Business
Financial investment and capital gains | The Express Tribune
Short-term capital gains do not bode well for developing economy where millions are underemployed or unemployed
LAHORE:
The current macroeconomic framework promotes a private debt financed consumption boom through fresh borrowing at a low policy rate. People have increased consumption by borrowing through commercial banks. They have been buying consumer durable goods for the last couple of years.
This consumption is also supported by a boom in the stock market as the PSX index is hovering around 176,000. The index has jumped around 52% in calendar year 2025.
The increase in stock prices creates a feeling among investors and they perceive themselves as if they are rich. On this basis, they increase consumption. This is an indirect way to increase consumption demand in the economy where rising asset prices play a pivotal role. In the economic jargon, this is known as the wealth effect.
Financial capitalists invest in real estate, stock market and gold. All these fall in the category of financial investments. These investments involve a change of ownership in the secondary market. Considering the current stagnancy of the real estate market, wealthy individuals have also parked their capital in gold in the last couple of years to get quick returns.
Gold prices are at an all-time high of Rs460,000 per tola. The high international prices of gold have made these returns possible for the wealthy investors. In the jargon, these returns are known as capital gains.
Capital gains attract financial investments to a great extent. If capital gains are high, they reduce the acquisition cost of financial assets. The reduction in acquisition cost makes these investments quite attractive for financial investors/capitalists. Furthermore, entry and exit from the financial markets are relatively easy as they are quite organised and orderly.
On the other hand, capital gains increase the replacement cost of real investment. In simple words, it means that new real investment becomes costly. Here, the real investment means investment in equipment, machinery, tools and fixtures, which increases the productive capacity of the economy.
In addition, real investments cannot be recouped easily. For instance, a garment manufacturer cannot exit his business with ease as he has to sell his machines, tools and fixtures and this process takes a considerable period of time. If he sells them, it will depreciate their value. Therefore, capital gains have a depressing effect on real investments.
Financial assets also attract portfolio investments from abroad. Foreign institutional investors chase low-yielding stocks in order to book high capital gains. If shares are valued low at the stock market, these financial investors buy stocks which would re-rate their valuations. This would perpetuate the boom at the stock market.
Capital gains have a positive impact on the financial account of balance of payments (BOP). However, they have a negative impact on the current account balance owing to higher imports, which contribute to current account deficit.
On the one hand, capital gains would increase consumption, which will increase the aggregate demand. On the other hand, capital gains would decrease real investment and turn the current account balance into a deficit by attracting capital inflows from abroad in the form of portfolio investment. This would reduce the aggregate demand.
However, the economy follows a consumption-led regime, where the positive effect of consumption outweighs the negative effects of real investment and capital inflows.
In short, financial investors/capitalists have been calling the shots in this globalised world. High capital gains divert investment away from the real investment. These short-term gains are obtained at the cost of long-term loss, ie, productive capacity. This situation does not bode well for a developing economy where teeming millions are either underemployed or unemployed.
The writer is an independent economist and authored a book: Pakistan’s Structural Economic Problems in the era of Financial Globalisation
Kayla Epsteinand
Osmond Chia
Getty ImagesUS President Donald Trump has said Venezuela “will be turning over” up to 50m barrels of oil to the US, after a surprise military operation that removed President Nicolás Maduro from power.
The oil will be sold at its market price, Trump posted on social media, adding that the money would be controlled by himself and used to benefit the people of Venezuela and the US.
His comments come after he said the US oil industry would be “up and running” in Venezuela within 18 months and that he expected huge investments to pour into the country.
Analysts previously told the BBC it could take tens of billions of dollars, and potentially a decade, to restore Venezuela’s former output.
Trump posted on Truth Social on Tuesday: “I am pleased to announce that the Interim Authorities in Venezuela will be turning over between 30 and 50 MILLION Barrels of High Quality, Sanctioned Oil, to the United States of America.
“This Oil will be sold at its Market Price, and that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States!”
His comment came a day after Delcy Rodríguez, formerly Venezuela’s vice-president, was sworn in as its interim president. Maduro has been brought to the US to face drug-trafficking and weapons charges.
On Monday the US president told NBC News: “Having a Venezuela that’s an oil producer is good for the United States because it keeps the price of oil down.”
Representatives from major US petroleum companies planned to meet the Trump administration this week, the BBC’s US partner CBS reported.
Analysts who previously spoke to the BBC were sceptical that Trump’s plans would have a major impact on the global supply – and therefore price – of oil.
They suggested that firms would look for reassurance that a stable government was in place, and even when they did invest, their projects would not deliver for years.
Trump has argued in recent days that American oil companies can fix Venezuela’s oil infrastructure.
The country has an estimated 303bn barrels – the world’s largest proven reserve – but its oil production has been in decline since the early 2000s.
The Trump administration sees significant potential for its own energy prospects in Venezuela’s reserves.
Increasing the country’s production of oil would be expensive for US firms.
Venezuelan oil is also heavy and more difficult to refine. There is only one US firm, Chevron, currently operating in the country.
Asked for comment about Trump’s plans for US oil production in Venezuela, Chevron spokesman Bill Turenne said the company “remains focused on the safety and wellbeing of our employees, as well as the integrity of our assets”.
“We continue to operate in full compliance with all relevant laws and regulations,” Turenne added.
ConocoPhillips, a major US oil company that no longer has a presence in Venezuela, “is monitoring developments in Venezuela and their potential implications for global energy supply and stability”, said spokesman Dennis Nuss.
“It would be premature to speculate on any future business activities or investments,” Nuss said.
A third company, Exxon, did not immediately respond to requests for comment.
While justifying the seizure of Maduro from Caracas, Trump also claimed that Venezuela “unilaterally seized and stole American oil”.
Vice-President JD Vance echoed those claims on X after Maduro was taken, writing that “Venezuela expropriated American oil property and until recently used that stolen property to get rich and fund their narcoterrorist activities”.
The reality is more complex.
US oil companies have a long history in Venezuela, extracting oil under licence agreements.
Venezuela nationalised its oil industry in 1976 and in 2007, President Hugo Chavez exerted more state control over the remaining foreign-owned assets of US oil firms operating in the country.
In 2019, a World Bank tribunal ordered Venezuela to pay $8.7 billion to ConocoPhillips in compensation for this 2007 move.
That sum has not been paid by Venezuela, so at least one US oil company has outstanding compensation which is owed to it.
But BBC Verify’s Ben Chu said the claim Venezuela has “stolen” American oil is too simplistic, as experts said the oil itself was never actually owned by anyone except Venezuela.
Sainsbury’s has announced it is launching a new graduate programme focused on developing skills in artificial intelligence.
The FutureMaker programme, which will take on nearly 50 graduates in the firm’s store support centre, will last for two years and aims to help graduates develop critical digital and artificial intelligence (AI) skills, which the retailer views as vital for supporting future business growth.
The decision to focus the new graduate programme on digital and AI skills was informed by “extensive research” into the future needs of the business, the company said.
Graduates on the scheme will also develop skills in areas including data and analytics, as well as business decision-making.
It comes after warnings earlier this year that UK graduates were facing the toughest job market in years, according to job search site Indeed.
The number of roles advertised for graduates was down 33% on the previous year, its lowest level in seven years.
By focusing its programme on these skills, Sainsbury’s hopes to open more accessible pathways for graduates, improving their digital confidence by demystifying AI and machine learning and enabling more responsible use of these tools.
A Sainsbury’s spokesperson said: “As a proud people-first business, our colleagues are at the heart of everything we do.
“We’re committed to investing in early careers and have spent time identifying the skills our future leaders will need to help us build a sustainable retail talent pipeline.”
In 2024, the retailer announced a partnership with Microsoft to enhance customer and colleague experience with AI, including “upskilling programmes for Sainsbury’s colleagues, helping them learn and grow in the new AI-driven economy”.
Clodagh Moriarty, Sainsbury’s chief retail and technology officer, said of the partnership at the time: “It’s one of the key ways we’re investing in transforming our capabilities over the next three years, enabling us to take another big leap forward in efficiency and productivity.”
But the supermarket stressed that the new graduate programme was not specifically connected to that partnership.
Applications for the graduate scheme open on January 9.
Over the past two years, Sainsbury’s has announced two rounds of job cuts, axing 1,500 jobs in February 2024 and 3,000 jobs in January 2025, as part of plans to simplify its business and cut £1 billion in costs in a challenging economic environment.
Part of its overhaul has also included increasing investment in automation and AI.
CCI has invoked section 48 of the law, which extends liability to senior executives in charge of company operations. Under this provision, individuals can be held personally accountable and face penalties of up to 10% of their average income over the last three financial years if the violations are proven.Last week, TOI had sent questionnaires to several companies that are under probe but they did not respond to the queries.Based on the investigation by its director general (DG) investigation, the CCI issued an order to the 31 steel companies named in the probe. The firms were directed to submit their audited financial statements, including balance sheets, income and expenditure accounts and profit & loss accounts, for the period from 2015-16 to 2022-23. They have also been asked to provide certified details of turnover linked to the alleged violations, this information is usually used to assess potential penalties, if any.
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