Bank a record 250bps, despite saying this time last year it was unlikely to budge.

The dollar this week gave the yen a lift.

In emerging markets, Turkey’s inflation and monetary policy problems have cost the lira another 28%, but its stock market is the best performer in the world.

Hard-pressed Egypt devalued its currency more than 36%. Ghana’s cedi crashed 60% as it has joined Sri Lanka in default. Despite being well down from its June highs, Russia’s rouble is still the world’s second-best performing currency supported by Moscow’s capital controls. It was initially smashed after the invasion of Ukraine.

“If you ask me what will happen next year I really couldn’t tell you,” said Close Brothers Asset Management’s Chief Investment Officer Robert Alster, who, like many, also pointed to the pummeling the pound and British bond markets took when the short-lived government of Liz Truss flirted with an unfunded spending splurge.

Ten-year gilt yields soared over 100 bps and the pound lost 9% in a matter of days — moves the scale of which are rare in major markets.

“If you sell it wrong, don’t be surprised if it goes down like a cup of cold sick,” said veteran CMC Markets’ analyst Michael Hewson.

Tech problems

The surge in rates has also taken $3.6 trillion off the tech titans. Facebook and Tesla have both hemorrhaged more than 60% while Alphabet’s Google and Amazon are respectively down 40% and 50%.

Chinese stocks have staged a late rally thanks to signs that its zero-COVID policy’s days are numbered but they are still down 25% and emerging market ‘hard currency’ government debt will notch its first ever back-to-back loss.

Initial public offerings and bond sales have also slumped almost everywhere apart from the Middle East, while commodities have been the best-performing asset class for a second consecutive year.

Natural gas’ more than 50% rise is the best overall in that group, albeit largely due to the war in Ukraine which had hoisted prices 140% at one point.

Mounting recession worries along with the West’s plan to stop buying Russian oil mean Brent has given back the entire 80% it made in the first quarter, as have wheat and corn.

The cryptomarket has been even more chaotic. Bitcoin ends 2022 robbed of its cocktail of cheap money and leveraged bets.

The pre-eminent cryptocurrency has lost 60% of its value, while the wider crypto market has shrunk by $1.4 trillion, squashed by the collapse of Sam Bankman-Fried’s FTX empire, Celsius and supposed ‘stablecoins’ terraUSD and Luna.

“What has gone in global markets this year has been traumatic,” said EFG Bank Chief Economist and ex-Deputy Governor of Ireland’s central bank, Stefan Gerlach.

“But if central banks hadn’t underestimated the rise in inflation so dramatically and had to jack up interest rates, it wouldn’t have been so catastrophic”.

Business

Exchange achieves all-time high: KSE-100 index surpasses 72,500 points

Published

5 hours ago

Farwa

With the benchmark KSE-100 index hitting a record-breaking high of 72,501 points, the Karachi Stock Exchange saw yet another incredible rise.

Within Pakistan’s financial environment, investors demonstrated a strong sense of trust in the market as the bullish trend continued.

As a result of the significant inflow of investment and optimism among market players, the index had an amazing 450-point rise during the trading session.

In their analysis of the market’s remarkable performance, financial analysts pointed to a number of causes for the upward trend, such as encouraging economic data, robust company profits, and the government’s proactive measures to promote economic expansion.

The durability and upward momentum of the market have also been greatly aided by continuous infrastructural investments and efforts meant to boost investor confidence.

In the meantime, interbank rates increased by six paisas, and the US dollar’s value saw a slight rise in the currency market. As a result of the current market conditions and the dynamic nature of foreign exchange swings, the dollar was quoted at Rs 278.45 in the interbank market.

Business

The investment plan for K-Electric will be audited every three months.

Published

5 hours ago

Farwa

In light of K-Electric’s inability to persuade NEPRA with its Rs. 484 billion investment plan, the regulatory body has decided to hold off on making changes to the utility’s Transmission & Distribution Investment Plan until FY 2030.

As stated in the order, the NEPRA will select the terms of reference (ToR) for the third-party audit in addition to announcing the quarterly audit. A report on the company’s investment plan’s progress will need to be submitted every quarter.

A performance report would also be required under the investment plan by K-Electric, Karachi’s only power distribution utility, according to the statement. A secure mechanism to avoid electrical mishaps was also mandated by the authority to the utility.

In the meantime, the power distribution firm stated in a statement that the investment plan will boost the utility’s infrastructure to meet present and future demands, decrease transmission and distribution losses, and increase customer base growth.

With investments totaling Rs. 544 billion, KE has been able to more than halve its T&D losses and quadruple its customer base and power consumption since privatisation, according to the statement.

A hearing in March 2023 was held to inform stakeholders about the projects that KE management had planned for FY2024–FY2030, and the statement claimed that the plan had been presented in compliance with regulatory requirements.

In terms of investment areas including expansion, energy loss reduction, network rehabilitation, maintenance, and safety, KE claimed to have clearly defined priorities and projects for this era.

The plan calls for the construction of transmission lines and grids, which will increase the dependability of KE’s network and make it possible to take on more electricity from the National Grid.

In order to manage the city’s needs through targeted investments and tech-based interventions, CEO KE Moonis Alvi said, “We are looking to invest $2 billion in Transmission and Distribution over the next 7 years.” The work of all the stakeholders who have contributed to this trip and who will help us modernise our infrastructure and get ready for the future is something I’d like to acknowledge.

The investment plan is a supplement to the business’s Power Acquisition Programme, which outlines KE’s goal of having 30% renewable energy in its generation mix by 2030. As part of its efforts to provide everyone with access to reasonably priced energy, the firm has also been granted regulatory permission for its RFPs for 640 MW of renewable projects.

Business

$399 million in airline revenue is being blocked by Pakistan. IATA

Published

6 hours ago

Farwa

Pakistan and Bangladesh have been urged by the International Air Transport Association (IATA) to promptly release airline profits that are being withheld in violation of international agreements.

“Airlines are unable to repatriate over $720 million ($399 million in Pakistan and $323 million in Bangladesh) of revenues earned in these markets, resulting in a severe situation,” an IATA statement stated.

“Money-denominated expenses like lease agreements, spare parts, overflight fees, and fuel must be paid for in a timely manner by repatriating revenues to their home countries.”

Delaying repatriation raises exchange rate risks for airlines and violates bilateral agreements’ international commitments. In order for airlines to effectively continue to offer the aviation connectivity that both of these countries depend on, Pakistan and Bangladesh must immediately release the more than $720 million that they are blocking, according to Philip Goh, Regional Vice President for Asia-Pacific at IATA.

Pakistan needs to make the difficult repatriation procedure less complicated. According to the statement, this presently includes the need to present audit certifications and tax exemption certificates, both of which create needless delays.

Approximately 425,000 jobs and $2.8 billion in economic activity were supported by Pakistan’s aviation industry prior to COVID-19. Passenger numbers are predicted to increase by more than 2.5 times by 2040 after returning to pre-COVID levels in 2023, according to the statement.