Business

How 2022 shocked, rocked and rolled global markets

Published

2 years 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

The IMF assessment mission is scheduled to land in Pakistan on March 3.

Published

3 hours ago

Farwa

According to sources, the economic review and negotiations will go on until March 15.

The second $1 billion tranche will be released after the nine-member team, headed by Nathan Porter, evaluates Pakistan’s economic performance throughout the course of their two-week visit.

The IMF mission will also present its recommendations for the next financial year’s budget, sources said. “Any relief to the salaried class can only be offered after the lender agreed over it,” according to sources.

The IMF mission will hold talks with the ministries of finance and energy, planning ministry and the State Bank of Pakistan. The IMF delegation will also hold discussions with the FBR, OGRA, NEPRA and other state institutions and ministries.

Separate discussions with the governments of Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan will also be held by the IMF delegation.

Tax reforms such as the agriculture sector’s income tax, the advancement of privatization, fiscal policies, and energy sector reforms will be the main topics of debate. In addition, the IMF will examine inflation, interest rates, exchange rate management, and monetary policy.

Today, an IMF mission will discuss climate assistance with the governments of Punjab and Balochistan.

Business

The amount of trade between Saudi Arabia and Pakistan hits $700 million.

Published

1 day ago

Farwa

Through the Special Investment Facilitation Council (SIFC), Pakistan’s trade connections with Saudi Arabia have grown significantly, with bilateral trade volume rising from $546 million to $700 million and exports to the Kingdom growing by 22%.

As bilateral economic cooperation continues to grow, Saudi investors have shown a strong interest in Pakistan’s construction, energy, agricultural, and information technology sectors. The objective for exporting IT services between the two countries has been raised from $50 million to $100 million.

Saudi Arabia has set up a help desk dedicated to making it easier for Pakistani IT companies to register in the Kingdom in order to expedite commercial procedures. The goal of this program is to speed up economic collaborations between the two countries and lower administrative barriers.

The well-known Saudi restaurant chain AlBaik has revealed plans to open locations in Pakistan, which is a big step for the food service industry and should lead to the creation of new job possibilities in the area.

Officials have noted that stronger business links between the two countries lead to greater economic stability, and the SIFC has played a crucial role in promoting these trade advancements. For bilateral trade and investment projects, the Council remains a crucial facilitator.

According to a trade official with knowledge of the developments, “the establishment of dedicated support mechanisms, such as the help desk for IT companies, demonstrates a commitment to long-term economic partnership,” The goal of these programs is to improve the conditions for commercial collaboration between the two nations.

The increasing amount of trade and the diversity of investment sectors show that Saudi Arabia and Pakistan’s economic ties are changing as both countries seek to deepen their business alliances in a number of industries.

Business

After more than 50 years, Bangladesh and Pakistan resume direct trade.

Published

1 day ago

Farwa

After more than 50 years, the two governments will resume direct bilateral trade, with Bangladesh’s food ministry announcing Sunday that it will receive a supply of 25,000 tonnes of rice from Pakistan next month.

After former Prime Minister Sheikh Hasina was overthrown last August, relations between Bangladesh and Pakistan have begun to improve after decades of tense relations.

Since then, there have been increased bilateral interactions between Bangladesh and Pakistan. Nobel laureate Muhammad Yunus, the interim government’s senior adviser, has met twice with Pakistani Prime Minister Shehbaz Sharif.

According to the food ministry, Dhaka completed an agreement earlier this month to import grains from Pakistan.

“On March 3, the first shipment of 25,000 tonnes will reach Bangladesh,” Zia Uddin Ahmed, a ministry assistant secretary, told Arab News.

“This is the first time that Bangladesh has started importing rice from Pakistan at the government-to-government level since 1971.”

Following direct maritime contact between the two South Asian countries in November—a Pakistani cargo ship stopped in Bangladesh for the first time since 1971 with imports and exports arranged by private companies—their trade relations grew.

Resuming trade with Pakistan is a significant step for Bangladesh, according to Amena Mohsin, a lecturer at North South University and a specialist in international relations.

“We want to see progress in our bilateral relationship with Pakistan. Most significantly, we are currently going through a low point dispute with India, even though we constantly diversify our partnerships.

This most recent move to purchase rice from Pakistan is really significant in this context,” she told Arab News.