profit.com.pk Saturday, 9 June, 2012 sBP’s MONETARY POLICY DECIsION WHAT DON’T KILL YA MAKEs YA MORE sTRONG KARACHI STAFF REPORT Global macroeconomic uncertainties particularly in Euro-zone, lower consumer confidence and slow- down in demand in emerging markets have damp- ened sentiments in global commodities market, said a report issued by Topline Research on Friday. From beginning of May, it said, the CRB index that constitutes of 19 commodities is down 11% while price of WTI crude, Arab light crude and coal prices are down 20%, 16% and 3%, respectively. Cotton which was already under-pressure has de- clined by 16%. Other commodity prices like PTA and Px have also come under pressure, while fertil- izer prices have remained relatively immune. The decline in international commodities prices is expected to have divergent impact on different listed sectors. Decline in international oil prices is expected to negatively affect E&P sector's prof- itability. A US$10/bbl change in oil prices alters sector's FY13 earnings by 6.3% with POL being the most sensitive (7.0%), while OGDC and PPL earn- ings change by 6.5% and 5.9%, respectively. For OMCs, we expect APL to remain relatively immune but for PSO it is a blessing in disguise. De- clining oil price would reduce PSO’s margin on FO and cause inventory loss, but reduction would also slowdown the built-up of circular debt and subse- quently improve its liquidity position. In similar context, IPPs liquidity position is also expected to improve due to reduce built-up of cir- cular debt. For refineries, reduce prices means lower benefit of deemed duty in absolute terms and result in inventory loss. For every US$10 change in the oil prices, deemed duty changes by US$1.4/bbll, which effect NRL and ATRL annualized earnings by Rs3 and Rs2 per share. However, for NRL, the reduction in oil prices bodes well for lube margins at least in the short run. Decline in coal prices could further improve margin of local cement manufacturers. Our estimates suggest that every US$10 per ton decline in coal price improves DGKC and Lucky FY13 earnings by 8-9% Similarly, falling steel prices bodes well for Auto Assemblers and slightly improve their mar- gins, assuming PKR-Yen parity to remain same. Compared to other commodity prices, international urea and DAP prices remained relatively immune. However, domestic urea prices still more than 30% discount to int'l prices, the change in int'l prices has minimal bearing on predominantly urea produc- ers like FFC, FATIMA and Engro. For DAP producers like FFBL, the int'l DAP prices has remained relatively immune to commodity price fall boding well for the profitability. On textile sector, fall in cotton prices is expected to reduce mar- gins on cotton yarn., However, given integrated business, like NML, the impact would be slightly di- luted given the diversified portfolio that include high end products. In chemical sector we cover LOTPTA. Since price of Int PTA (end product) reduced by 20%, while overall PTA-Px margin have decline by 20% boding negatively for the company. Por favor? Page 2 KARACHI ISMAIL DILAWAR T HE central bank Friday kept the dis- count rate intact at 12 percent for the next two months in view of macro- economic challenges the country’s troubled economy would be facing. The mone- tary policy decision was taken by the bank’s central board of directors at a meeting held here under the chairmanship of SBP Governor Yaseen Anwar. “The economy basically needs fundamental reforms to engineer a turnaround in economic performance,” observed the board in the policy decision issued after the meeting. It said inflation expectations could not be effec- tively anchored around single digit targets with- out limiting fiscal borrowings from the banking system, particularly the SBP. The size of the external current account deficit for FY13 as percent of GDP is projected to be approximately the same as in FY12. “How- ever, due to the anticipated rise in debt pay- ments in FY13, the economy would need substantial external inflows to preserve our for- eign exchange reserves,” it said. Further, the problems in the euro zone have increased uncertainty in the global econ- omy,’ Monetary policy decision said and added that being a safe haven for investors, the US dollar has strengthened significantly in the past few weeks against almost all currencies, espe- cially the euro, and Pakistan rupee was no ex- ception. “While managing the external and fiscal pressures remain more of an immediate concern, the real challenge lies in reviving pri- vate investment in the economy. Inflationary pressures have not subsided either despite slug- gish GDP growth. At the same time, the sched- uled banks continue to avoid extending credit to private businesses, which are already suffer- ing from energy shortages. Fiscal authority, on the other hand, is accu- mulating short term domestic debt at a rapid pace. The impact of SBP’s monetary policy, in these circumstances, is less effective. The econ- omy basically needs fundamental reforms to engineer a turnaround in economic perform- ance. For instance, inflation expectations can- not be effectively anchored around single digit targets without limiting fiscal borrowings from the banking system, particularly the SBP. Borrowing from the banking system has risen substantially during this fiscal year, Rs 1098 billion (Rs707 billion excluding the Rs391 billion related to the partial settlement of circu- lar debt), from 1st July to 25th May, FY12 with borrowing from SBP (on cash basis) expanding by Rs 414 billion during the same period. In fact, the latter has accelerated between 1st April and 4th June, 2012, increasing by Rs310 billion, pushing the outstanding stock to Rs1660 billion (on cash basis). This behaviour contravenes the SBP (Amendment) Act 2012, which requires not only zero quarterly borrow- ings but also envisages their retirement in the next seven years. Not surprisingly, the year-on- year CPI inflation has increased to 12.3 percent in May 2012. A noteworthy aspect of inflation behaviour is its persistence at this high level alongside slack economic activity. A probable explanation of this persistence is that the ex- pansionary effect of the fiscal position is off-set- ting the weak private demand, especially investment demand. SBP is not expecting a sharp increase in inflation but its continuation around current levels in FY13. The issue is not just aggregate demand pressures but also peo- ple’s expectations. Therefore, limiting and re- tiring budgetary borrowings from the banking system and implementation of consistent and credible policies would help in moving away from this undesirable equilibrium. The sheer volume of borrowing from the banking system and expectations that this trend will continue, in the absence of fiscal reforms, has made banks complacent. They are simply channeling the economy’s incremental de- posits, raised at 7 percent on average, to gov- ernment securities that give an average return of approximately 12 percent across different maturities. Specifically, the scheduled banks perceive the government as a captive borrower and can afford to avoid the private sector with- out taking a hit on their profits. The real issue is the structural gap between fiscal revenues and expenditures of the fiscal authority. This gap cannot be narrowed without fiscal reforms. In particular, it would be difficult to re- duce the scale of borrowings from the sched- uled banks and adhere to the legal requirements of limiting and retiring borrow- ings from the SBP without generating addi- tional revenues. Falling private investment to GDP ratio to 12.5 percent in FY12 according to provisional data, also echo’s the need for fiscal reforms. Absence of an enabling business envi- ronment due to persistent energy shortages and precarious law and order conditions has damp- ened the demand for fresh private credit. Therefore, urgent energy sector reforms are required to boost business confidence and ar- rest the declining investment to GDP ratio. As for the developments in the external sector, the issue is not the size of the external current ac- count deficit but lack of sufficient external in- flows to finance it. Cushioned by robust worker remittances of $10.9 billion, the current ac- count deficit was $3.4 billion during the first ten months of FY12. After incorporating the esti- mated deficit for the remaining two months, it is likely to remain around 1.7 percent of GDP for FY12, which is not large for a developing country like Pakistan. The net flows in the cap- ital and financial account, on the other hand, were only $1.4 billion during the same period. Accounting for repayments of the IMF loans during the year, SBP’s net liquid foreign ex- change reserves have declined to $11.3 billion by end-May 2012 compared to $14.8 billion at end-June 2011. For FY13, the size of the exter- nal current account deficit as percent of GDP is projected to be approximately the same as in FY12. However, due to anticipated rise in debt payments in FY13, the economy would need substantial external inflows to preserve our for- eign exchange reserves. Further, the problems in the euro zone have increased uncertainty in the global economy. Being a safe haven for investors, the US dollar has strengthened significantly in the past few weeks against almost all currencies, espe- cially the euro, and Pakistan rupee was no ex- ception. Appreciation of the US dollar in international markets is probably one explana- tion why oil prices have eased somewhat, de- clining from a peak of $130 per barrel (Saudi Arabian Light) on 3rd April 2012 to $97 per barrel on 1st June 2012. This, together with expected global slow- down may keep the oil prices softer compared to earlier projections. Given that almost one third of Pakistan’s total import bill is due to oil payments, this would be a positive develop- ment. For instance, with the current quantum of petroleum products and crude imports at 21 million metric ton, a decline of $5 per barrel in international oil prices could save up to $700 million in import payments in FY13. “After an assessment of the macroeconomic challenges faced by our economy, the Central Board of Di- rectors of SBP has decided to keep its policy rate at 12 percent,” said the SBP policymakers. India allows investments from Pakistan NEW DELHI ONLINE In order to strengthen bilateral economic relations, India has al- lowed foreign direct investment from Pakistan, Commerce and Industry Minister Anand Sharma has said. Emphasizing the need to increase economic engagement with the neighboring countries, Sharma said: "We have allowed Indian investments in Pakistan and Pakistan's investment, what- ever is the amount, to come to India". He said that without en- gaging with Pakistan, South Asian economic integration would not be possible. "We are clear that without engaging with Pakistan, South Asia Free Trade Agreement ( SAFTA) could not move for- ward," he said at a Ficci function. The minister said that in the last one year, trade ties between India and Pakistan have move forward. To allow investments from Pak- istan, the Department of Indus- trial Policy and Promotion ( DIPP) had sent a proposal to Fi- nance Ministry for changes in Foreign Exchange Management Act (FEMA) to allow FDI from Pakistan. Sources said that in order to address the security con- cerns over investments from Pak- istan, FDI proposals from the neighbouring country can be routed through the Foreign In- vestment Promotion Board (FIPB) which is headed by Eco- nomic Affairs Secretary in the Fi- nance Ministry. As per the present FDI policy, a non-resi- dent entity, other than a citizen of Pakistan or an entity incorpo- rated in there, can invest in India. The govt had earlier allowed in- vestments from Bangladesh under the FIPB route. Further, Sharma said that Chinese busi- nessmen are also interested in in- vesting in India. "We will be encouraging and welcoming Chi- nese investments," he added. g Commodity prices fall, massively impact listed sectors g Keeps policy rate unchanged at 12pc for macroeconomic challenges You rise, you fall, you’re down when you rise again They vied to chalk out new rate; no one knew where the chalk was Layout 3 pages_Layout 1 6/9/2012 2:04 AM Page 1
Transcript
profit.com.pk Saturday, 9 June, 2012
sBP’s MONETARY POLICY DECIsION
WHAT DON’ T KILL YA MAKEs YA MORE sTRONG
KARACHISTAFF REPORT
Global macroeconomic uncertainties particularly inEuro-zone, lower consumer confidence and slow-down in demand in emerging markets have damp-ened sentiments in global commodities market,said a report issued by Topline Research on Friday.
From beginning of May, it said, the CRB indexthat constitutes of 19 commodities is down 11%while price of WTI crude, Arab light crude and coalprices are down 20%, 16% and 3%, respectively.Cotton which was already under-pressure has de-clined by 16%. Other commodity prices like PTAand Px have also come under pressure, while fertil-izer prices have remained relatively immune.
The decline in international commodities pricesis expected to have divergent impact on differentlisted sectors. Decline in international oil prices isexpected to negatively affect E&P sector's prof-itability. A US$10/bbl change in oil prices alterssector's FY13 earnings by 6.3% with POL being themost sensitive (7.0%), while OGDC and PPL earn-ings change by 6.5% and 5.9%, respectively.
For OMCs, we expect APL to remain relatively
immune but for PSO it is a blessing in disguise. De-clining oil price would reduce PSO’s margin on FOand cause inventory loss, but reduction would alsoslowdown the built-up of circular debt and subse-quently improve its liquidity position.
In similar context, IPPs liquidity position is alsoexpected to improve due to reduce built-up of cir-cular debt. For refineries, reduce prices meanslower benefit of deemed duty in absoluteterms and result in inventory loss. Forevery US$10 change in the oil prices,deemed duty changes by US$1.4/bbll,which effect NRL and ATRL annualizedearnings by Rs3 and Rs2 per share.However, for NRL, the reduction in oilprices bodes well for lube margins atleast in the short run.
Decline in coal prices couldfurther improve margin oflocal cement manufacturers.Our estimates suggest thatevery US$10 per ton decline in coalprice improves DGKC and Lucky FY13earnings by 8-9%
Similarly, falling steel prices bodes well for
Auto Assemblers and slightly improve their mar-gins, assuming PKR-Yen parity to remain same.
Compared to other commodityprices, international urea and DAPprices remained relatively immune.
However, domestic urea prices stillmore than 30% discount to int'l prices,the change in int'l prices has minimalbearing on predominantly urea produc-ers like FFC, FATIMA and Engro. ForDAP producers like FFBL, the int'l DAPprices has remained relatively immuneto commodity price fall boding well for
the profitability.On textile sector, fall in cotton
prices is expected to reduce mar-gins on cotton yarn., However,
given integrated business, likeNML, the impact would be slightly di-
luted given the diversified portfoliothat include high end products.
In chemical sector we cover LOTPTA.Since price of Int PTA (end product) reduced by
20%, while overall PTA-Px margin have decline by20% boding negatively for the company.
Por favor? Page 2
KARACHIISMAIL DILAWAR
THE central bank Friday kept the dis-count rate intact at 12 percent for thenext two months in view of macro-economic challenges the country’s
troubled economy would be facing. The mone-tary policy decision was taken by the bank’scentral board of directors at a meeting held hereunder the chairmanship of SBP GovernorYaseen Anwar. “The economy basically needsfundamental reforms to engineer a turnaroundin economic performance,” observed the boardin the policy decision issued after the meeting.It said inflation expectations could not be effec-tively anchored around single digit targets with-out limiting fiscal borrowings from the bankingsystem, particularly the SBP.
The size of the external current accountdeficit for FY13 as percent of GDP is projectedto be approximately the same as in FY12. “How-ever, due to the anticipated rise in debt pay-ments in FY13, the economy would needsubstantial external inflows to preserve our for-eign exchange reserves,” it said.
Further, the problems in the euro zonehave increased uncertainty in the global econ-omy,’ Monetary policy decision said and addedthat being a safe haven for investors, the USdollar has strengthened significantly in the pastfew weeks against almost all currencies, espe-cially the euro, and Pakistan rupee was no ex-ception. “While managing the external andfiscal pressures remain more of an immediateconcern, the real challenge lies in reviving pri-vate investment in the economy. Inflationarypressures have not subsided either despite slug-gish GDP growth. At the same time, the sched-uled banks continue to avoid extending creditto private businesses, which are already suffer-ing from energy shortages.
Fiscal authority, on the other hand, is accu-mulating short term domestic debt at a rapidpace. The impact of SBP’s monetary policy, inthese circumstances, is less effective. The econ-
omy basically needs fundamental reforms toengineer a turnaround in economic perform-ance. For instance, inflation expectations can-not be effectively anchored around single digittargets without limiting fiscal borrowings fromthe banking system, particularly the SBP.
Borrowing from the banking system hasrisen substantially during this fiscal year, Rs1098 billion (Rs707 billion excluding the Rs391billion related to the partial settlement of circu-lar debt), from 1st July to 25th May, FY12 withborrowing from SBP (on cash basis) expandingby Rs 414 billion during the same period.
In fact, the latter has accelerated between1st April and 4th June, 2012, increasing byRs310 billion, pushing the outstanding stock toRs1660 billion (on cash basis). This behaviourcontravenes the SBP (Amendment) Act 2012,which requires not only zero quarterly borrow-ings but also envisages their retirement in thenext seven years. Not surprisingly, the year-on-year CPI inflation has increased to 12.3 percentin May 2012. A noteworthy aspect of inflationbehaviour is its persistence at this high levelalongside slack economic activity. A probable
explanation of this persistence is that the ex-pansionary effect of the fiscal position is off-set-ting the weak private demand, especiallyinvestment demand. SBP is not expecting asharp increase in inflation but its continuationaround current levels in FY13. The issue is notjust aggregate demand pressures but also peo-ple’s expectations. Therefore, limiting and re-tiring budgetary borrowings from the bankingsystem and implementation of consistent andcredible policies would help in moving awayfrom this undesirable equilibrium.
The sheer volume of borrowing from thebanking system and expectations that this trendwill continue, in the absence of fiscal reforms,has made banks complacent. They are simplychanneling the economy’s incremental de-posits, raised at 7 percent on average, to gov-ernment securities that give an average returnof approximately 12 percent across differentmaturities. Specifically, the scheduled banksperceive the government as a captive borrowerand can afford to avoid the private sector with-out taking a hit on their profits. The real issueis the structural gap between fiscal revenuesand expenditures of the fiscal authority.
This gap cannot be narrowed without fiscalreforms. In particular, it would be difficult to re-duce the scale of borrowings from the sched-uled banks and adhere to the legalrequirements of limiting and retiring borrow-ings from the SBP without generating addi-tional revenues. Falling private investment toGDP ratio to 12.5 percent in FY12 according toprovisional data, also echo’s the need for fiscalreforms. Absence of an enabling business envi-ronment due to persistent energy shortages andprecarious law and order conditions has damp-ened the demand for fresh private credit.
Therefore, urgent energy sector reforms arerequired to boost business confidence and ar-rest the declining investment to GDP ratio. Asfor the developments in the external sector, theissue is not the size of the external current ac-count deficit but lack of sufficient external in-flows to finance it. Cushioned by robust worker
remittances of $10.9 billion, the current ac-count deficit was $3.4 billion during the first tenmonths of FY12. After incorporating the esti-mated deficit for the remaining two months, itis likely to remain around 1.7 percent of GDPfor FY12, which is not large for a developingcountry like Pakistan. The net flows in the cap-ital and financial account, on the other hand,were only $1.4 billion during the same period.Accounting for repayments of the IMF loansduring the year, SBP’s net liquid foreign ex-change reserves have declined to $11.3 billionby end-May 2012 compared to $14.8 billion atend-June 2011. For FY13, the size of the exter-nal current account deficit as percent of GDP isprojected to be approximately the same as inFY12. However, due to anticipated rise in debtpayments in FY13, the economy would needsubstantial external inflows to preserve our for-eign exchange reserves. Further, the problemsin the euro zone have increased uncertainty inthe global economy.
Being a safe haven for investors, the USdollar has strengthened significantly in the pastfew weeks against almost all currencies, espe-cially the euro, and Pakistan rupee was no ex-ception. Appreciation of the US dollar ininternational markets is probably one explana-tion why oil prices have eased somewhat, de-clining from a peak of $130 per barrel (SaudiArabian Light) on 3rd April 2012 to $97 perbarrel on 1st June 2012.
This, together with expected global slow-down may keep the oil prices softer comparedto earlier projections. Given that almost onethird of Pakistan’s total import bill is due to oilpayments, this would be a positive develop-ment. For instance, with the current quantumof petroleum products and crude imports at 21million metric ton, a decline of $5 per barrel ininternational oil prices could save up to $700million in import payments in FY13. “After anassessment of the macroeconomic challengesfaced by our economy, the Central Board of Di-rectors of SBP has decided to keep its policy rateat 12 percent,” said the SBP policymakers.
India allowsinvestmentsfrom Pakistan
NEW DELHIONLINE
In order to strengthen bilateraleconomic relations, India has al-lowed foreign direct investmentfrom Pakistan, Commerce andIndustry Minister Anand Sharmahas said. Emphasizing the need toincrease economic engagementwith the neighboring countries,Sharma said: "We have allowedIndian investments in Pakistanand Pakistan's investment, what-ever is the amount, to come toIndia". He said that without en-gaging with Pakistan, South Asianeconomic integration would notbe possible. "We are clear thatwithout engaging with Pakistan,South Asia Free Trade Agreement( SAFTA) could not move for-ward," he said at a Ficci function.The minister said that in the lastone year, trade ties between Indiaand Pakistan have move forward.To allow investments from Pak-istan, the Department of Indus-trial Policy and Promotion (DIPP) had sent a proposal to Fi-nance Ministry for changes inForeign Exchange ManagementAct (FEMA) to allow FDI fromPakistan. Sources said that inorder to address the security con-cerns over investments from Pak-istan, FDI proposals from theneighbouring country can berouted through the Foreign In-vestment Promotion Board(FIPB) which is headed by Eco-nomic Affairs Secretary in the Fi-nance Ministry. As per thepresent FDI policy, a non-resi-dent entity, other than a citizen ofPakistan or an entity incorpo-rated in there, can invest in India.The govt had earlier allowed in-vestments from Bangladeshunder the FIPB route. Further,Sharma said that Chinese busi-nessmen are also interested in in-vesting in India. "We will beencouraging and welcoming Chi-nese investments," he added.
g Commodity prices fall, massively impact listed sectors
g Keeps policy rate unchanged at 12pc for macroeconomic challenges
You rise, you fall, you’re down when you rise again
They vied to chalk out new rate;no one knew where the chalk was
Layout 3 pages_Layout 1 6/9/2012 2:04 AM Page 1
news02Saturday, 9 June, 2012
KARACHISTAFF REPORT
The GOP has defaulted on the sovereign guar-antee provided to the IPPs. The sovereign guar-antee, which formed the basis of the financingand investment by the private sector in IPPs,has been defaulted on thrice by the GOP in May2012. No measures are being taken to mitigatethe situation.S.NO. 30 DAy NOTIcE DATE OF GOP DEFAULT AMOUNT
1 19 March 2012 5 May 2012 18,540,359,302
2 4 April 2012 22 May 2012 6,298,781,523
3 12 April 2012 29 May 2012 1,196,229,572
TOTAL 26,035,370,397
Further two notices issued by the IPPs in Mayand June 2012 are also expected to go unno-ticed, resulting in two more defaults in end June
and end July respectively.The sources in the Ministry of Water and
Power concede that the government of Pakistanhas defaulted on its sovereign guarantee threetimes since March 2012. They said that theseIPPs are in fact doing a favour to the power con-sumers by producing electricity from whateverdaily payments are made to them. In fact theyconceded the daily payments hardly cover 40percent of the fuel expenses of these eight IPPs.The country thus remains deprived of around
1,000 MW of electricity they admitted.The government of Pakistan also failed to
honour the decision of the Economic Coordina-tion Committee of the cabinet to pay Rs18 bil-lion immediately. After the GOP default, theIPPS asked the government to pay at least Rs18billion and ensure supply of fuel in case the fu-ture payments are delayed.
An analyst Intazar Mahdi confirmed that itis now an established fact that the governmenthas defaulted on its sovereign guarantees. He
said the affected parties have the right to go tothe courts inside and outside Pakistan for re-demption of guaranteed amount. Left with nochoice, when the IPPs exercise this option Pak-istan's credit rating would be downgraded to'junk' and ongoing discussions with the IMFwould be seriously jeopardised.
The foreign reserves of Pakistan are alreadydepleting and with principal IMF repaymentscoming up, this would pose a serious problem.The rating of Pakistan bonds in the internationalmarkets is also affected with yields at recordhigh. This will have a serious impact on the abil-ity of Pakistan to raise debt in the foreign mar-kets. With a GOP default, any future investmentin the power sector would be impossible toarrange. Unfortunately it appears that there isno light at the end of the tunnel also.
MADRID/BERLINREUTERS
FIvE senior EU and Germanofficials said deputy financeministers from the single cur-rency area would hold a con-
ference call on Saturday morning todiscuss a Spanish request for aid, al-though no figure for the assistance hasyet been fixed. Later the Eurogroup,which consists of the euro zone's 17 fi-nance ministers, will hold a separate callto discuss approving the request, thesources said. "The announcement is ex-pected for Saturday afternoon," one ofthe EU officials said. The dramatic devel-opment comes after Fitch Ratings cutMadrid's sovereign credit rating by threenotches to BBB on Thursday, highlight-ing the Spanish banking sector's expo-sure to bad property loans and tocontagion from Greece's debt crisis.
"The government of Spain has real-ized the seriousness of their problem," asenior German official said. He addedthat an agreement needed to be reachedbefore a Greek election on June 17 whichcould cause market panic and increasethe threat of Athens leaving the euro zoneif left-wing parties opposed to Greece'sEU/IMF bailout win. The EU and Ger-man sources spoke to Reuters on condi-tion of anonymity due to the sensitivity ofthe matter. Spain's deputy prime minis-ter, Soraya Saenz de Santamaria, said thegovernment needed to have at least a pre-liminary estimate of how much extra cap-ital the banks needed before taking adecision. The International MonetaryFund is expected to announce immi-nently the results of its own audit.
"It's important to respect the pro-ceedings because it's important to knowthe ground," she told reporters, while notdenying that the Eurogroup would holda call on Spain's needs. "Before takingany kind of decision one should at leasthave a first estimate of the ground andthe ground means figures."
The European Commission'sspokesman on economic affairs saidSpain had made no request for aid butthe euro zone stood ready to help if nec-essary. "If such a request were to be
made, the instruments are there, ready tobe used, in agreement with the guidelinesagreed in the past," Amadeu Altafaj said."We are not at that point."EFSF FUNDS
If a request is made, Spain is ex-pected to ask for help from the eurozone's 440 billion euro bailout mecha-nism, known as the European FinancialStability Facility. The amount will de-pend on the IMF audit and a separate re-port due by June 21 from twoindependent assessors, Oliver Wymanand Roland Berger. Financial industrysources told Reuters on Thursday thatthe IMF report, to be made public onMonday, had estimated Spanish banks'minimum capital needs at 40 billioneuros ($50 billion), rising to 90 billioneuros for a fuller recapitalization.
Officials in Spain said the parametersfor the IMF and the private-sector auditswere effectively the same, meaning Spaincould make the request for aid on thebasis of the IMF figures rather than hav-ing to wait for the other assessment.
The euro zone has been under strongpressure from the United States, China,Canada and other major partners to takeswift, decisive action to prevent the debtcrisis spreading and causing greaterdamage to the world economy.
U.S. President Barack Obama saidEuropean leaders appeared to be movingin the right direction, but he also empha-sized that he was being careful not to tellEurope what to do. "They understand the
seriousness of the situation and the ur-gent need to act," Obama told a newsconference. Speaking in Berlin, GermanChancellor Angela Merkel said she wasnot pressing any country to take abailout, saying it was up to Spain to de-cide what it wanted to do: "It's down tothe individual countries to turn to us,"she said. "That has not happened so far,and therefore (we) will not exert anypressure." Fitch said the cost to the Span-ish state of recapitalizing banks strickenby the bursting of a real estate bubble, re-cession and mass unemployment couldbe between 60-100 billion euros ($75-$125 billion) - or 6 to 9 percent of Spain'sgross domestic product. The higher fig-ure would be in a stress scenario equiva-lent to Ireland's bank crash.BAILOUT LITE?
European shares and the euro fellamid mounting concern over Spain fol-lowing the Fitch downgrade although theSpanish stock market climbed nearly twopercent on the prospect of help for thebanks. While Spain would join Greece,Ireland and Portugal in receiving a Euro-pean financial rescue, officials said theaid would be focused only on its bankingsector, without taking the Spanish stateout of credit markets.
That would be crucial to avoid over-straining the euro zone's rescue funds,which would struggle to cover Spanishgovernment borrowing needs for the nextthree years plus possible additional assis-tance for Portugal and Ireland.
POR fAvOR?Let’s share thecommon wealthg Pakistan keen to build
on economic ties withC’wealth partners: Bokhari
ISLAMABADAPP
Chairman Senate Syed Nayyer HussainBokhari has said that Pakistan was keen tobuild on the fraternal ties with other Com-monwealth partners especially in the eco-nomic sector. He expressed these viewsduring his speech on "Shaping Capitalismfor Global Prosperity and SustainableGrowth" delivered on the occasion of lunchhosted by the Secretary General Common-wealth Kamalesh Sharma to mark the Dia-mond Jubilee of Queen's coronation inLondon, says a press release received hereon Friday. The Queen was joined by Headsof State/Governments or their representa-tives belonging to 54 Commonwealthmember-countries. The Chairman Senaterepresented Prime Minister Syed YusufRaza Gilani. The Queen was presented asouvenir by the representatives of the Com-monwealth community and a group photowas also taken on the occasion. During theevent, Chairman Senate conveyed to theQueen felicitations from the Governmentand People of Pakistan on the auspiciousoccasion of the Diamond Jubilee. In hisspeech, Bokhari highlighted the need fordeveloped and developing countries to pro-mote sustainable and more equitable eco-nomic system. In this regard, he added,Pakistan provided a very attractive marketin the present global economic turmoil witha 56 million strong workforce. The Chair-man Senate said that instability in the re-gion had directly affected Pakistan whichhad lost thousands of precious lives of civil-ian and military personnel in the ongoingwar against forces of terror and extremism."Pakistan also had to pay a heavy economiccost. The devastating floods in 2010 and2011 had further compounded difficulties".The Chairman noted that despite thesechallenges, Pakistan's economy had shownextraordinary resilience; GDP growth ratein the last two years averaged around 3.4percent compared to less than two percentin the previous two years. Later, the Chair-man Senate participated in the DiamondJubilee Commonwealth Economic Forumat Mansion Hall, London.
sNGPL earnsRs2,361m profit
ISLAMABADAPP
The Sui Northern Gas Pipelines Lim-ited (SNGPL) earned a profit of Rs.2,361 million and paid an amount of Rs1,228 million in corporate taxes duringthe year 2010-11. Talking to APP, an official of the Min-istry of Petroleum said that the SNGPLduring the current year extended itstransmission network to a length of7,613 Km.Replying to a question, he said on theother side Sui Southern Gas CompanyLimited (SSGCL) earned a profit of Rs.4,795 million during 2010-11 and ex-tended its transmission network to alength of 3,337 Km.
UN food priceindex registerssharp drop inprices during May
UNITED NATIONSAPP
The United Nations Friday reported asharp drop in global food prices duringMay owing to generally favourable sup-plies, growing global economic uncer-tainties and a strengthening of the USdollar. The monthly food price index ofthe Rome-based Food and AgricultureOrganization (FAO) averaged 204 pointsin May, down 9 points from April, theagency said in a news release. This wasthe lowest level since September 2011.The index measures the monthly changein international prices of a basket offood commodities, including meat,dairy, sugar, and cereals. Crop priceshave come down sharply from their peaklevel but they remain still high and vul-nerable due to risks related to weatherconditions in the critical growingmonths ahead, said Abdolreza Abbass-ian, a senior grains economist with FAO. The agency raised the forecast forworld cereal production by 48.5 milliontonnes since May, with the bulk of theincrease expected to come mainly frommaize in the US amid an early start ofthe planting season and prevailingfavourable growing conditions. FAO'slatest forecast for world cereal produc-tion in 2012 stands at a record level of2,419 million tonnes, 3.2 per cent upfrom the 2011 record. However, with planting still to be com-pleted and much of the crop at veryearly stages of development, the finaloutcome will depend greatly onweather conditions in the comingmonths, the agency stated. Global riceproduction in 2012 is expected to in-crease by2.2 per cent from 2011, tosome 490 million tonnes, mostly re-flecting larger plantings in Asia. At the same time, the latest indicationspoint to a decrease of about 3 per centin the production of wheat this year, to680 million tonnes. FAO noted thatthis is still well above the average ofthe past five years.
g Government defaults on sovereign guarantee to IPPs
ISLAMABADAPP
An energy-deficient Pakistan offers richopportunities for investment in the gassector given the presence of massive andproven gas and coal reserves waiting tobe explored in Pakistan.
"Pakistan is currently facing consid-erable energy shortage due to a risingdomestic demand and conditions areideal for leading gas and oil companiesto go in Pakistan and capitalize on op-portunities for energy exploration," saidHigh Commissioner for Pakistan to
Malaysia Masood Khalid while visitingPakistan's pavilion set up at the 25thWorld Gas Conference 2012 that con-cluded in Kuala Lumpur Friday,says amessage received here.
A six-member Pakistani delegationled by Asim Murtaza Khan, ChairmanPetroleum Institute of Pakistan as wellas Managing Director Pakistan Petro-leum Ltd (PPL), attended the conferenceand held meetings with senior officialsof participating companies besides set-ting up a Pakistani pavilion highlightingthe potential and scope of gas and en-ergy sector in Pakistan. The five-day
conference organized by the Interna-tional Gas Union was attended by over5,000 industry professionals and com-panies showcasing latest developmentswith information on policies, strategies,technologies, challenges and opportuni-ties. The conference held after threeyears featured 14 keynote speakers, 10strategic panels, 4 luncheon addresses,42 technical sessions, 135 poster ses-sions, expert forums and 3 task forcesessions. The event also had a11,400sqm exhibition with 270 compa-nies from over 80 countries showcasingthe latest in technologies and develop-
ments within the gas industry.The International Gas Union was
founded in 1931. It is a worldwide non-profit organisation whose objective is topromote the technical and economicprogress of the global gas industry.
The members of the IGU are associ-ations and entities of the gas industriesin 77 countries which account for over95% of the natural gas traded aroundthe world, and maintain very close tieswith many other international energyorganisations. It consists of a total of 116members, of which 78 are charter mem-bers and 38 are associate members.
You are hereby invited to comeand drag us out of this mess
g spain poised to request EU bank aid
Triple Whammy!
g Oil companies invited to explore energy-deficient Pakistan
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news
Saturday, 9 June, 2012
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LG introduces the first realstreaming multimedia cloudfor all three screens
LAHORE: LG Electronics (LG) announcedthe beta opening of LG Cloud service recentlywith the aim of providing seamless connectiv-ity and streaming access to all digital contentacross various electronic devices. Althoughcloud is today’s hottest IT buzzwords, LGCloud is the first that allows users to manageand consume all types of content on “threescreens” which includes Android smartphones,PCs and smart Tvs (including but not limitedto CINEMA 3D models) without a separate set-top box. To use the service, users need todownload the LG Cloud app from Google Playor LG SmartWorld app store from their An-droid smartphones, LG SmartWorld store fromtheir LG Smart Tvs or the LG Cloud website(www.lgecloud.com) from their PCs or laptops.LG’s Cloud service automatically synchronizessmartphone content with the cloud server andthe user’s PC and Tv. Photos and videos takenwith the smartphone can be viewed andstreamed to the PC or Tv almost instanta-neously. videos edited on a PC can be up-loaded to LG Cloud for viewing seconds lateron a smartphone. Unlike other cloud services,there’s very little waiting or lag time since thecontent is streamed to the Tv, PC or smart-phone, not downloaded first. The difference isin LG’s Real-time Streaming Transcoding tech-nology. The conversion happens on the serverin realtime, not on the device. There is no needto worry about installing codecs or converters,
everything happens seamlessly and in thebackground with no involvement from theuser. No other cloud service can make thissame claim. The service also works perfectlywith 3D content. vacation videos taken with anLG 3D smartphone can be uploaded via 3G orWi-Fi to the LG Cloud service. Back home inthe comforts of the living room, the family canwatch the vacation footage as it streams fromLG Cloud to their LG CINEMA 3D Smart Tv insuperb three dimensions.
AsiaMoney rates KAsBsecurities as Pakistan’s BestDomestic Equities HouseKARACHI: KASB Securities Ltd, Pakistan’sleading brokerage firm, has been ranked theBest Domestic Equities House in Pakistan byAsiaMoney, continuing its stronghold onPakistan’s equity markets related polls andawards. The latest recognition follows KASBSecurities’ recent dominance of the Asia-Money Polls, where KASB secured the topspot in all seven of the research sub-cate-gories as well as winning best sales and bestexecution. Closer to home, KASB Securitieswas rated as Pakistan’s Best Equity House byCFA Association of Pakistan for the third yearrunning in a poll of domestic institutionalclients during the CFA Excellence Awardsheld in mid 2011, while KASB’s analysts ex-tended their hold on the Best Analyst Awardto 6 years. The recognition both at home andabroad consolidates KASB’s positioning asPakistan's leading capital markets franchiseand is an appreciation of the company’s focuson providing clients with exceptional serviceand value-added investment recommenda-tions and research. KASB (www.kasb.com) isthe first brokerage house in Pakistan with aninternational research affiliation and hasbeen publishing joint Pakistan research withBank of America - Merrill Lynch for nearlytwo decades.
IfP Group appoints Eventage assole representative in PakistanKARACHI: IFP Group which is a leading ex-hibition and trade shows organizing companyhas appointed Eventage, a fast growing Pak-istani event management and PR company asits sole business affiliate for the territory ofPakistan with the mandate of raising the par-ticipation of Pakistani companies in the up-
coming trade shows in Qatar. Qatar, becauseof its strategic location in the Gulf area, strongeconomy and business friendly environmenthas gained edge over other states in the regionfor international events including commercial,recreational and sports. It is lucrative marketfor business to business and business to con-sumer and would open avenues for Pakistaniindustrialists, businessmen and serviceproviders to build up business relations. Theimportance of Qatar can be gauged by the factthat it has won an international bid for hold-ing the world’s largest sports event FIFA.Eventage aims at increasing the trade volumebetween Pakistan and Qatar particularly in thefields of construction, textile, energy, sportsand food industries.
special, physically challengedNBP employees being trained KARACHI: National Bank of Pakistan (NBP)besides offering employment opportunities tothe disabled people in discharge of its Corpo-rate Social Responsibilities (CSR) has takenanother initiative to impart them training totransform them to useful bankers and be ableto serve the society in a better way to gainrecognition and respect. Under the Umbrellaof Training and Organization DevelopmentGroup such trainings have already been con-ducted for the disabled employees of Sahiwal,Multan, Bahawalpur, D.G Khan, Gujranwala,Sialkot etc. NBP Training center of Peshawerwill be conducting training program for all itsdisabled employees in June 2012 working inNorthern Areas including KPK Province and indue course all parts of the country will be cov-ered under this training.
Interbank RatesUS Dollar 94.1465UK Pound 145.4186Japanese Yen 1.1859Euro 117.4289
Dollar EastBuy Sell
US Dollar 94.60 95.20Euro 117.22 118.98Great Britain Pound 144.93 147.06Japanese Yen 1.1767 1.1939Canadian Dollar 90.68 92.52Hong Kong Dollar 12.00 12.24UAE Dirham 25.62 25.97Saudi Riyal 25.11 25.43Australian Dollar 92.32 95.13
KARACHISTAFF REPORT
AFTER the budget announcementa negative trend was seen atKarachi Stock Exchange. At localequity market benchmark KSE-
100 share index plummeted by 158.60points or 1.16 percent to finish the day’strading at 13,558.70 points, as comparedto 13,717.30 points of the second last work-ing day of the week on Thursday.
Ahsan Mehanti, Director at Arif HabibInvestments Limited stated that the stocksfell at KSE on institutional profit-taking ashopes dim over reduction in SBP key pol-icy rates on fears for double digit inflationfor next fiscal year.
KSE-All share index shed 106.65points or 1.10 percent to end the day at9,550.94 points, KSE-30 share index lost162.18 points or 1.37 percent to end theday at 11,708.96 points while KMI-30share index shed 282.36 points or 1.19 per-cent to close the day at 23,466.87 level.
Trading took place in 353 companieswhere losers outnumbered gainers 80 to195 while values of 78 stocks remain intact.Bourse traded 124.437 million shares after
opening at 110.652 million shares and thevalue of traded shares was Rs 4.019 billionas compared to Rs 2.759 billion of the pre-vious trading session. He added that thestocks fell across the board on limited for-eign interest, fall in global stocks and com-modities, concerns over fall in rupee dollarparity.
Jahangir Siddiqui Company was thetop traded company of the day with 21.968million shares and gained Rs 0.90 to reachRs 13.93. D.G.K.Cement was on the secondposition with 13.087 million shares andshed Rs 1.28 to reach Rs 39.82. They werefollowed by Engro Corporation, AzgardNine, Jahangir Siddiqui Invesments Lim-ited, Engro Foods Limited, National BankPakistan and Fauji Cement with turnoversof 7.409 million, 7.168 million, 6.080 mil-lion, 6.005 million, 3.666 million, and2.979 million shares respectively.
Rafhan Maize XD was the biggest pricegainer of the day and increased by Rs132.97 to end at Rs 2963.47 followed byMithchells Fruit up Rs 16.45 to end at Rs345.63. Major losers included UniLeverPakistan down by Rs 51.50 to lock at Rs7208.50 and Sanofi-Aventis Pakistan offRs 9.13 to close at Rs 183.00 respectively.
Bears at KsE aregood with numbers
HONEY: fOREIGN sELLING fEARs
ISLAMABAD: Fahad Qadir, Director, Public Affairs andcommunications, coca-cola Pakistan, along withmedia representatives and a group of students fromvarious universities of Islamabad on a field trip atNathia Gali, organised by coca-cola Pakistan incollaboration with WWF on World Environment Day.
LCCI is fed up with sBP!LAHORE
STAFF REPORT
Lahore Chamber of Commerce and Industry Fridayexpressed its dismay over the State Bank of Pak-istan’s decision to keep policy rate unchanged andcalled for bringing it to single digit to encourage newinvestments, for revival of businesses and to give ajumpstart to the economy which is at a standstill.In a statement issued here, the LCCI President IrfanQaiser Sheikh said that the availability of cheapermoney to the businessmen is needed to expedite theprocess of industrialisation that would ultimately re-sult in much-needed job creation. LCCI president, however, endorsed the SBP viewpoint regarding economic and power sector reformssaying the reforms should be introduced in consul-tation with the private sector that this the engine ofgrowth. Irfan Qaiser Sheikh said that the businesscommunity understands that the ongoing electricitycrisis could be overcome to some extent by control-ling electricity pilferage. The president said that on-going economic scenario shows that there washardly any time left for economic managers of thecountry to manage things on the economic fronttherefore, they should all understand that a cut inthe policy rate is absolutely necessary to boost upeconomic activities in the country.He added that all the major economies, despite hav-ing higher inflation, have either curtailed or are inthe process of reducing interest rates to protect theirrespective economies. LCCI president further saidthat the State Bank of Pakistan should understandthat the continued tighter stance was damaging thenational economy. It was forestalling industrialisa-tion process in the country, he added.“If cheaper money would not be made available to thebusinessmen, nobody would put up new ventures.”LCCI president also urged the government to pass onthe benefit of cut in oil prices in the internationalmarket as the cost of doing business in Pakistan hadgone so high that Pakistani merchandises were nolonger competitive in the global market.
100,000 MW!!!g That’s how much electricity we
can generate through hydropower,so says Norwegian ambassador
ISLAMABADONLINE
Norwegian Ambassador to Pakistan Cecilie Landsverk on Friday saidthat Norwegian investors are interested in hydel power and gas sec-tors in Pakistan, adding that could generate 100000 MW through itshydropower resources to overcome energy crisis. Talking to vicePresident FPCCI Mirza Abdul Rehman, she said that optimum uti-lization of hydropower potential with the help of international com-munity could tackle power shortfall on sustainable basis. TheAmbassador said that Pakistan has fantastic potential to generateelectricity. Hydropower is the best way to bridge the gap betweenelectricity generation and consumption which would improve theratio of low-cost electricity in the system to stabilise the tariff, saidCecilie Landsverk. She said that Norwegian investors are also inter-ested in promising onshore and off shore gas sectors of Pakistan. MsLandsverk advised Pakistani business community to focus on foodchains in Norway. There are great business possibilities here but per-ception in west about Pakistan is not improving since last few yearswhich is blocking investment, she added. Mirza Abdul Rehman askedfor cooperation to overcome energy crisis, resume fisheries exportsand initiate projects aimed at imparting vocational training to youth.He said that Norway's fruit and vegetable chains should visit Pakistanto explore opportunities. Norwegian designers can help educate ourartisans about taste and demand patterns of European countries toboost exports, said Mirza Abdul Rehman. Mirza Abdul Rehman saidthat a delegation of FPCCI is to visit Norway to explore opportunitiesin different sectors including pharmaceutical and surgical sectors.FPCCI and Norway can join hands to establish vocational centres inKhyber Pakhtoonkhwa and Punjab, said Malik Sohail.
Balance of trade improves in MayKARACHI
STAFF REPORT
Pakistan’s balance of trade has improved by 13% in May 2012 overthe same month last fiscal year. During May 2012 the trade deficitwas US$ 1.7 billion while it was US$ 1.99 billion in May 2011. Asper released data, Pakistan exports during eleven months of thefiscal year 2011-12, decreased by 3.8 percent. The cumulativetrade figure shows that Pakistan’s exports during July-May wereUS$ 21.53 billion, while in the corresponding period of the last fis-cal year, exports were $ 22.39 billion. Imports during July-May2011-12 were $ 40.93 billion as compared to US$36.55 billion dur-ing the same period of the year 2010-11, registering a 12 percentgrowth. On the other hand Pakistan’s exports during May 2012were valued at US $ 2.16 billion which was 5.96% lower than thelevel of US$ 2.3 billion during May 2011. Imports during May2012 were valued at US $ 3.89 billion registering a decline of 9.3per cent over the imports of US $ 4.29 billion in May 2011.
g KsE nosedives by 158 points as apprehension overdouble-digit inflation for next fiscal reins supreme
