After a spate of long holidays, ready cotton market opened again on Thursday conceding a further loss of Rs 100 per maund (37.32 kgs). With hardly any reported business, ready cotton prices of the new crop (2017/2018) were reported to have ranged further lower between Rs 6,300 to Rs 6,400 per maund, having conceded about Rs 300 to Rs 400 per maund within the past fortnight.
Low domestic yarn prices with little demand and a weak global cotton market has also resulted in the decline of local cotton prices. In the meantime, the domestic textile industry continues to suffer large losses due to high cost of producing yarns compared to its regional competitors.
Domestic textile industry has suffered large losses as not only high costs of inputs is impeding its competitiveness, but a large sum of its capital is stuck up with the government which is not refunding the dues of the mills since a long time. Gas and power supply are also short and intermittent.
International cotton futures prices in New York have fallen in the recent months which have also weakened the textile market. Large plantings and good output for the forthcoming cotton crops (2017/2018) have driven lint prices downward in China, India and the United States. In Pakistan, the forthcoming crop is likely to increase its output to range between 12.5 and 13 million bales (155 kgs) on an ex-gin basis.
Largely scattered rains in Punjab and some rains falling recently in such cotton areas like Thatta and Badin in Sindh are likely to boost the output of the forthcoming cotton crop in Pakistan. Outgoing cotton crop has mostly been lifted barely leaving 50,000 bales which may be lying with the ginners for which ready buyers are reported to be few.
The cotton economy in Pakistan is presently presenting a depressing picture. In the meantime, increasing rains with the commencement of the monsoon season, the cotton pundits are predicting the current showers to be beneficial to the new crop (2017/2018). Till now good sowing and favourable weather are holding good prospects for the incoming cotton crop in Pakistan.
On the global economic and financial front, it appeared that since the beginning of this year (2017), the global economy seemed to be moving towards better times and would mend its decade long deficiencies, albeit slowly and gradually. However, we are still receiving cautionary signs and signals warning us not to become too complacent of achieving an early economic recovery.
In this regard, the Bank of International Settlements (BIS) has recently warned that "Athough a better economy is helping global banks to turn the corner a decade after the financial crisis began, Eurozone lenders remain a damper on the sector's recovery. The financial sector faces an improving but still challenging environment. The near term economic outlook has lightened substantially and financial headwinds have turned into tailwinds in many advanced economies"
After noting the significant improvement in certain leading economies, the Bank of International Settlements (BIS) appeared apprehensive enough to observe: "That said, the banking system in some jurisdictions still looks vulnerable to a further deterioration in credit quality. In a number of Euro area countries, for example, the share of non-performing loans (NPLs) remains stubbornly high.
While a quantum of guarded optimism is being expressed regarding the exposure of banks in the Euro area, the top banking regulator in China has advised the banks "to reform by tackling China's zombie firms, control regional housing market bubbles and push forward with debt to equity swaps". Reuters has also reported from Beijing that China's banking regulator Guo Shuqing met the representatives of China's largest banks in a bid to clean up the chaos in the country's banking system.
Globalisation has currently become a contentious issue while assessing economic growth. In this connection, the BIS has deeply studied the effect of globalisation around the world. BIS has concluded that "economic globalisation has contributed to a substantial rise in giving standards and falling poverty over the past half a century."
A positive assessment has appeared in the study made recently by the American Federal Reserve Bank whether the U.S. banks could withstand another recession. The results have indicated after stress tests conducted on 34 major banks that "even during a severe recession, our large banks would remain well capitalised.
This would allow them to lend throughout the economic cycle and support household and businesses when times are tough." Thus it is believed that collectively the global banking system could withstand another Great Recession reasonably well.
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