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ICCI’s sage advice g
Government should allocate more funds for crippling power shortages ISLAMABAD INP
Government should have allocated sufficient funds for the development of water and power sector in the announced budget 2012-13 to cope with energy crisis. There is dire need to initiate various power projects to bridge supply and demand gap as it is high time to develop all available energy generating resources including hydel, thermal and wind to end the energy crisis, Yassar Sakhi Butt, President Islamabad Chamber of Commerce and Industry (ICCI) made these remarks during a meeting held at Chamber House. ICCI President said that the industrial sector could not wait for long, therefore government should present quick solution to fill in the gap between demand and supply of energy. He said that Government should have allocated more funds in the announced budget for tapping Thar Coal potential because these reserves could play a pivotal role in meeting energy crises both in long term and short term which would enhance industrial competitiveness due to cost effectiveness. He expressed concern over the allocation of very diminutive money which has been set for the development of water and power sector that is only 6 percent of the total budget outlay and also stresses a mini budget every month in the form of gas and electricity price hike is destroying the industry and measures should be taken on immediate stop on these mini budgets. Yassar Sakhi Butt said that Government should also strive hard to attract foreign investors by giving them lucrative incentives to invest in energy projects in Pakistan, aiming to bring down expensive oil-based energy generation in the country. He said that Pakistan’s electricity demand was increasing by 7 per cent annually and allocation of small amount of funds in the budget 2012-13 for new dams and water reservoirs were insufficient. ICCI President said that high power tariff, a burden on businesses and consumers, could be reduced by utilizing the available water resources more efficiently as the water is the most viable and cheapest way to produce electricity.
Monday, 4 June, 2012
Textile industry in low cotton g
Depression prevails on cotton market; textile to receive Rs13b in budget
Auto vendors pumped up! g
Welcome changes in income tax and sales tax regimes in budget LAHORE ONLINE
KARACHI
D
ONLINE
EPRESSION prevailed in the cotton market while Textile Sector would be benefited by receiving Rs 13 billion in the budget 2012-13. The Karachi Cotton Association kept the spot rate unchanged at Rs 5,600. In ready business approximately, 1400 bales of cotton changed hands between Rs 5400-6000. The rate in Punjab and Sindh is between Rs.4700 to Rs. 5700. According to the market sources, the cotton traders were hoping that the activity may improve in the coming days as the dollar's rise was attracting the exporters. Sharing the same views Naseem Usman appreciating the government's decision to withdraw five percent sales tax (ST) on sizing, weaving and warping sectors and allow sales tax zero-rating facility to these sectors of the textile chain in budget (201213). In fact, despite pessimism about the world and
country's economy and political conditions, at the end of third quarter of out-going fiscal year, the textile sector has earned over nine billion dollars, indicating that the country may achieve better earnings from the exports of ready-made garments and cloth. Naseem Usman said that upward trend in the dollar likely to help in reviving the exports activity as some importing countries were taking interest in purchasing cloth of good quality. The ginners, who were worried about the resent fall in the prices of cotton, trying to sell at the prevailing rates just to get rid of fears of losses, they said. They said that decline in the cotton prices, particularly in the NY cotton market where, within a year, the rates came down from 2.27 dollars per pound to 70-72 cents. Thus, within 45 days, NY futures lost nearly 1618 cents per lb to 70-72 cents, which propelled the ginners to sell to save themselves from the future losses, he said.
Pakistan Association of Automotive Parts & Accessories Manufacturers Chairman Syed Nabeel Hashmi has termed the Budget 2012-13 normal, as under the circumstances its not very bad. Whilst commenting on the Budget, he stated that changes in the income tax and sales tax regimes are welcome. We are happy to see Rs 10 billion allocated for export promotion activities. We hope that now substantial amount shall be allocated to the Engineering and auto sector. Reduction of withholding tax from 1% to ½% on export proceeds shall further encourage exporters. We also welcome Hybrid vehicle tariff changes that may allow green vehicles into Pakistan. "Our strong demand to insure sales tax at auto parts markets and retail stage has once again not being implemented," he added. Further control on import of used cars regime that has so far taken away over 22,000 jobs from the Pakistan automotive industry is regretted. Some of the extensive proposals given to the government for enhancement of revenues including corrections of US$ import values of used cars remain unchanged which is very surprising. How can seven years old values still be used to assess values of now expensive vehicles. Many of the details are still being reviewed and the association shall further comment on the same once a detailed review is completed, he said.
RIsky tImes
World growth at risk as US employment stumbles WASHINGTON/LONDON REUTERS
In a shock that sent global equity markets into a dive, the U.S. economy added just 69,000 jobs in May, less than half what analysts expected and well below what is seen as needed to keep the jobless rate moving lower. Readings for the prior two months were also revised down, while the unemployment rate rose for the first time in almost a year, to 8.2 percent. The Labor Department report dealt a blow to confidence in the U.S. economic recovery, which until recently had contrasted with Europe's deteriorating economic situation and seemingly intractable political crisis over government budget deficits. "The negative employment data caps the recent deterioration in global economic data. From China to Europe to the U.S., all the data have shown real slowing," said John Kilduff, partner at Again Capital LLC in New York. The jobs figures, which raised expectations for another possible round of monetary easing from the Federal Reserve, also carried an important political dimension. If sustained, the weakness in employment could threaten President Barack Obama's bid for reelection in November. His challenger Mitt Romney said the data was "devastating news" for American workers. Worsening economic conditions were also being felt in major emerging countries such as Brazil and India, causing some economists to wonder just where growth is going to come from.
"The global economy downshifted sharply in May, and judging by these data, the U.S. followed suit," said Michelle Girard, economist at RBS. U.S. stocks fell sharply as the employment numbers compounded worries about upcoming elections in Greece and banking troubles in Spain, pushing the Dow Jones industrial average down over 2 percent on the day, and negative for the year. Treasury bond yields, in contrast, continued to hit record lows across the board as investors scurried for safety. In Britain, manufacturing activity shrank at its fastest pace in three years last month as the global economic slowdown hit demand for its goods. Markit's Eurozone Manufacturing Purchasing Managers' Index dropped to 45.1 in May from 45.9 in April, slightly above a preliminary reading but marking its lowest level since June 2009. It has been below the 50 mark that divides growth from contraction for 10 months. Similarly, the output index fell to 44.6 from April's 46.1, also the lowest since June 2009. U.S. manufacturing proved a bit more resilient, with the Institute for Supply Management's index falling modestly in May but still at a respectable level of 53.5. New orders also rose to their highest since April of 2011. CORE CONSTERNATION Earlier data from France and from Germany, Europe's largest economy, showed their manufacturing sectors contracted at the fastest pace in nearly three years. It was only German strength that had prevented the euro zone falling
into recession in the first quarter. Italy's factories contracted for the tenth straight month, while in Spain the PMI fell below that of Greece's, and posted the lowest reading of all the countries surveyed. The news in Britain, linked inexorably to the fortunes of the euro zone, was little better. The UK economy is mired in its second recession in two years and its PMI plunged to 45.9 last month, its lowest reading since May 2009 and the second-steepest fall in the survey's 20year history. Analysts had expected a more modest dip to 49.8. The euro zone's economic deterioration prompted more than a third of economists polled by Reuters this week to say the European Central Bank will cut interest rates from their record 1.0 percent low before the end of the year to boost growth. "Fundamentals certainly justify a rate cut any time soon. However, the ECB might keep some powder dry at next week's meeting and wait for the outcome of the Greek elections - and future of the monetary union - to change its policy stance," said Annalisa Piazza at Newedge. Greece, which unleashed the financial maelstrom that has ravaged the bloc, is due for a crucial second election on June 17 that may determine whether it remains a member of the currency union. Recent Reuters polls of fund managers, economists and money market traders have all suggested that the battered economy will still be a member of the 17-nation bloc come 2014.
BRICS TAKE A HIT Declines in two gauges of China's manufacturing sector were particularly worrying for investors looking to the world's second-biggest economy - the main engine of global growth in recent years - to pick up the slack created by Europe's debt crisis and the sluggish U.S. economy. China's annual economic growth is expected by analysts to fall to 7.9 percent in the second quarter, the first dip below 8 percent since 2009. That could pile pressure on authorities to attempt further stimulus. The country's official purchasing managers' index - covering China's biggest, mainly statebacked firms - fell more than expected to 50.4 in May, the weakest reading this year and down from April's 13-month high, with output at its lowest since November 2011. India was also feeling the pain. Growth in its gross domestic product slumped in the first quarter to a nine-year low of 5.3 percent as the manufacturing sector contracted. Brazil's economy barely expanded in the first quarter, setting the stage for another disappointing year and casting new doubt on the health of emerging markets. The economy grew just 0.2 percent compared to the final three months of 2011, less than half the pace economists expected. Things look to have remained weak so far in the second quarter too, with HSBC's manufacturing index for Brazil holding steady at 49.3, below the 50 mark that separates growth from contraction.
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Monday, 4 June, 2012
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History offers an ugly precedent for a Greek Euro exit L
SEAN VANATTA
OOKING over the precipice of national default and an untimely exit from the international monetary system, the Greek leader issued a somber warning to Europe’s economic leaders: “Bear in mind that if you leave the small states without assistance, a black future awaits Europe.” Delivered by Prime Minister Eleftherios Venizelos on April 15, 1932, less than two weeks before his nation would suspend loan repayments and exit the gold standard, the prescient remark and the trials that followed offer urgent lessons for the current Greek crisis. Before the euro bound the continent’s disparate economies into one monetary system, European governments relied on the gold standard to direct international monetary flows. This promised stability, but also required the vigorous coordination of each country’s central-bank policy. The turmoil of World War I disrupted the international order, pushing Greece and the rest of Europe off the standard, a blow from which the monetary system would never fully recover. MODERN STATE: Nevertheless, in the absence of alternatives, gold remained the standard for much of the rest of the developed world, and Greece made the drachma convertible to gold in 1928 under the leadership of Venizelos’s Liberal Party. A centerpiece of the government’s reform agenda, the return to gold, combined with vigorous economic development and large-scale public works, promised to turn Greece into a “sync h r o n o n kratos,” or modern s t a t e . Further, regilding the drachma offered pride to a Greek nation that had recently suffered prolonged inflation and political turmoil. This triumphant return was not only desired from within Greece, but imposed from without. Venizelos’s project was largely dependent on foreign financing, both in the form of government loans and direct foreign investment. The drachma’s convertibility was thus also meant to appease investors. So too was the regime’s simultaneous creation of the Bank of Greece, the country’s first true central bank, which replaced the privately owned National Bank of Greece as the issuer of the drachma. The Great Depression, though, came at an inopportune time for the fledgling Greek financial system. When the world economy began to decline in 1929, Greek exports dwindled, creating an acute imbalance -- more foreign currency left Greece through the purchase of imports than came in through the sale of exports, draining the currency reserves of the Bank of Greece. This situation was exacerbated by the country’s foreign debts, which also had to be repaid in foreign currencies, such as the U.K. pound and the French franc. As effectively gold equivalents, these monies undergirded the drachma; as they left Greece, each successive loan payment made defending the currency more difficult. To make matters worse, the country’s commercial banks began speculating against the drachma. Led by the recently displaced National Bank of Greece, these institutions purchased Greek national bonds, securities denominated in pounds and francs, on foreign exchanges -- securities that
would be worth more if the drachma was devalued. SpREADINg CONTAgION: Yet while Greece’s development had been financed by foreign borrowing, the government could hardly be accused of profligacy. As Greece’s exchange crisis increased during the late 1920s and into 1931, Venizelos’s government still managed a budget surplus, and relative to other nations the Greek economy suffered less from the global depression. Nevertheless, as economists such as Barry Eichengreen have conclusively shown, the gold standard, like the euro in recent years, spread economic contagion. The Venizelos government searched for a solution. In the first salvo of the “battle for the drachma,” the Greek parliament considered a regulatory package aimed at strengthening the Bank of Greece’s control over the country’s commercial-banking sector. But the National Bank of Greece and its allies intervened, so weakening the bill as to make it virtually ineffectual. As the crisis deepened, the government sought international assistance, turning next to the Europe-dominated League of Nations Finance Committee. The fight for the drachma was quickly draining Greece’s financial resources, and the government’s 1931 surplus flipped to a sharp deficit in 1932. To meet this shortfall, to keep up its bond payments and to retain the gold standard, Greece needed an injection of foreign capital. In a familiar tune, most recently sung in a German accent, Europe’s financial leaders demanded austerity as the price for assistance. The French delegate advocated closing schools and cutting the salaries of public employees by 20 percent. These were harsh terms, and Venizelos feared that the sacrifices demanded by the guardians of the international monetary system would doom his liberal regime and perhaps democracy in Greece. To build national unity, he reached out to the opposition Populist Party, hoping to form a coalition and share the burden of leadership. The party’s leader, Panayis Tsaldaris, curtly refused. By April 1932, Greece was out of options. Without substantive foreign intervention, the combined pressures of foreign debt service and hemorrhaging currency reserves finally forced Greece off the gold standard and into default. By tying his regime to the integrity of the drachma, Venizelos also ensured his fall from power, while the subsequent decline of his centrist Liberal Party shattered the Greek political system. COup, FASCISM: After default the Greek economy actually began a steady recovery as the nation turned its efforts toward self- sufficiency outside the global market. But in this case, the inward-looking recovery was a false friend, and the political instability that followed the drachma’s devaluation paved the way for a successful coup by General Ioannis Metaxas. Whether his regime was a fascist one or merely conservativeauthoritarian is an academic debate that accepts a simple fact: It wasn’t democratic. It is unlikely, whatever the outcome of Greece’s present currency crisis, that fascism lies in the nation’s future. Venizelos believed that liberal democracy couldn’t withstand the burdens imposed by the international monetary system, and his solution was to exit that system, with unfortunate results. Although to date Greek leaders have made different choices, a black future may still await Venizelos’s country -- and Europe - - if Greece and similar small states are left without assistance. Courtesy: Bloomberg
ASiA expoSed A
STEPHEN S ROACH
SIAN authorities were understandably smug in the aftermath of the financial crisis of 2008-2009. Growth in the region slowed sharply, as might be expected of export-led economies confronted with the sharpest collapse in global trade since the 1930’s. But, with the notable exception of Japan, which suffered its deepest recession of the modern era, Asia came through an extraordinarily tough period in excellent shape. That was then. For the second time in less than four years, Asia is being hit with a major external demand shock. This time it is from Europe, where a raging sovereign-debt crisis threatens to turn a mild recession into something far worse: a possible Greek exit from the euro, which could trigger contagion across the eurozone. This is a big deal for Asia. Financial and trade linkages make Asia highly vulnerable to Europe’s malaise. Owing to the former, the risks to Asia from a European banking crisis cannot be taken lightly. Lacking well-developed capital markets as an alternative source of credit, bank-funding channels are especially vital in Asia. Indeed, the Asian Development Bank estimates that European banks fund about 9% of total domestic credit in developing Asia – three times the share of financing provided by banks based in the United States. The role of European banks is especially significant in Singapore and Hong Kong – the region’s two major financial centers. That means that Asia is far more exposed to an offshore banking crisis today than it was in the aftermath of Lehman Brothers’ collapse in 2008, which led to a near-meltdown of the US banking system. The transmission effects through trade linkages are just as worrying. Historically, the US was modern Asia’s largest source of external demand. But that appears to have changed over the past decade. Seduced by China’s spectacular growth, the region shifted from US- to China-centric export growth. That seemed like a good move. Combined shipments to the US and Europe fell to 24% of developing Asia’s total exports in 2010 – down sharply from 34% in 1998-1999. Meanwhile, over the same period, Asia’s dependence on intraregional exports – trade flows within the region – expanded sharply, from 36% of total exports in 1998 to 44% in 2010. These numbers seem to paint a comforting picture of an increasingly autonomous Asia that can better withstand the blows from the West’s recurring crises. But research by the International Monetary Fund shows that, beneath the veneer, 60-65% of all trade flows in the region can be classified as “intermediate goods” – components that are made in countries like Korea and Taiwan, assembled in China, and ultimately shipped out as finished goods to the West. With Europe and the US still accounting for the largest shares of
China’s end-market exports, there can be no escaping the tight linkages of Asia’s China-centric supply chain to the ups and downs of demand in the major developed economies. Moreover, there is an important and worrisome twist to those linkages: China itself has tilted increasingly toward Europe as its major source of external demand. In 2007, the European Union surpassed the US as China’s largest export market. By 2010, the EU accounted for 20% of total Chinese exports, while the US share was just 18%. In other words, a China-centric Asian supply chain has made a big bet on the grand European experiment – a bet that now appears to be backfiring. Indeed, in China, a nowfamiliar pattern is playing out yet again – another slowdown in domestic growth stemming from a crisis in the advanced economies of the West. And, as goes China, so will go the rest of an increasingly integrated Asia. The good news is that, so far, the downside has been much better contained than was the case in late 2008 and early 2009. Back then, Chinese exports went from boom to bust in just seven months – from 26% annual growth in July 2008 to a 27% decline in February 2009. This time, the annual export gain has slowed from 20% in 2011 to 5% in April 2012 – a significant deceleration, to be sure, but one that stops well short of the previous outright collapse. That could change in the event of a disorderly euro breakup, but, barring that outcome, there is reason to be more sanguine this time around. The bad news is that Asia seems to be learning little from repeated external demand shocks. In the end, internal demand is the only effective defense against external vulnerability. Yet the region has failed to construct that firewall. On the contrary, private consumption fell to a recordlow 45% of developing Asia’s GDP in 2010 – down ten percentage points from 2002. In these circumstances, immunity from external shocks – or “decoupling,” as it is often called – seems fanciful. As with most things in Asia nowadays, China holds the key to supplying Asia’s missing consumer demand. The recently enacted 12th Five-Year Plan (2011-15) has all the right ingredients to produce the ultimate buffer between the dynamism of the East and the perils of a crisisbattered West. But, as the euro crisis causes China’s economy to slow for the second time in three and a half years, there can be little doubt that implementation of the Plan’s proconsumption rebalancing is lagging. There are no oases of prosperity in a crisis-prone globalized world. That is equally true for Asia, the world’s fastest-growing region. As Europe’s crisis deepens, the twin channels of financial and trade linkages have placed Asia’s economies in a vice. Rebalancing is the only way out for China and its partners in the Asian supply chain. Until that occurs, the vice now gripping Asia will only continue to tighten. Courtesy: Project Syndicate
Portfolio managers would buy Facebook stock, at lower price NEWYORK REUTERS
Technology glitches and a communications breakdown marred Facebook's $16 billion IPO on May 18, leading many observers to believe the initial stock was overvalued, contributing to its free-fall over the past two weeks. Still, the company isn't value-free and at some price, shares represent an opportunity, portfolio managers say. "There is no company in the Internet area that has gained such a huge market share in such a short period of time," said Mark Hawtin, portfolio manager of the $64 million GAM Star Technology
Strategy, a portfolio for offshore investors launched in February 2011. "It's absolutely a value asset in the Internet world." Hawtin believes $18 to $25 a share "would be a great entry point." While many analysts are concerned about Facebook's ability to generate revenues from advertising, Hawtin believes the model for the social media website will eventually be fee-based, which could prove very profitable. "I think they will be the launch page for people to get to the Internet," he said. Under a fee-based structure, vendors would pay Facebook for every user that goes to their site from Facebook. For example, if Netflix Inc paid Facebook $10 for every person who
came to their website, that could be $10 billion in revenue for Facebook, Hawtin said. The fact that Facebook's stock did not go up right away and keep climbing in its debut may serve the company well in the long run, said Jerry Jordan, manager of the $67.2 million Jordan Opportunity Fund. "If they were wellcoached by their bankers, they may have been told to wait for three to four months after the IPO (to announce) any big projects," Jordan said. "You don't want to show your leverage before an IPO." Jordan received a "tiny" allocation of Facebook stock pre-IPO and sold it the Monday after it started trading at a very small loss, he said. He may buy shares for the fund
again if it hits $25 per share, he said. Zack Shafran, manager of the $1.1 billion Ivy Science and Technology Fund is also unfazed by the concerns surrounding the stock's decline. "A lot of the time there is a real disconnect between a company and a stock, and the Facebook IPO is a good example of that," Shafran said. Shafran believes Facebook has a strong brand and organization, but is not convinced the company has shown evidence of a clear path to sustainable profitability. Even so, Shafran said if the stock comes down enough, he would strongly consider buying it because of its products, management team and brand recognition. He did not have a specific stock price in mind.
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Putin’s final act V
NILA L KHRUSHCHEVA
LADIMIR Putin’s new presidential term is just beginning, but it increasingly looks like the beginning of the end. Whenever Russia’s people pour into the streetsen masse, as they currently are doing, from that point on things never work out well for the authorities. In 1917, Russian Emperor Nicholas II had to abdicate in the wake of mass street protests, clearing the way for the Bolshevik Revolution. In 1991, the Soviet Union – then seemingly an unbreakable monolith – collapsed in just a few months. Hundreds of thousands went into the streets to confront the hardline coup against Mikhail Gorbachev’s perestroika. Now it is Putin’s turn. Moscow boasts Occupy Abai, modeled on the Occupy Wall Street movement in the United States (and located on a boulevard next to a statue of Kazakh poet Abai Kunanbaev, whose work has gone from regional obscurity to one of the top Russian Internet downloads in a month). Other cities are witnessing protests as well, all echoing the same call: Putin must go. Russians are famously patient and slow to rebel. And who would blame them? If protests have turned out badly for Russian governments over the centuries, they have ended even more disastrously for the protesters. In 1917, liberation from absolute monarchy ushered in an even more despotic form of absolutism. After 1991, Boris Yeltsin’s unruly privatization reduced millions of people to penury, and elevated a corrupt oligarchy into virtual rulership. But, despite being well aware of their history, once Russians turn on the man at the top, they don’t stop until he is out. History debunks Putin’s myth that the majority of the country supports him because they want “stability,” and that the protests, headed by “Western stooges,” are about to subside. They won’t abate. And the appointment of Igor Kholmanskikh, a tank factory foreman who had offered to come to Moscow with a burly cohort of his fellow assembly-line workers to defend Putin’s regime, to rule the vast Ural region will not scare them. Soft power has the upper hand today, and tanks can’t shut down the Internet. In nominating his new cabinet (which he deemed so important that he could not attend the G-8 summit), Putin’s Soviet origins could not be more obvious. Leonid Brezhnev used to have his culture and agriculture ministers swap places, as if – bound by the word culture – they were one and the same field of expertise. Putin’s new cabinet is a similar reshuffling of the incompetent with the unqualified. This debunks another
03
WALL stReet Week AHeAD
myth – that Putin, now back in charge, will abandon his vulgar anti-Western rhetoric and become a reformer, understanding that only a democratic Russia can maintain its territorial integrity and sovereignty. And the reason that he won’t embrace reform is that he can’t, because that old truism – absolute power corrupts absolutely – has proven itself once more. After more than a decade in power, Russia’s leaders are no longer capable of pursuing better polices. Their personal interests, and riches, are too dependent on maintaining the status quo. Of course, Russia has seen this pattern before as well. I will never forget what my great-grandmother Nina used to say about the corrupting nature of power in our own family. “Regrettably, the Khrushchev of 1962 wasn’t the Khrushchev of 1956.” My great-grandfather denounced Stalin’s cult of personality, only to be worshipped – for example, in the over-the-top documentary Our Nikita Sergeevich (1961) – for his “super vision” of how to diminish imperialism and “catch up with West.” Khrushchev’s self-eulogizing flatly contradicted his earlier de-Stalinization campaign, the point of which was that Stalin betrayed communism by doing all that he could to resemble the royals of the past. Everything officially said about him was superior and superlative: “best friend of Soviet athletes,” “father of all children on earth,” etc. That is the bombastic language of absolute monarchy. Later, Yeltsin, upon assuming office as Russia’s leader in 1990, denounced all Nomenklatura privileges as his first order of business. In his book A Confession, he wrote, “As long as [Russians] are so poor and dismal, I can’t eat sturgeon and caviar, I can’t race cars, ignoring traffic lights, I can’t take imported super-pills, knowing that a neighbor has no aspirin for a child. Because I am ashamed.” When he left the Kremlin in 2000, his secret fortune, from real estate, yachts, horses, and other properties, was estimated to be worth at least $15 million. In January 2000, the novice President Putin gave a slew of persuasive interviews to Russian TV networks, praising the rule of law and promising not to remain in office a day beyond his two constitutional terms, or if he lost popular support. These are the “rules of the game, of democracy,” he said. After two presidential terms, followed by a stint as Prime Minister and now a third presidency, Putin is entering his 13th year in power with 40% of the population desperately wanting him out. If history is any indication, that number will only grow. Courtesy: Project Syndicate
time for some more stimulus? g
things are shaping up for another hot summer on Wall street, and there is a long, long way to go yet NEW YORK
F
REUTERS
EDERAL Reserve Chairman Ben Bernanke will be back on Capitol Hill on Thursday to testify before a congressional committee about the state of the U.S. economy. He's not going to get an easy ride. The blue-chip Dow average .DJI of stocks is now negative for the year. Employment appears to be slowing to a snail's pace and Europe remains mired in crisis. "This puts the Fed firmly in play and they will likely feel compelled to respond," said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, after data on Friday showed U.S. job growth in May was the weakest in a year. "The missing ingredient preventing the Fed from action had been the equity market, but now we are seeing it softening," he said. "Equities are falling and that was the last hurdle for Fed policy action because all the other criteria have been met." For the week, the Dow Jones industrial average fell 2.7 percent, the Standard & Poor's 500 index.SPX was down 3 percent and the Nasdaq composite index .IXIC fell 3.2 percent. The Fed's next policy meeting occurs on June 19-20. A Reuters poll of 15 dealers gives a 35 percent chance of the Fed extending its stimulative operating twist at that meeting. The poll showed that dealers expecting further quantitative easing, or QE3, rose to 50 percent from 33 percent in May. Stock market rallies in each of the past three years were fueled by combinations of massive central bank and government stimulus spending. That maybe the only hope for equities this year, too. The world's economic outlook darkened on Friday as reports showed as well as slowing U.S. employment growth, Chinese factory output barely grew and European manufacturing fell deeper into malaise. "It certainly suggests that perhaps the softness in Europe is either influencing the U.S. or that the U.S. recovery may not be strong enough to overcome the softness in Europe," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "I underestimated the relationship or the alignment of the world markets to the European markets," he said. "I felt that Europe could potentially proceed in their own
little corner of the world. For right now anyway it just doesn't seem that way." Nothing tells the story of the global economy at the moment better than the world's equity markets. Bear markets are raging in Spain, Italy, Brazil and Russia. Asian stocks have been weak. Most of Europe's other markets are negative for the year, and that is where U.S. stocks are going - and fast. "I don't see any compelling reason to think that we are going to have any sustained recovery absent new fiscal, monetary stimulus, not only here in the United States but perhaps even more importantly elsewhere around the world," said Clark Yingst, chief market analyst at Joseph Gunnar. Yingst said that signs of more stimulus may be a compelling reason to get bullish. We will be "watching very closely for new fiscal and monetary stimulus from a variety of countries. I think the source will be important, I think the magnitude, the scope will be important," he said. On Friday the S&P 500 fell 2.5 percent, edging below its 200-day moving average for the first time since December. The level is closely watched by investors, and a significant breach there could open the way for steeper losses. That looks like a distinct possibility at the moment. Greece will face new elections in two weeks. A victory for parties that oppose the bailout led by the European Union and International Monetary Fund could start the ball rolling on the country's withdrawal from the euro zone. Such an event would have unforeseen consequences for the global economy and financial markets. Part of the 6.3 percent drop in the S&P 500 in May - its worst month since September - was about pricing that in. But it is anyone's guess how far stocks will fall if a Greek exit sparks the Lehman-type event that some investors fear. Fears the euro-zone debt crisis is spilling over to the United States sparked fresh buying of U.S., German, Japanese, Swiss and Nordic government debt, which are perceived as safe havens in times of market turbulence. Yields on the benchmark 10-year Treasury note hit 1.442 percent, the lowest level in records going back to the early 1800s. At the same time, funding options are narrowing for companies across the globe as issuers are shut out of markets due to risk aversion for weaker credits and demand for spread that is sending costs soaring.
CORPORATE CORNER Chairman nomination for Pakistan-saudi Arabia Business Council of FPCCI ISLAMABAD: Mr.Shah Faisal Afridi – The President & CEO of Ruba SEZ Group & Haier Pakistan has been elected as the Chairman of Pakistan-Saudi Arabia Business Council of FPCCI (Federation of Pakistan Chambers of Commerce and industry) in the elections held on 21st May, 2012. With a rich business experience and his exposure to the international trade, Mr.Faisal will add value to the Pak-Saudi ties and would help promote joint ventures and collaboration between the two nations. The business community at both ends will immensely benefit from Mr.Faisal’s appointment as the Chairman.
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tDAP to approach FBR on struxureWare Data Center Operation smuggling in leather sector suite v7.1 with increased flexibility to KARACHI: The officials of TDAP and representatives of PTA sat together for resolving the isalign with organisational processes sues of the leather exporters. The Chief LAHORE: Schneider Electric, a global specialist in energy management, introduced StruxureWare Data Center Operation Suite v7.1 featuring updated and flexible change management with a customizable approach to work flow management and maintenance processes. The suite provides IT managers with the confidence that all organizational policies and projects are easily implemented and universally applied within the data center. Schneider Electric’s StruxureWare Data Center Operation Suite provides end to end Data Center Infrastructure Management (DCIM) software for monitoring and operating power, cooling, security and energy usage from the building through IT systems and gives customers complete visibility and control over their data center’s daily operations. The StruxureWare Data Center Operation Suite v7.1 also offers an integration with BMC Remedy Change Management, part of the market-leading BMC Remedy IT Service Management Suite, and ensures that relevant information flows seamlessly between the two systems. This update continues to enhance the flexibility and scalability of Schneider Electric’s
Executive TDAP assured full support for facilitating the development and export of leather sector, especially to stop the smuggling and misdeclaration in export of wet blue leather. In this connection, he said the FBR would be approached for checking the exports by unscrupulous elements. Tariq Puri Chief Executive of TDAP briefed the participants regarding actions taken by TDAP on some of the concerns of the leather exporters. He also directed the concerned Division of TDAP to take urgent action on measures suggested by PTA for controlling the mis-declaration and smuggling of pickle and wet blue. The Director General TDAP and the representative of PTA will also visit member exports and brief him on the issue. The TDAP chief assured the PTA that all subsidies of PTA members in connection with exhibitions would be released within one month and subsidies related to outstanding claims on lab test and effluent treatment plant would be released once PTA members submit complete documents and funds are released by the Ministry of Finance. S M Naseem, Chairman PTA; Mr. S.M Muneer,
Chairman of Din Group; Naseem Shafi and Gulzar Firoz attended the meeting.
mobilink Jazba launches mobile Game Development contest LAHORE: Mobilink Jazba has launched an exciting Mobile Game-Development Contest providing a platform for students and independent software developers to test their skills at creating gaming software for mobile platforms. Mobilink Jazba’s mobile game development contest has been designed to evaluate the concept, technique and creative acumen of participants, whilst at the same time providing a new avenue for local mobile technology developers to develop content for mobile users. Winners of the competition will get cash rewards up to Rs. 500,000, as well as other valuable prizes such as handsets and internship opportunities within Mobilink. The announcement of the game competition was preceded by a series of nationwide workshops conducted by Mobilink in partnership with ‘We R Play’, where participants were introduced to the basics techniques of mobile game development. Mobilink will also provide an additional incentive for participants by publishing all submissions on JazzBananas.com, which is Pakistan’s first mobile application store, with developers earning revenue for each download through the store. Mo-
bilink Jazba has also set up a web resource for aspiring mobile game developers, where they will have access to tutorials and unique game development kits. This resource can be accessed at www.jazba.com.pk/gbg.
ICI Pakistan Limited divides its paints business KARACHI: In May 2011, the Board of Directors of ICI Pakistan Limited decided that the Paints Business of ICI Pakistan Limited would be separated from ICI Pakistan Limited and vested into another company, Akzo Nobel Pakistan Limited which will be listed on the Karachi, Lahore and Islamabad Stock Exchanges. ICI Pakistan Limited would retain all other businesses of ICI Pakistan Limited and will continue to be listed on the Karachi, Lahore and Islamabad Stock Exchanges. The Scheme of Arrangement for the reconstruction of ICI Pakistan Limited, which was approved by the shareholders at the Extraordinary General Meeting on February 08, 2012, has been sanctioned by the Honorable High Court of Sindh by its order announced on May 17, 2012 and has in accordance with its terms become operative on June 01, 2012. As a consequence of this reconstruction, the Paints Business formerly carried on by ICI Pakistan Limited will henceforth be carried on by Akzo Nobel Pakistan Limited.
LAHORE: Member TEVTA Board Ismail Khurram is addressing the 2nd Consultative meeting of industrialists and employers to identify Technical Vocational Education and Training(TVET) priority areas. President Board of Management Sialkot Mian Naeem Javaid, Acting President FPCCI Sh. Abdul Waheed Sandal and General Manager TEVTA Prof. Javed Iqbal Malik are also seen in the picture.