Zig’s Place Chat and News Monday PM 4-5-21

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Butterfly   The market, as measured by the Rabee Securities RSISX USD Index, after February's explosive rally of 25.7%, took a breather and ended the month up 2.3%, and up 16.7% for the year. The market's 2.3% month-end gain masks an earlier gain of 11.0% by mid-month which would have taken it to a year-to-date gain of 26.7%, before profit talking scaled-down most this gain.

However, the passage of the delayed 2021 budget, after the market's close on March 31st, seems to have reignited the rally with the market up 6.9% over the following two days in response to the budget's expansionary spending plans ahead of early elections planned in October.

March saw a continuation and the sustainability of the same positive trends that drove the index's strong performance in February. Average daily turnover, excluding block transactions, continued the monthly increase - up 7% on the back of February's 189% increase over January, and up 135% over the average of the prior 12 months (first chart below).

Foreign buying, both in absolute terms and as a percentage of total buying, continued along the same lines as in February and was accompanied by continued declines in foreign selling, both in absolute terms and as a percentage of total selling (second chart below).   https://www.iraq-businessnews.co

butterfly  It is somewhat early to draw too many conclusions from such positive trends from only two months of market action. Nevertheless, these trends reflect a very different tone to the market from that which prevailed over the last two years, as the two charts show.

butterfly  Moreover, just as in February, it was local buying that extended and sustained the rally throughout March, and similarly in response to the passage of the budget. February's stalwart trio of Bank of Baghdad (BBOB) up 69.2%, Baghdad Soft Drinks (IBSD) up 30.7%, and AsiaCell (TASC) up 24.6%, had mixed performances in March.

IBSD did not trade throughout the month, as it was suspended from trading while completing the procedures for its acquisition of Al-Zaki Group, as reported here in January. IBSD will resume trading on April 5th after announcing a 4.3% dividend yield in its latest annual general meeting (AGM).

TASC ended the month down 3.0% after minor gains of 1.3% early in the month, while BBOB saw a continuation of February's blistering performance, up 21.2% by the Ides of March before profit taking reduced these gains into a loss of 1.5%.

Among the banking sector, low-priced Gulf Commercial Bank (BGUC) and Iraqi Middle East Investment Bank (BIME) were still up 17.6% and 26.3% even after shedding earlier gains of 35.3% and 57.9% respectively. February's laggards Mansour Bank (BMNS), and Commercial Bank of Iraq (BCOI) ended March flat and up 6.8% after peeling-off gains of 15.0% and 15.9% respectively.

The exception among February's laggards was the National Bank of Iraq (BNOI), which sustained its gains throughout month end, up 14.9% after completing its acquisition of the Iraqi branch network of Lebanon's Bank Audi, and announcing a 9.2% dividend yield in its AGM. Within the consumer space, Al Mansour Pharmaceuticals (IMAP), sustained its grains throughout the month, up 7.8% on the back of February's 15.2% gain.

butterfly  The market's 6.9% gain for the two days following the budget's passage was mostly led by these same stocks given their leverage to a consumer led economic revival on the back of the budget's expansionary spending plans. Over the two days, BGUC was up 20.0%, BBOB up 16.9%, IMAP up 16.1%, BIME up 12.5%, BCOI up 10.6%, TASC up 2.4%, and BNOI up 2.0%.

These gains in the banking, consumer, and telecom stocks, both on that day and year to-date, build on the revival in economic activity that has returned to levels meaningfully above those that prevailed just before the nationwide lockdown in March 2020, as seen from Google's mobility data (below chart). In particular, activity in the crucial sectors of retail and grocery has recovered to between 20-60% above the levels that prevailed pre-lockdown.

butterfly The market's 6.9% gain for the two days following the budget's passage was mostly led by these same stocks given their leverage to a consumer led economic revival on the back of the budget's expansionary spending plans. Over the two days, BGUC was up 20.0%, BBOB up 16.9%, IMAP up 16.1%, BIME up 12.5%, BCOI up 10.6%, TASC up 2.4%, and BNOI up 2.0%.

These gains in the banking, consumer, and telecom stocks, both on that day and year to-date, build on the revival in economic activity that has returned to levels meaningfully above those that prevailed just before the nationwide lockdown in March 2020, as seen from Google's mobility data (below chart). In particular, activity in the crucial sectors of retail and grocery has recovered to between 20-60% above the levels that prevailed pre-lockdown.

butterfly  It remains to be seen if the market can sustain these early gains in April and beyond, though the broadening of the market's breadth beyond the narrow lead of February's trio is a promising sign for the rally's continuation and staying power.

But such a recovery's pace is likely to be uneven with plenty of zigs and zags along the way. Nevertheless, the potential upside from a continuation of such a rally is substantial for even accounting for the most recent gains, the market, as measured by the Rabee Securities RSISX USD Index, is still down over 60% from its 2014 high.

butterfly  Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years' experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS), and an Adjunct Assistant Professor at AUIS. He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy.

It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment. 5th April 2021

butterfly  https://www.shafaq.com/en/Economy/Gold-prices-slip-as-strong-U-S-jobs-data-lifts-yields-stocks Gold prices slip as strong U.S. jobs data lifts yields, stocks 2021-04-05 03:29

Shafaq News/ Gold prices eased on Monday as U.S. Treasury yields rose and global stocks gained after better-than-expected jobs data in the United States fuelled optimism over a swift economic recovery.

Spot gold was down 0.3% at $1,723.16 per ounce, as of 0553 GMT. Gold futures were flat at $1,761.20 per ounce.

"Strong payroll data has boosted the dollar and the yields and is weighing on gold prices. I think gold's primary trend is bearish," said DailyFX strategist Margaret Yang.

"Global economic growth is definitely taking a positive turn, however, it is uneven. Growth in the U.S. is particularly strong, but parts of EU are having a challenging time with the third wave of virus."

The U.S. economy created the most jobs in seven months in March as more Americans got vaccinated and the government doled out additional pandemic relief money.

That lifted global stock prices to a more than one-month high on Monday, while benchmark U.S. Treasury yields held near a 14-month peak.  The dollar, however, was steady against its rivals ahead of U.S. services sector data.

U.S. President Joe Biden's announcement of a long-awaited $2 trillion-plus job plan last week has raised some concerns over inflation.

Some investors view gold as a hedge against inflation, but higher Treasury yields, which translate into a higher opportunity cost for holding bullion, have challenged that status.

"It is becoming clear to me that gold's sensitivity is not to future inflation expectations, but rather, to moves in U.S. bond yields, notably the 10-year tenor," said OANDA senior market analyst Jeffrey Halley in a note.

Elsewhere, silver fell 1.1% to $24.70 per ounce and palladium was down 0.8% at $2,645.98.

butterfly https://www.shafaq.com/en/World/U-S-anticipates-difficult-discussions-with-Iran U.S. anticipates "difficult" discussions with Iran 2021-04-05 13:59

Shafaq News / The U.S. State Department played down expectations for indirect talks that begin on Tuesday in Vienna on Washington and Tehran resuming compliance with the 2015 Iran nuclear deal, saying it expected the talks to be difficult, Reuters reported.

“We don’t underestimate the scale of the challenges ahead. These are early days. We don’t anticipate an early or immediate breakthrough as these discussions, we fully expect, will be difficult,” State Department spokesman Ned Price told reporters during his daily briefing on Monday.

Doug_W Silver:$24.96 -0.10

Butterfly   https://ninanews.com/Website/News/Details?key=897446

Al-Kazemi: We will not leave the lecturers unfairly, and we will discuss their issue in the cabinet session

Monday 05, April 2021 23:52 Prime Minister Mustafa Al-Kazemi affirmed that he would not leave the lecturers unfairly, and their topic would be discussed in the cabinet session to find a prompt and fair solution to them.

"We will not leave you without your fairness, and we will not allow any party or person to bid at the expense of your feelings, and we have tried to solve the problem through the budget.  " An urgent and fair solution to you. ”

butterfly Oh poor Maliki has to put his nose in where it may get cut off. If memory serves me, he came close one time........ Al-Maliki's office calls for the head of the Finance Committee to apologize and not to mix the papers

Monday 05, April 2021 23:48 Hisham Al-Rikabi, a spokesman for the media office of the head of the State of Law coalition, Nouri Al-Maliki, called on the head of the Finance Committee, Haitham Al-Jubouri, to apologize and not to mix the papers after the people directed sharp criticism to them.

Al-Rikabi said in a tweet about regret: the position of the Chairman of the Finance Committee, who claimed that all the blocks agreed to reduce the price of the dinar in a meeting of political forces.

He added: The fact is that the representative of the state of law in the meeting proved his objection and left the meeting and the position of the state of law did not change in all the meetings and statements.

And he demanded the necessity of restoring the exchange rate to its previous condition.

butterfly Cardinal Sacco discusses with Al Kaabi and Al Jabri the results of the Pope’s visit and respect for diversity and pluralism in Iraq

Monday 05, April 2021 22:43 Patriarch Cardinal Louis Raphael Sacco discussed with the First Deputy Speaker of Parliament Hassan Karim al-Kaabi and Haider al-Jabri, Director of the Media Office of Muqtada al-Sadr, the results of the Pope’s visit to Iraq.

A statement issued by Cardinal Sacco stated that the meeting, which was held at the headquarters of the Patriarchate in Mansour, dealt with the visit of His Holiness Pope Francis, and the respect for diversity and pluralism.

butterfly  https://www.thenationalnews.com/mena/iraq/iraq-s-plan-to-diversify-regional-trade-relations-aims-to-fend-off-iran-s-influence-1.1197721  Iraq's plan to diversify regional trade relations aims to fend off Iran's influence

UAE and Saudi Arabia have both allocated $3 billion for joint investment funds with Iraq April 5, 2021

Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, welcomes Iraq's Prime Minister Mustafa Al Kadhimi upon his arrival in Abu Dhabi, UAE. AFP

Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, welcomes Iraq's   strategy of diversifying its trade relations is aimed at repelling Iran’s influence in the country, by reaching out to the wider region for investment opportunities, experts and officials said on Monday.

Saudi Arabia and the UAE separately announced this week that they will invest $3 billion in Iraq following Prime Minister Mustafa Al Kadhimi’s visit to the Gulf. The joint funds raise Gulf financial commitments in the country of 40 million people to levels not seen in decades.

“By reaching out to UAE and other gulf states, Iraq is trying to regain alternative investments and lifelines so it’s not stuck to one primarily trading partner,” Renad Mansour, director of the Iraq initiative at London’s Chatham House, told The National.

“Iraq at the moment is primarily linked to investments and economic relations with Iran and to a lesser extent Turkey, which puts it in a position where it is behest of Iran and its interest,” Mr Mansour said.

The country is not only diversifying away from oil as a resource but is also looking at different economic partners rather “than being stuck to one which is Iran”, he said.

butterfly  Due to years of conflict and rampant corruption, Baghdad needs the support of Gulf states to revive its economy. Oil production was cut in the first half of 2020 as oil demand crashed when the world ground to a near-halt due to Covid-19 lockdowns.   Iraq’s economy shrank by almost 11 per cent in 2020 due to the pandemic.

So far the government is trying to be less dependent on oil and the country currently exports dates and bitumen – for road surfacing – to the UAE.

butterfly  The UAE’s initiative aims to strengthen economic and investment relations, create new opportunities for cooperation and partnership, and advance economic, social, and developmental growth in support of Iraq, a statement by state news agency, WAM, said.

Saudi Arabia said the joint fund will be for the "benefit of the Saudi and Iraqi economies, with the participation of the private sector from both sides.”

It was welcomed by politicians and parliamentarians who claim the diversification will assist in stabilising the country.

“The visit to Riyadh and Abu Dhabi can be seen as part of a strategic tour that may result in a rearrangement of the region's priorities and to help secure Iraq’s role in the Arab world,” Raad Al Dahlaki, an Iraqi member of parliament said.

“It is a basis for restoring Iraq’s role in the region and to confront challenges and plots facing the Arab cause,” Mr Al Dahlaki said.

Iraq’s populist cleric, Muqtada Al Sadr, said Baghdad's move towards diversifying its trade relations is a "step in the right direction."

butterfly  "We have a rich history with the two countries, and let us have a prosperous future with them," Mr Al Sadr said.  The cleric commands a large following among the urban poor of Baghdad and southern cities and was once the leader of a powerful militia who fought against American forces stationed in Iraq.

Baghdad lies on the fault line between the Shiite Muslim power Iran and the Sunni-ruled countries that are Tehran's regional rivals, among them Saudi Arabia.   "Let Iraq be the hub of peace in the entire region," he said.

What happens next?   Over the years, corruption and economic mismanagement have worsened conditions even further for the country to function adequately.

During times of economic crises, Iraq looks for foreign investment but as soon as oil prices rise, it often allows politics to carry on as usual, Mr Mansour said.

The opportunities presented by Abu Dhabi and Riyadh present an important lifeline to the Iraqi economy as it’s “economic system is rotten.”

“The political economy of corruption will most likely mean that any of these types of investment deals will not meet the ends for which they seek,” Mr Mansour said.  It will not resolve Iraq's “fundamental economic problem,” he said.

butterfly  Cash flow is not the issue but instead is more of a structural problem, particularly the question of how funds are split between political parties, he said.

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