profitepaper pakistantoday 07th october, 2012

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Sunday, 7 October, 2012

IMF slashes global growth forecast

India business group visits Iran for ‘win-win’ trade NEW DELHI AFP

BERLIN AFP

T

he International Monetary Fund has cut its global growth forecasts for this year and 2013 and called on politicians in the eurozone and the US to take “decisive” steps to restore confidence, a German newspaper said Friday.

Citing excerpts from the IMF’s World Economic Outlook to be released early next week, the Handelsblatt business daily said that the Washington-based body predicted world economic growth of 3.3 percent in 2012 and 3.6 percent in 2013.

In July, the IMF issued forecasts of 3.5 percent and 3.9 percent, respectively. The German-language paper quoted the report as saying that the “further cooling of growth in the world economy this year and next goes along with a clear increase in downward risks.” The forecast depends in particular on “whether decisive political steps are taken in the eurozone and the US to stabilise confidence,” the paper quoted the report as saying. The IMF forecasts a shrinking of the eurozone economy of 0.4 percent this year and a small positive growth of 0.2 percent in 2013. The fund also saw a “further drop in inflation” given the sluggish global economic output and recommended additional cuts in interest rates to stimulate activity. Three leading European economic institutes have

estimated meanwhile that the eurozone economy will remain in recession until the end of this year. The French institute INSEE and its German and Italian counterparts IFO and ISTAT forecast a contraction in business activity of 0.2 percent in the third quarter, they said in a joint statement.

An Indian business group said Saturday a delegation was visiting Iran to boost trade with the Islamic republic, which is under strain from Western sanctions over its alleged nuclear weapons programme.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) said the “highpowered” 50-member business delegation was on a four-day visit to Iran to attend the Tehran International Industry Exhibition (TIIE).

Anil Agarwal, chairman of International Affairs Council of ASSOCHAM, called opportunities for trade a “win-win situation” for the two countries. Iran is a major oil supplier to energy-hungry India, and New Delhi is seeking to increase its exports to Tehran as the West’s sanctions campaign dries up payment routes it was using to pay for Iranian fuel imports. India and Iran have worked out a deal under which New Delhi will pay for a big chunk of its Iranian oil imports in rupees. The rupee payments will be used by Iran to purchase Indian goods.

“Indian industry has huge scope for investments” in Iran in sectors like construction, pharmaceuticals, telecom and textiles, “while Iran can import fertilizers, zinc, copper and iron”, Agarwal said.

Auto sector welcomes ecc decision to grAduAlly cut tAriff regime

The visit to Tehran, one in a series of recent commercial exchanges between the two countries, comes as ordinary Iranians struggle with growing economic problems amid the US-led Western sanctions.

Annual trade between India and Iran totals $15 billion and heavily skewed towards Tehran, which exports mainly oil.

India has been walking a diplomatic tightrope as it pursues good ties with the Gulf nation while deepening relations with the United States. India, a longtime Tehran ally, sharing historical, trading and cultural links, views Iran as an important counterweight to rival Pakistan in the region.

In June, Washington said it would exempt seven emerging economies including India from reprisals after they pledged to cut back on oil purchases from Iran.

India expects to import less than 14 million tonnes of Iranian crude in 2012-13, below official estimates of 15.5 million tonnes due to the sanctions, the Economic Times newspaper reported earlier in the week.

By contrast, India imported 21.8 million tonnes of crude from Iran in 2008-09, the newspaper quoted an unnamed government official as saying. Iran is keen to increase crude oil sales to New Delhi and is looking at ways to work round Western sanctions, the official added.

APTMA welcomes cut in discount rate PESHAWAR APP

LAHORE ONLINE

The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has welcomed the Economic Coordination Committee (ECC) decision to gradually bring down tariff regime for the motorcycle industry in such a way that local industry would not be adversely affected.

The decision will go a long way in stimulating the growth of the domestic industry and a flagging economy.

The newly-elected Chairman Munir Bana and Vice Chairman Usman Malik said that Federal Minister for Finance and Economic Affairs, Dr Abdul Hafeez Shaikh, deserves appreciation for accepting the demand of local auto industry to rationalize tariff regime gradually.

They agreed with the Finance Minister’s observations that in the whole process it

must be ensured that the local motorcycle industry is not affected and that a level playing field is provided to all the stakeholders.

The PAAPAM leaders, however, called for measures to overcome energy crisis, security challenges and political instability to make investment-friendly decisions meaningful and result-oriented.

“If these factors are not brought under control, they would continue to create problems for the economy in general and for the foreign investment in particular,” Bana observed.

PAAPAM chairman and vice chairman said that Pakistan’s motorcycle industry has progressed in a very impressive fashion over the last half decade based on the AIDP. Adequate competition has been introduced and today well over 60 companies are producing motorcycles in Pakistan.

They added that during the period 20012007, with the help of stable policies of the

government, the automobile industry went through a period of tremendous expansion, with investments of over Rs 40 billion and volumes going up by over 500 per cent.

These developments made the auto industry one of the top five industrial sectors of the country in terms of contribution to tax revenue, acquisition of hi-tech manufacturing technologies and generation of employment. Unfortunately, due to import of used vehicles and other adverse policy factors, our industry is now suffering from excess Capacity.

Currently, car assemblers and parts manufacturers are intermittently shutting down their plants by observing Non Production Days (NPDs) and retrenching labour.

Desperate times call for desperate measures, concluded Munir Bana. Minister of Finance must immediately intervene and stop car dealers from using “Used car imports facility meant for overseas Pakistanis only”.

Chairman, All Pakistan Textile Mills Association (APTMA), Mohsin Aziz has welcomed the decision of the State Bank of Pakistan (SBP) for announcing 0.50 per cent cut in the discount rate. He termed it very beneficial for textile sector of the country and continuous and consequent reduction in two policies is a very well come sign and be hoped that such policies would continue and further reduction in discount rate in the next monetary policies so as to bring the discount rate to approximately 7-8%. In a statement issued here Saturday, Mohsin Aziz said that APTMA was persistently persuading the central bank and senior officials of the government functionaries and have brought it into the notice of President of Asif Ali Zardari as well in the annual dinner of the association. He said that though the cut is still very nominal as compared to their expectations. However, he said that SBP in its last monitory policy have also cut down the discount rate by 1.5%. He termed the decision very important for textile sector and its growth. He said that according to the estimates of APTMA, the country will witness a bumper cotton crop this year and the textile sector will requires investment to convert this cotton to value added textile and such kind of positive intervention on behalf of the financial mangers of the country will prove beneficial for the sector.

‘Cut in interest rate to stop flight of capital’ LAHORE APP

The decision to cut interest rate to 10% is a welcome step and will benefit the economy. These views were expressed by Pakistan Tanners Association President Agha Saiddain in a statement here on Saturday.

“SPB has taken a wise step to control capital flight,” he said and suggested that interest rate be further reduced for the economic uplift of the country. He said the decision was a ray of hope in the circumstances faced by the industry due to the the energy crisis. It will reduce the cost of doing business in the country, he added. He suggested that exportfriendly policies, increase in the literacy rate, improvement in law and order and such other steps were needed to further boost the economy.

He urged the government to take steps for revival of development finance institutions in the country for long term financing to the industry. DFIs have played a remarkable role in the past and they can do the same if they are given an atmosphere of working in the country, he added. Praising SBP’s efforts for revival of the economy, he said his association would continue to support all positive steps.

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Business 02

Shares gain, bonds tumble as US unemployment falls

us deficit ends fourth fiscal year above $1 trillion: cBo

Global shares edged higher on Friday and Treasury prices tumbled after the US unemployment rate unexpectedly fell to a near four-year low, pointing to improvement in the labor market NEW YORK

W

AGENCIES

ALL Street, however, erased early gains With the S&P 500 breaking a four-day string of gains, weighed by concerns about the upcoming earnings season, which begins with Alcoa

(AA.N) next week.

The dollar advanced to a two-week high versus the yen and the euro gained as investors sold the U.S. and Japanese currencies, which are often perceived as safe havens. The United States added 114,000 jobs last month, driving the jobless rate down to 7.8 percent, its lowest since January 2009, the Labor Department reported.

Payroll gains for both July and August were revised higher. "The details were about as good as they realistically could be under the circumstances," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. The MSCI global stock index .MIWD00000PUS rose 0.3 percent to 336.55.

The Dow Jones industrial average .DJI ended up 34.79 points, or 0.26 percent, to 13,610.15. The Standard & Poor's 500 Index .SPX closed down 0.47 points, or 0.03 percent, to 1,460.93. The Nasdaq Composite Index.IXIC dropped 13.27 points, or 0.42 percent, to 3,136.19.

The S&P 500 is still up 16.4 percent so far this year.

The benchmark is on track for its best yearly run since 2009 when stocks rebounded after the financial crisis.

"The speed with which the market will get overbought on continued strength may pose a problem," said Ralph Edwards, director of derivatives strategy at ITG in New York. "The market never had a truly ugly day since the highs registered on September 14th."

Europe's FTSEurofirst 300 index .FTEU3 rallied 1 percent to close at 1,111.65. European markets had risen earlier after reassurance from the European Central Bank on Thursday that it stood ready to buy Spain's bonds if it requested aid. The ECB also said Europe had a "fully ef-

fective backstop mechanism in place" to protect the euro.

The ECB envisions buying large volumes of sovereign debt for periods of one to two months once its bond-buying program is triggered, senior central bank sources told Reuters. The dollar rose to 78.87 yen, the highest since September 19, before pulling back to 78.62 yen, up 0.2 percent on the day. The euro rose 0.1 percent to $1.3029.

Safe-haven government bond prices fell. The benchmark 10-year U.S. Treasury note was down 18/32, with the yield at 1.7341 percent. "Treasuries sank after the jobs report," said Cary Leahey, economist and senior advisor to Decision Economics in New York.

"Though September job growth was close to expectations, several facets of the report, particularly the large drop in the unemployment rate to 7.8 percent, suggested that the Fed was closer to the exit window," he said, referring to the Federal Reserve's program of unconventional monetary easing. Brent futures lost 56 cents to settle at $112.02 a barrel. U.S. crude futures eased $1.83 to settle at $89.88 per barrel, after climbing nearly 4 percent in the prior session.

Gold retreated from an 11-month high as the jobs data dampened its appeal as an inflation hedge. Spot gold rose above $1,795 an ounce earlier, the highest since November, and was last down slightly at around $1,781.

The federal budget deficit for the just-ended 2012 fiscal year shrank by $207 billion from the prior year, but still marked its fourth straight year above $1 trillion, Congress' budget referee estimated WASHINGTON AGENCIES

The deficit equaled about 7 percent of U.S. economic output, down from 8.7 percent in 2011, 9 percent in 2010 and 10.1 percent in 2009, but it was still greater than in any other year since 1947, the non-partisan Congressional Budget Office said.

Economists generally consider any deficit that exceeds 3 percent of U.S. gross domestic product to be unsustainable in the long term.

CBO said a $75 billion surplus September surplus helped to hold the full-year fiscal 2012 deficit to $1.09 trillion, compared with a $1.297 trillion deficit in fiscal 2012.

The September surplus was just the second month in the black for the U.S. government since September 2008, when the country was in the throes of a financial crisis.

The September data was buoyed by strong quarterly corporate income tax payments and $7 billion from the sale of shares in bailed-out insurer American International Group. The U.S. Treasury is expected to release official final figures for the year ended September 30 next week.

Republicans, including presidential nominee Mitt Romney, have long been hammering President Barack Obama for overseeing four straight years of trillion-dollar deficits during his time in office. Democrats have countered that these were necessary to avoid another depression and help dig out of a deep recession they inherited.

Whether the U.S. deficit will mark a fifth year above $1 trillion in fiscal 2013 depends on how Congress handles the year-end "fiscal cliff" of expiring tax cuts and automatic spending cuts.

If that massive fiscal tightening happens as scheduled, the deficit could be as low as $641 billion next year, according to a CBO estimate in August. But if Congress keeps current tax rates in place and finds a way to avoid the spending cuts, CBO estimates the deficit at about where it is now -- $1.04 trillion.

In September's rare surplus, the CBO estimated that receipts grew $23 billion compared with a year earlier, while outlays shrank by $115 billion. Most of the spending decline was the result of calendar shifts associated with benefit payments, but adjusting for this, there were some notable changes.

Net payments to government-controlled housing finance giants Fannie Mae and Freddie Mac fell by $7 billion in September because they did not need any capital injections. Outlays for unemployment benefits fell by $6 billion while military spending fell by $5 billion.

For the full fiscal year, total receipts grew 6.4 percent to $2.45 trillion, while outlays fell 1.6 percent to $3.54 trillion, CBO estimated. Individual income tax receipts rose 3.4 percent while corporate income tax collections rose 33.7 percent. Most categories of spending fell, except for Social Security benefits, which rose 5.9 percent, to $762 billion, and Medicare, which rose 3.2 percent to $469 billion after adjusting for offsetting receipts.

S&P 500 dips after four days of gains; earnings eyed The S&P 500 broke a four-day string of gains, ending slightly lower as an unexpected drop in the US unemployment rate was overshadowed by concerns about the coming earnings season, which begins with Alcoa next week NEW YORK AGENCIES

All three major U.S. stock indexes came off session highs by afternoon trade, with the S&P 500 turning negative for the first time this week, as investors braced for weak corporate results.

The Nasdaq was pressured by Apple Inc (AAPL.O), which fell 2.1 percent to close at $652.59. S&P 500 earnings for the third quarter are forecast to have fallen 2.4 percent from the year-ago period, which would be the first decline in three years, according to Thomson Reuters data. "It's a

bit 'sell-on-the-news' type of a situation.

We had the big jobs numbers this morning, but traders and investors don't want to keep their positions going into the weekend and next week," said Chris Bertelsen, chief investment officer of Global Financial Private Capital, a Sarasota, Florida-based wealth manager with $1.5 billion in assets under management.

Despite the lackluster performance for the day, the S&P 500 is still up 16.2 percent so far this year. The benchmark is on track for its best yearly run since 2009 when stocks rebounded after the financial crisis. "On the negative side, the speed

with which the market will get overbought on continued strength may pose a problem," said Ralph Edwards, director of derivatives strategy at ITG in New York. "The market never had a truly ugly day since the highs registered on September 14th."

Most of the market's gains this year have been prompted by easy monetary policies. The improvement in U.S. hiring last month is one bright spot as manufacturing around the world has been showing signs of softness in recent months.

The Dow Jones industrial average .DJI rose 34.79 points, or 0.26 percent, to 13,610.15 at the close. The Standard &

KARACHI: Participants of Air Safety Investigators training photographed with PIA MD Muhammad Junaid Yunus, PIA DMD Air Vice Marshal Qasim Masood, Canadian Safety Experts Caj Erik Frostell and Mike Doiron, Wing Commander (r) Syed Nasim Ahmed and Capt. Mohsin Ausaf of SASI after the certificate distribution ceremony at PIA Training Centre. PR

Poor's 500 Index .SPX dipped just 0.47 of a point, or 0.03 percent, to 1,460.93. The Nasdaq Composite Index .IXIC slipped 13.27 points, or 0.42 percent, to end at 3,136.19. For the week, the Dow rose 1.3 percent, the S&P 500 advanced 1.4 percent and the Nasdaq added 0.6 percent.

Dow component Alcoa Inc (AA.N) will kick off the earnings period on Tuesday, when the aluminum company is expected to report that it broke even, compared with earnings of 15 cents a share a year ago. Alcoa's stock edged up 0.2 percent to close at$9.07 on Friday.

Labor Department data showed the

U.S. unemployment rate dropped by 0.3 percentage point in September to 7.8 percent, its lowest since January 2009. Investors focused on a survey of households that pointed to a big surge in hiring.

A separate survey of business establishments showed employers added 114,000 jobs to their payrolls last month while data for July and August was revised to show 86,000 more jobs created than previously reported. Zynga (ZNGA.O) shares plunged 11.9 percent to $2.48 after it slashed its 2012 outlook for a second time, fanning doubts about the games maker's ability to shore up its dwindling earnings.

KARACHI: The British Deputy High Commissioner and Director of Trade and Investment in Pakistan Mr Francis Campbell hosted a reception for UK delegation participating in the 7th Expo Pakistan Exhibition at his residence. Photo shows (left to right) Mr Shehzad G.Dada CEO Barclays Bank, Mr Mian Abrar (Former President Chamber), Mr Francis Campbell, Mr Waqar A Malik Cheif Executive AkzoNobel, Mr Ghouse Akbar (Director Akbar Groups), Mr Aslam Faruque (Chairmen Ghulam Faruque Group).

Sunday, 7 October, 2012