Morning Briefing

Karachi: Why Asian market witness downward rally?

Asian markets witnessed a decline in stocks as data signalled slowdown in the global economic growth and fear of Greece default further exaggerating the concerns. The spreading impact of Europe’s credit woes encouraged investors to pull funds out of risk assets.

This downward rally was on account of various concerns;
Global Economic growth is decelerating as witnessed by the slowed U.S consumer spending since income unexpectedly dropped. Inflationary pressures in the emerging economies like China and India to name the few are additional concerns adding to the global slowdown.

The Greece debt monster is still lingering around the global economy undermining the Asian, commodity and even FX market. Euro fell to an eight month low versus dollar before European finance ministers gather today to weigh the threat of a default in Greece, which is making fresh budget cuts to secure an international bailout. The European Officials are expecting this crisis to stretch for many, many months which may cause euro to slide further along with depressing the equity market.

Amongst Asian market, NIKKEI 225 fell by 205.6pts to 8494.7 whereas Hong Kong and Indian market witnessed decline of 870.9pts (Index: 16722.46) and 293.3pts (Index: 16160.50) respectively. FTSE and Shanghai also observed this negative rally by shedding 9.2pts and 6.1pts respectively.

Depressing relations may yield nothing…
An odd decision by Pakistani Government to damage its relations with the International Monetary Fund has resulted in the suspension of development loans from other multilateral financial institutions. The likely consequence of which is both short and long‐term repercussions for the economy.

Asian Development Bank (ADB) has put a condition which has to be fulfilled before extending loan to Pakistan. Pakistan has to receive IMF’s Letter of Assessments, a certificate of soundness of a country’s economic indicators and of progress on promised reforms before opting for a loan financing.

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