Why Wall Street is Betting Big on a Stronger Yuan

The cost of doing business in Pakistan is about one-third higher than in regional peers and the gap appears to be discouraging entrepreneurship and quietly pushing more people toward salaried employment instead of pursuing their own startups, recent private research shows.

Last month, Pakistan Business Forum (PBF), a national organization representing trade and industry, found that operating a business in the country is 34% costlier than in neighboring South Asian countries. Ahmed Jawad, the PBF's chief organizer, shared the findings with Nikkei Asia in an interview on Friday.

Jawad said the analysis was based on industrial data available as of December 2025 and that a mix of structural factors is driving the costs. "Fuel taxes remain high, with an additional petroleum development levy of about 80 rupees ($0.28) per liter, while interest rates are around 12.5%, nearly double the 6 to 7% seen in the region," he said.

He added that electricity expenses average about 34 rupees per unit, compared with a regional average of 17 rupees. The sharp depreciation of Pakistan's currency -- which tumbled from 110.7 rupees per dollar in January 2018 to 280 rupees per dollar in December 2025 -- has made imports far more expensive. "In addition, the overall tax burden can reach up to 55%, significantly higher than in regional economies," he told Nikkei Asia, referring to the effective tax rate for companies.

Bilal Ghani, executive director of research and consultancy firm Gallup Pakistan, said hat input costs have risen largely because of policy choices that restrict competition. "Trade and industrial policies have often protected domestic producers by restricting imports of cheaper foreign inputs," he told Nikkei. "Instead of allowing firms to access globally competitive inputs, businesses are forced to rely on more expensive local alternatives."

He further added that Pakistan is perceived as a high-risk jurisdiction due to terrorism, money-laundering concerns, and geopolitical tensions. Therefore, its firms face far more licensing, certification and due diligence requirements than companies in most other developing countries. "[Those] requirements raise the fixed cost of doing business, particularly for exporters and technology firms," he said.

The costly environment appears to be hurting Pakistan's economy, particularly exports, which have struggled to achieve sustained growth since 2021, as Jawad offering as examples the "hundreds of medium-sized businesses in the textile sector" that have shut down in recent years. "The trade agreement between the European Union and India, which is favorable to India, could further disadvantage Pakistan's textile sector," he added.

That is Pakistan's largest exporting industry, accounting for around 60% of total overseas shipments in fiscal year 2024. In December last year, the PBF wrote a letter to Prime Minister Shehbaz Sharif, asking the government to address the cost of doing business with concrete measures, including regionally competitive electricity tariffs and more competitive corporate tax rates.

In addition to the PBF's analysis, Gallup Pakistan released one covering household income and expenditure last month. It shows that salaried employees now account for 60.1% of the workforce, up from 53.4% in fiscal 2010-2011, while self-employment has remained low at 21.8%, down from 24.4% in 2010-2011.

Ali, a business graduate based in Islamabad who asked that his full name not be used, said he tried to start a restaurant after completing his studies but later abandoned the plan in frustration. "I was hounded by so many government departments that I ultimately decided to give up the idea and started looking for a job," he told Nikkei.

"The cost of doing business is high, which is pushing more people toward salaried jobs, while bureaucratic hurdles, limited access to finance and ongoing political and economic uncertainty continue to constrain small businesses," Niaz Murtaza, an independent economist based in Islamabad, told Nikkei.

Ghani, from Gallup, points toward an educational dimension in which the number of salaried workers in Pakistan is increasing. "Entrepreneurship, risk-taking and opportunity recognition were never meaningfully integrated into higher education curricula in Pakistan. Instead, students were socialized to become efficient workers for large firms and multinationals," he added.

Source: Asia_Nikkei

A Rapid Shift In India’s Trade Position

Manufacturing Emerges As The Early Beneficiary

IT Services Gain From Improved Political Relations

Pharmaceuticals Poised For Structural Gains From The EU Deal

Market Reaction And Investor Sentiment

A Strategic Repositioning Rather Than An Overnight Shift

Source: CNBC

Gold prices surged over 2% on February 4, extending a powerful rally that began the previous day with the metal's best performance since 2008. The move was driven by a combination of bargain hunting and a softer U.S. dollar, which made bullion more attractive to international buyers.

As of 9:12 a.m. Singapore time, spot gold was trading 2.2% higher at US$5,044.74 per ounce. This followed a massive 5.9% gain on February 3, its largest single-day jump since November 2008. The precious metal had previously hit a record high of US$5,594.82 on February 29.

Dollar Weakness Provides Key Support

A key factor fueling gold's recovery was the U.S. dollar, which fell against most major currencies on February 3. Traders appeared to be consolidating recent gains in the greenback, which had been powered by strong U.S. economic data and expectations of a less dovish Federal Reserve after President Donald Trump nominated Kevin Warsh as its next chair. A weaker dollar makes gold, which is priced in dollars, more affordable for investors holding other currencies.

According to Daniel Ghali, a senior commodity strategist at TD Securities, the recent wave of forced selling in precious metals has likely concluded. However, he cautioned that the market's recent turbulence could deter retail investors.

"The intense volatility over the last week could certainly keep retail participants on the sidelines, removing an increasingly important cohort of buyers," Ghali noted.

Volatility Persists After Market Whiplash

The latest price action comes after a period of extreme volatility. In January, precious metals soared on speculative momentum, geopolitical tensions, and concerns over the independence of the Federal Reserve.

However, many market watchers warned that the rally was too large and too fast. This sentiment proved correct when the surge abruptly ended late last week. Gold experienced its most significant plunge since 2013, while silver suffered its biggest daily drop on record.

Analysts at Bank of America expect this elevated volatility in precious metals to continue. Niklas Westermark, the bank's head of EMEA commodities trading, stated that gold possesses a stronger long-term investment case than silver. He added that while market turmoil might influence position sizing, it is unlikely to diminish overall investor appetite for gold.

Banks Maintain Bullish Long-Term Outlook

Despite the recent turbulence, many major financial institutions remain confident in gold's long-term prospects. On February 2, Deutsche Bank reiterated its forecast that bullion will eventually rally to US$6,000 an ounce, signaling that the fundamental drivers for the precious metal remain intact.

The Reserve Bank of India (RBI) is widely expected to hold its key interest rate steady on Friday, shifting its focus from further cuts to ensuring its previous monetary easing effectively filters through the economy. A new U.S.–India trade deal has eased immediate pressure on the central bank to provide more stimulus.

A Reuters poll conducted before the trade deal was announced showed a strong consensus, with 59 of 70 economists anticipating no change in rates. While a minority had called for another cut due to low inflation and U.S. tariff risks, the trade agreement has reinforced the case for a policy pause.

Dhiraj Nim, an economist at ANZ Bank, noted, "The U.S.-India trade deal further bolsters the case for the RBI keeping rates unchanged this week."

Since last February, the RBI has already cut its policy repo rate by a total of 125 basis points, bringing it down to 5.25%.

A "Goldilocks" Economy Supports Stability

The decision to hold rates is supported by India's strong economic performance. RBI Governor Sanjay Malhotra described the economy as being in a "Goldilocks phase" at the last policy meeting in December.

Official forecasts reflect this optimism:

• GDP growth is projected to hit 7.4% in the current financial year.

• The government's economic adviser anticipates growth between 6.8% and 7.2% for the next fiscal year.

• The RBI’s own forecast for the fiscal year ending March 31 was 7.3% growth with CPI inflation at 2%.

Figure 1: Projections for India's key economic indicators show a declining repo rate alongside stabilizing inflation and robust GDP growth through 2025.

This backdrop of steady growth and controlled inflation gives the central bank room to observe the impact of its past actions.

The Challenge of Policy Transmission

Despite the aggressive rate cuts over the past year, the benefits have not fully reached borrowers. The primary challenge for the RBI is now "policy transmission"—ensuring its lower rates translate into lower funding costs across the financial system.

A key indicator of this disconnect is the benchmark 10-year government bond yield, which has barely fallen. This yield serves as a reference for pricing corporate and bank loans, and its stickiness has kept borrowing costs high, limiting the economic boost from the RBI's easing.

"The challenge now is to ensure that transmission of previous rate cuts is not hampered, while the central bank remains on an extended pause," said Kaushik Das, chief economist for India, Malaysia, and South Asia at Deutsche Bank.

Figure 2: The spread between India's 10-year bond yield and the RBI's repo rate has widened significantly, indicating that central bank rate cuts are not being fully passed through to the broader market.

Market Pressures and the RBI's Next Move

The bond market has been under significant pressure from multiple fronts. To manage foreign capital outflows from equity markets prior to the trade deal, the RBI sold $30 billion from its foreign exchange reserves between September and November. This intervention drained rupee liquidity from the system, adding to the strain on bond markets already grappling with record government borrowings.

To counter these pressures and improve policy transmission, analysts expect the RBI to increase its open market bond purchases by at least 1 trillion rupees ($10.92 billion). This move would inject liquidity into the market, ease the strain, and help bring down yields.

The need for RBI support has grown more urgent following the announcement of a higher-than-expected government borrowing program for the upcoming fiscal year. As economists at Nomura stated, "Higher market borrowing numbers mean concerns around bond supply will remain a challenge for policy transmission."

Tech Weakness In The US Sets The Tone

Asia Markets Track The Downturn Unevenly

Stock-Specific Pressures Add To Volatility

Gold’s Breakout Signals Defensive Positioning

Source: CNBC

Thailand's sluggish economy has pushed its stocks and bonds into a precarious position: cheap, overlooked, and increasingly off the radar for global capital. With a general election this weekend, major money managers are signaling caution, viewing the vote as more likely to worsen existing challenges than to solve them.

Persistent issues like high household debt and weak growth have already taken their toll. In the past year, Thai stocks were among the world's worst performers, while its bonds lagged most emerging market peers in 2026. Investors see little reason to believe the country's fourth leader in three years can deliver the reforms needed to fix poor governance and policy drift.

The market consensus points to a steeper yield curve, driven by potential interest rate cuts and government spending, while equities remain depressed as capital seeks opportunities elsewhere.

"Thailand does look cheap in terms of valuations," said Christopher Leow, chief investment officer at Principal Asset Management in Singapore. "But looking cheap is probably not enough."

Global Fund Managers Keep Their Distance

The sentiment is clear among institutional investors, who are limiting their exposure ahead of the election.

• T Rowe Price Group Inc. has reduced its bond holdings and remains cautious on local currency debt, waiting for clear policy direction before committing more capital.

• Allianz Global Investors holds a broadly underweight allocation but is considering a shift into longer-duration bonds.

• Aberdeen is favoring defensive stocks and exporters to minimize exposure to the domestic Thai economy, warning that a fragile coalition government could lead to uneven policy execution.

"For lasting investor confidence, the election is only the starting point," said Nattanont Arunyakananda, an investment manager at Aberdeen in Bangkok. He stressed that the outlook depends on credible reforms and sustained fiscal and monetary support. "Without reforms that lift productivity and improve the investment climate, any post-election bounce is likely to remain tactical rather than structural."

History Suggests a Short-Lived Rally

Historically, Thai markets have seen a brief lift after elections. Over the past three votes, the benchmark Stock Exchange of Thailand (SET) Index gained an average of 3.3% in the month following the polls. However, these rallies often fade as political realities set in.

A chart showing mixed results for the Thai SET index one and six months after elections from 2001 to 2023.

The ongoing worries are forcing a rethink of Thai assets in international portfolios. Once valued for their exposure to global growth, they have lost appeal due to a stagnant economy, weak tourism, and recurring political instability.

Debt and Spending Promises Weigh on Markets

A key concern is the expected rise in debt issuance needed to fund campaign promises from leading political parties. With the central bank forecasting economic growth of just 2.2% in 2025—trailing regional peers—the government has already approved a US$1.4 billion food and services subsidy program.

These additional spending pledges have helped push the spread between Thailand's two- and 10-year bond yields to its widest point since October 2023.

A line graph showing the spread between Thailand's 2-year and 10-year government bonds steepening to its highest level since October 2023.

"We'll be looking for them to invest into unleashing the potential of the economy," said Leonard Kwan, a portfolio manager at T Rowe Price in Hong Kong. While Thailand has some fiscal capacity, he added, "the key question is effectiveness in how they utilize it."

Finding Value Amid the Gloom

Despite the bearish outlook, some signs of value are emerging. Thai stocks are trading at around 14 times forward earnings, which is below both their five-year average and a gauge of regional peers. The steepening yield curve, with expectations of higher fiscal spending already priced in, may also present opportunities at the long end.

BlackRock Inc., while holding less exposure than a year ago, has recently begun buying more bonds with longer maturities, according to Navin Saigal, its Asia Pacific head of fundamental fixed income in Singapore.

The Verdict: A 'Muddle-Through' Scenario

Ultimately, investors are watching to see if the election will be followed by meaningful reforms or if policy will be watered down by the compromises needed to form a government. The frequent turnover in political leadership is also dimming hopes for lasting change.

"With no clear majority for any single party in sight, it's hard to envisage a sharp turn in investor confidence," said Wai Kiat Soh, a portfolio manager at Ninety One in Singapore. "The 'muddle-through' scenario will likely play out once again."