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Euro zone ministers to consider Spanish bailout
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IMF calls for action to reform global financial system
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Sunday, 10 June, 2012
Excavating hope from beneath the quagmire g
Pak energy needs, anti-US feelings hasten expedition of gas project with Iran TEHRAN
ISLAMABAD ONLINE
Managing Director Christine Lagarde of the International Monetary Fund (IMF) has called for further action to reform the global financial system, by strengthening crisis management tools and the overall architecture of the system. “We are still at a great distance from our final destination,” Ms. Lagarde said in a speech in New York,” and with the stakes rising by the day, we stand at a crossroads. She said that five years into the crisis, while important steps have been taken, the goal of a safer financial system is not yet secured. Policymakers need to lay out and follow a clear roadmap of how to finish the job—not just looking to the next five or ten years, but looking to the next weeks and months ahead.” The next steps by policymakers in the financial sector will be “critical to breaking the damaging cycles of the crisis,” which include the political economy of deciding and implementing policies, she said, adding, “The immediate focus should be on repairing the health of the financial system. Without repair, weak banks will continue to strangle growth.” In this regard, European banks are a priority to repair, she said, but because the world is deeply interconnected, restoring the health of the European banks lies in the interest of all. “Let me be clear: The heart of European bank repair lies in Europe. That means more Europe, not less,” Ms. Lagarde said, adding that a single European financial market needs to have a more integrated framework.
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IrE energy needs have made Pakistan, which is increasingly at odds with the United States over Washington's disrespect for the civilian casualties of its so-called war on the al-Qaeda, accelerate construction and expedition of a 1,300-mile pipeline to carry natural gas from Iran. Iran would provide Pakistan with 750 million cubic feet of gas a day from its massive offshore South Pars field in the Persian Gulf for the next 25 years, greatly alleviating Pakistan's worsening energy deficit. Despite strong pressure from Washington to abandon the plan, Pakistan recently put out tenders for the project, said officials of state-run Inter State Gas Systems, which will oversee development of the pipeline inside Pakistan. They said ISGS hopes to start work on the $1.6 billion project by late 2012, with gas flowing by December 2014. Pakistan is having major problems securing financing for the segment of the line on its territory, which runs through violence-plagued Baluchistan province, to reach Pakistan's power-short industrial North. Pakistani officials led by Foreign Minister Hina rabbani Khar, insisted that alternative financing would be forthcoming, says a report by FArS news agency. And there once again, Iran extended its hand of aid and assistance to the Muslim nation of the neighboring Pakistan and offered to finance the Pakistani segment of the project. Iran has already built its 560-mile section of the pipeline up to the Pakistani border. The moves by Tehran and Islamabad to get the pipeline up and running and both sides have urgent economic as well as geostrategic reasons for wanting to get the pipeline built, is sure to intensify the growing strains between Washington and Islamabad. The Americans have invested a lot of time and effort, and probably treasure as well, in trying to torpedo the pipeline plan,
to pressure Iranian economy in a bid to force the country to give up its nuclear rights. "Predictably … Islamabad is convinced that the CIA, India's intelligence agency rAW, the Israeli Mossad and Britain's MI6 have been actively conspiring to get some sort of Greater Baluchistan to secede from the central government … and balkanize Pakistan," the Asia Times observed. But as the anti-American mood in Pakistan darkens amid continued and increasing civilian casualties of the US drone attacks on the al-Qaeda and other mili-
tants, Islamabad is under immense domestic pressure to defy Washington. The pipeline project, first mooted in 1996, was originally intended to run 1,620 miles from Iran, which has the world's second largest gas reserves after russia, through Pakistan to India. It was known as IPI. But India, reportedly under intense pressure from Washington, gave up the project in 2009. However, Indians have recently voiced enthusiasm to rejoin the project. The bottom line is that Pakistan's in dire need of Iran's natural gas and, as rela-
tions with Washington sink lower by the day, Islamabad could stick with the Islamic republic just to thumb its nose at the Americans. Pakistan only produces 30 percent of the gas it needs. It desperately needs the Iranian gas for power generation - at least 5,000 megawatts, equivalent to the current peak power shortage. Islamabad's Petroleum Minister Asim Hussein has warned Pakistan's entire energy system could collapse because the demand-supply gap has reached 2.2 billion cubic feet unless there's a massive infusion of gas.
Spanish bank aid request seen as Moody’s cautions EMMA ROSS THOMAS/CHARLES PENTY BLOOMBERG
Spain may today move closer to becoming the fourth euro-area nation to receive aid, as theInternational Monetary Fund said the country’s banks need at least 37 billion euros ($46 billion) to bear a weaker economy. European Central Bank Vice President Vitor Constancio said yesterday that a Spanish request for a bank bailout is “awaited.” That bid may come as soon as today when finance ministers hold a conference call, said a German official and a European Union aide, who declined to be identified because the matter is confidential. Finance ministers were due to start discussions at 4 p.m. Madrid time, two European officials said. They will issue a statement afterwards, another official said. In time for the call, the IMF released a report overnight disclosing its estimate for the extra capital Spain’s banks need to cope with a worsening economy. Spain may need to go beyond the 37 billion euros of capital needs identified and build a buffer of 60 billion euros to 80 billion euros, an official at the Washington-based IMF, who declined to be named, told reporters. Prime Minister Mariano rajoy is resisting pressure from European officials to accelerate any request for help as Greek elections loom and Spain’s access to markets narrows. He said June 7 he won’t take any decisions about how to shore up lenders until seeing the results of the IMF analysis and similar tests by two international consultants due this month. Spain Reeling Deputy Prime Minister Soraya Saenz de Santa-
maria declined to comment when asked at a briefing yesterday whether Spain was seeking a rescue. A bailout for Spain, reeling from a recession and the bursting of a property bubble, may dwarf previous rescues in the effort to stem the turmoil that began with Greece’s disclosure in 2009 that its finances were in worse shape than was previously known. Since then, European governments and the IMF have made 386 billion euros in loan pledges to Greece, Ireland and Portugal. Spain’s economy is more than twice the size of the three countries combined. JPMorgan Chase & Co. (JPM) economist David Mackie said on May 30 that aid for the Spanish government and banks could total 350 billion euros. Rubicon cRoSSed “Spain is the rubicon that should have never been crossed,” Nicholas Spiro, managing director of Spiro Sovereign Strategy said in a note to clients. “Not only would a limited bailout for Spain fail to restore confidence in the markets, it could fuel fears that more aid will be needed at a later stage and could also put Italy under more pressure.” Spain has been toppled by its banking industry and one of the highest private debt levels in the euro region, even as its public debt remains below the European Union average. The country had budget surpluses in the three years through 2007, allowing it to go into the crisis with a debt burden equivalent to 36 percent of gross domestic product. That ratio was 69 percent last year. The country has made at least four attempts to clean up its banks since the collapse of the real estate boom in 2008, tightening provisioning rules, encouraging mergers and coaxing lenders onto the stock mar-
ket. The IMF said that “gradual approach” had allowed weak banks to undermine financial stability. Rapidity needed Constancio told reporters in Lisbon that the request for help should be made “with some rapidity.” ECB council member Jens Weidmann urged Spain to request aid from the euro area’s rescue fund if the country can’t meet its financing needs, Die Welt am Sonntag reported, citing an interview. The government shouldn’t hold out against seeking help, the Berlin-based newspaper quoted Weidmann as saying. Hoping for the ECB to jump in to avoid conditions attached to a rescue “is the wrong way.” Still, rajoy said he won’t act until he has received the results of stress tests by roland Bergerand Oliver Wyman, due by June 21, and has made repeated calls for European institutions to help bring down the nation’s borrowing costs. Spain blinkS “The Spanish government was making noises to the effect that ECB was going to step in and Spain wasn’t going to blink,” said Ken Wattret, chief euro-region market economist at BNP Paribas SA in a telephone interview. “Well now Spain is going to blink.” “The cost to the credibility of the sovereign has been pretty high,” he said. Moody’s Investors Service said late yesterday the increasing prospect of Spain seeking aid, as well as growing estimates of the cost of helping banks, may prompt downgrades to its A3 rating. If Greece leaves the single currency, “posing a threat to the euro’s continued existence,” the company would review all euro-area sovereign ratings, including those of the Aaa nations, Moody’s said. The IMF report, which said the “core of the sys-
tem appears resilient,” said the 37 billion euros of capital needs estimated for weaker lenders could rise due to unanticipated losses. The assessment incorporated Bankia group, which was nationalized on May 9, and put its needs at 13 billion euros to 14 billion euros, compared with the 19 billion euros the bank’s new management has demanded, the IMF official said. pReviouS bailout Bankia group also went beyond the government’s provisioning rules when calculating the need for 19 billion euros of state support, which comes on top of 4.5 billion euros it received in a previous bailout. Economy Minister Luis de Guindos said two weeks earlier that 15 billion euros would be enough to fulfill the second of two decrees passed this year. Even as the government said Bankia was a specific case, investors extrapolated the losses to the rest of the industry, undermining confidence and the government’s credibility. De Guindos told banks to take 84 billion euros in provisions and capital buffers, on top of 100 billion euros of provisions made since 2008. rajoy’s failure to restore confidence in its banks has prompted foreign investors to shun Spain’s bonds, making the Treasury increasingly dependent on Spanish lenders. rajoy, who in November won the biggest majority that any Spanish party has clinched since 1982, is also losing support among voters as austerity measures fail to stem the crisis that has pushed unemployment to 24 percent. Governments in Greece, Ireland and Portugal were toppled after those three countries took bailouts.
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ICCI pulls out the guns and launches a blitzkrieg! g
Castigates SBP’s decion to maintain same policy rate level, flays high discount rate ISLAMABAD INP
There is a total uncertainty in the country’s economic sector due to high markup rates, policy makers should take steps to bring down mark-up rate to increase investment for improving the economy. Islamabad Chamber of Commerce & Industry (ICCI) has expressed its strong reservation over State Bank of Pakistan’s decision to maintain the same level of policy rate. Such policy restrains investment and trade activities in Pakistan and continually hampering growth of manufacturing in Pakistan, Yassar Sakhi Butt, President ICCI made these remarks in a statement. He said that the high mark-up rate was kept unchanged against expectations and a weak economy exercise continues to give a double blow to borrower’s payment capacity. He said that an interest rate of 12 percent is one of the highest in the region as domestic exporters have become uncompetitive in export market due to massive overheads, he maintained. President ICCI urged that SBP should cut the discount rate to provide relief to industry that is facing various problems mainly increasing cost of doing business. There is a dire need of private sector investment in current crisis prevailing in our economy and SBP is using an inappropriate tool as of tight monetary policy to compensate for the government's borrowing for financing its current expenditures, he opinioned. Considering the current economic slowdown, the SBP should make a deep cut in the discount rate, Yassar added. Yassar Sakhi Butt was of the view that the unchanged policy rate would not provide any relief to the industrial or corporate sectors, and it could result in a deepened recession this year. To promote industrial and economic growth, the government and the SBP should cut the mark-up rate down to a single digit, he contended. He said that high mark-up rates and less availability of cheaper credit for the private sector especially for setting up industrial units or reviving sick industrial units is hindering the future investment. ICCI President said that the SBP decision to keep unchanged interest rate has dashed the hopes of the business community, which was expecting a remarkable cut in the existing rate of mark-up. ICCI urged the central bank to announce cut in interest rate, which is a prerequisite to enhance productivity. Tight monetary policy is no solution to economic problems, he maintained.
Euro zone ministers to consider Spanish bailout g
The euro zone's senior finance minister urged a rapid resolution of Spain's debt crisis on Saturday before a meeting where he will lead discussions on a bailout of the country's teetering banks
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New Climate Technology Network, Finance Center to cut greenhouse gas emissions in Asia ISLAMABAD
BRUSSELS/BERLIN
ONLINE
REUTERS
EVErAL EU sources told reuters on Friday that Madrid was expected to ask the currency bloc for help with recapitalizing its banks this weekend, becoming the fourth country to seek assistance since Europe's debt crisis began. " There will have to be a quick solution," Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, told German radio. Juncker's spokesman said the finance ministers would hold a conference call at 4 p.m. Brussels time (1400 GMT). Asked if he expected Spain to request help, Swedish Prime Minister Fredrik reinfeldt told public service radio: "I think that is everybody's assessment. There is even talk about amounts up to 80 billion euros." It is not clear whether bailout numbers will be finalized on Saturday but the International Monetary Fund gave a clear guide to what it thought was needed, saying that under a stress scenario a number of Spanish banks would need to increase capital by 40 billion euros ($50 billion) in total. It advised seeking significantly more than that. "Going forward, it will be critical to communicate clearly the strategy for providing a credible backstop for capital shortfalls - a backstop that experience shows it is better to overestimate than underestimate," Ceyla Pazarbasioglu, Deputy Director of the IMF's Monetary and Capital Markets Department, said. Euro zone policymakers are eager to shore Spain's position up before June 17 elections which could push Greece closer to a euro zone exit and unleash a wave of contagion. Madrid had said it would wait for the IMF audit and a separate report
ADB to solve the world’s gaseous troubles
due by June 21 from two independent assessors, Oliver Wyman and roland Berger, before acting. But officials in Spain said the parameters for the IMF and the private-sector audits were effectively the same, meaning Spain could make the request for aid on the basis of the IMF figures rather than having to wait for the other assessment. Prime Minister Mariano rajoy held talks with socialist opposition chief Alfredo Perez rubalcaba. "They've talked in the last hours - I don't know the content of that conversation, but yes they did talk," socialist member of parliament Eduardo Madina told Cadena Ser radio. Bundesbank president Jens Weidmann said Spain should turn to the European Financial Stability Facility (EFSF) rescue fund if it could not afford the bank recapitalization bill. In an interview to appear in Sunday's Welt am Sonntag newspaper, Weidmann said: "If Spain sees
itself overwhelmed by financing needs, it should use the instruments that were created for that." The ECB could not be expected to fill a policy vacuum, he said. The bank's vice president, Vitor Constancio, said he hoped the call for assistance from Madrid would come swiftly. eFSF FundS The race to resolve the banks' troubles comes after Fitch ratings cut Madrid's sovereign credit rating by three notches to BBB, highlighting the Spanish banking sector's exposure to bad property loans and to contagion from Greece's debt crisis. It said the cost to the Spanish state of recapitalizing banks stricken by the bursting of a real estate bubble, recession and mass unemployment could be between 60-100 billion euros ($75-$125 billion). The higher figure would be in a stress scenario equivalent to Ireland's bank crash.
A new Climate Technology Network would be established to generate investments to cut greenhouse gas emissions by more than 12 million tons of carbon dioxide in next 10 years in Asia and the Pacific region. The new Climate Technology Network and Finance Center will expand the availability of lowcarbon and climate-resilient technologies in Asia and the Pacific with support from the Asian Development Bank (ADB) and the United Nations Environment Programme (UNEP), with core funding from the Global Environment Facility (GEF). “The countries of Asia and the Pacific need to rapidly deploy new technologies capable of decoupling their growth from high emissions of greenhouse gases, and they need to build their resilience to climate change impacts,” said S. Chander, Director-General of ADB’s regional and Sustainable Development Department. The technology finance center will be set up in Manila, Philippines, to be managed by ADB, while the climate technology network secretariat will be based in Bangkok, Thailand, to be managed by UNEP. The new center will help mobilize financing for clean technology by folding technology considerations into national investment plans and strategies, and by piloting innovative financing mechanisms. The network, meanwhile, will provide complementary technical support and policy advice and be a forum for knowledge sharing. A pilot technology marketplace to spur transactions in climate-friendly technologies will also be established. Asia and the Pacific is the fastest-growing source of greenhouse gas emissions, with emissions from the energy sector alone up 183% since 1990, and has more people at risk who live in the region’s coastal cities, and in rural areas where livelihoods are heavily dependent on agriculture and other climate-sensitive sectors.
Exploring new avenues g
LCCI’s off to Turkey and the United Kingdom LAHORE STAFF REPORT
A high-level 37-member LCCI delegation Friday left for 12-day tour to Turkey and United Kingdom to explore new business avenues and enhance two-way trade with these countries. The delegation headed by LCCI President Irfan Qaiser Sheikh would have joint and one-to-one meetings at various chambers in Turkey and UK besides signing a number of MoUs with various trade and Industry organizations in the two countries. The LCCI delegation has in its fold businessmen belonging to almost all sectors of the economy including Petrochemicals, Steal, Industrial Chemicals,
Cosmetic raw Material, Pharmaceuticals, Textiles and its machinery, Auto, Plastic, Artificial Leather, Plastic Chemicals, Construction, Used Machinery, Tourism, Engineering, Oil and Lubricants, Halal Meat, Yarn, rice, Handicrafts, Heating and Cooling Equipment, Household products, Garments and real Estate. On June 11, the LCCI delegation would have working lunch at Instanbul Chamber of Commerce and Industry while in the evening it would meet Mayor of Instanbul. On June 12, the delegation would sign an MoU with Industrialists and Businessmen Association MUSAID besides having a meeting with Association of Anatolian Businessmen ASKON. On
June 13, the delegation will meet the President of Foreign Economic relations Board. On June 16, the delegation would have a working dinner at Pak-UK Chamber of Commerce. They would also meet Pakistan’s High Commissioner in UK Wajid Shamsul Hassan and Lord Nazir Ahmed. The LCCI delegation would also participate in a programme on “Business Prospects in Pakistan” arranged by Birmingham Chamber of Commerce and Industry at its premises. In Manchester, the LCCI team would meet Pakistan’s Consul General and Lord Mayor Manchester. The LCCI business delegation would also meet different British personalities
to highlight the soft image of the country so that the flow of Foreign Direct Investment could get a boost in real terms. The delegation also included former LCCI President Mian Anjum Nisar, former Senior Vice Presidents Engr. Sohail Lashari, Tahir Javed Malik and Executive Committee Members Khawaja Khawar rashid, Shahzeb Akram, Mahmood Ghaznavi, Mian rehman Aziz Chan, Nabila Intisar, Ilyas Majeed Sheikh, Chaudhry Wajid Ali and Faheem-ur-rehman Saigol. Turkey for being second fastest growing economy of the world after China and first in the European Union has a lot to offer to their Pakistani counterparts and they should avail the available opportunities.
European shares snap rally on global growth concerns g
FTSEurofirst 300 down 0.2 pct, Euro STOXX 50 flat g Basic resources shares down 2.8 pct on weak China data fears g Ibex 35 up 1.8 pct on optimism over euro zone aid deal LONDON REUTERS
European equities snapped a four-day rally on Friday as investors, already disappointed at a lack of U.S. monetary stimulus, positioned for a possible batch of weak Chinese economic data over the weekend. Cyclical stocks led the selloff as markets feared a sur-
prise interest rate cut in China On Thursday signalled the impending release of grim economic data, while the U.S. Federal reserve quashed market hopes for a cash injection. "Yesterday (Fed Chairman Ben) Bernanke disappointed and the market reacted badly," Lorne Baring, managing director of B Capital Wealth Management, said. "Equities are attractive at the current levels but we have
to exercise caution because of the macro overlay, defined by the European crisis and the risk of a Chinese slowdown." Baring had been "underweight" equities since April but started building up positions more recently, estimating an 11 percent sell-off in global equities since late March was overdone as central banks in the United States and China would eventually
intervene to shore up the world's largest economies. China, the world's second largest economy and top metal consumer, cut its deposit and interest rates on Thursday, sparking speculation the move was a prelude to worse-than-expected second quarter economic data over the weekend and sending basic resources shares down 2.8 percent. "We suspect that this rate and deposit cut indicates that underlying inflation is going to fall a lot more than people expect," Credit Suisse strategists said in a note. They were "strategic bears" of mining
stocks on concerns about investments and house prices in China, the world's largest consumer of metals, but acknowledged there was scope for a "tactical trade" on the sector, which had been "oversold" on overly pessimistic expectations for U.S. growth after recent weak data. Despite their recent rebound, metals & mining stocks were still trading at the lowest valuation multiple of all components of the STOXX 60 index at 14.8 times their expectedearnings for the next twelve months, compared to a 17.3 multiple for the broader index.
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Cross border trade dips in JK SRINAGAR NNI
There is dip in the cross border trade from Azad Kashmir to Jammu and Kashmir through the Chakan-da-Bagh border, which has upset one of the major bilateral confidence-building modes to improve ties between New Delhi and Islamabad. Speaking to media persons at Poonch trade centre, a trader said that they have incurred losses, and that border trade has lost momentum, as out of the list of 21 items, only two or three items are being exported. "The reason is that trade began for the 21 items mentioned in the Standard Operating Procedure (SOP) list and instead of increasing the number of items, the items were decreased and now only two or three items are being exported," Abdul Gani Dewan, a local trader said. He added that the Home Secretary r.K. Singh, during his recent visit to the region had promised additions to the list but no changes have been effected yet. "He (r.K. Singh) had said that more items would be added to that list but neither the number of items has increased and nor is the SOP list being followed. Only two-three items are being exported. Bananas were being exported but due to the summer season, either the exported bananas are being sent back from, Pakistan or the produce is getting damaged. Garlic has also been sent back, so the traders are incurring losses," Dewan said. Trade Facilitating Officer (TFO), Chakan-da-Bagh, Poonch, Abdul Hameed Sheikh, clarified that the Indian government had not imposed any ban and the 21 items mentioned in the list can be exported. "There is no ban on the 21 items mentioned in the list, it is agreed from the side of the government. However, if a ban is imposed by the Azad Kashmir, then it is not in our control. There is no ban on the 21 items from the Indian side, those items produced in Jammu and Kashmir would be exported," Sheikh said.
CORPORATE CORNER PTCL extends voice and data services to under-served Balochistan
Wall Street ends best week of year as aid for Spain’s banks seen near Spain blinked. And Wall Street jumped. The US stock market ended Friday's session with its best weekly gains of the year in a rally late in the day after sources told Reuters that Spain was expected to ask the euro zone for money to bail out its troubled banks NEW YORK
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F the scenario unfolds as expected this weekend, Spain would become the fourth country to seek aid since Europe's debt crisis began. That could go a long way toward ending the uncertainty and worry that Spain's banking woes could prolong a downturn in the euro zone into recession and hurt the U.S. economy for the foreseeable future. Five senior European Union and German officials said euro-zone deputyfinance ministers would hold a conference call on Saturday morning to discuss Spain's request for help to recapitalize its banks. This was seen as an effort to stem the tide of worsening market turmoil. "They're asking for the banks to be allowed to tap" the European Financial Stability Facility, said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, whose firm manages about $13 billion in assets. "So I think that gives folks some hope, but most of these measures tend to be temporary boosts to investor psychology." U.S. President Barack Obama said on Friday that European leaders face an "urgent need to act" to resolve the region's financial crisis as the threat of a renewed recession there spells dangers for an anemic U.S. recovery. On Friday, the S&P financial index .GSPF rose 1.2 percent while the KBW bank index .BKX climbed 1.7 percent and shares of JPMorgan Chase &
Co (JPM.N) advanced 2.7 percent to $33.68 - all adding to gains just ahead of the close. The Dow Jones industrial average .DJI rose 93.24 points, or 0.75 percent, to end at 12,554.20. The Standard & Poor's 500 Index .SPX gained 10.67 points, or 0.81 percent, to 1,325.66. The Nasdaq Composite Index .IXIC climbed 27.40 points, or 0.97 percent, to close at 2,858.42. For the week, the Dow advanced 3.6 percent, the S&P 500 rose 3.7 percent and the Nasdaq jumped about 4 percent - the best percentage weekly gains for all three indexes since December. As the euro zone's fiscal troubles grew worse in recent weeks, even ronald McDonald
felt the pinch. Underscoring the impact of Europe's debt crisis, McDonald's Corp (MCD.N), the world's largest hamburger chain, reported a lower-than-expected rise in global same-store sales in May and warned that austerity measures in Europe were taking a toll. McDonald's stock fell 0.7 percent to $87.75, causing the biggest drag on the Dow. Stocks' strong gains came about a week after the benchmark S&P 500 index fell more than 6 percent in May and dropped just below its 200-day moving average, signaling a technical bounce for equities. But the rally took place on light volume of 6.2 billion shares traded on the
New York Stock Exchange, NYSE Amex and Nasdaq, compared with the year-todate daily average of 6.85 billion shares. Shares of Facebook (FB.O) added 3 percent to $27.10. CNBC reported that Swiss bank UBS (UBSN.VX) may have lost as much as $350 million from trading Facebook's stock amid the confusion of the social network's glitch-ridden debut on May 18. UBS was not immediately available for comment. Though financials gained steam late in the session, telecommunications was the day's best-performing S&P 500 sector. Verizon Communications Inc (VZ.N) gained 1.9 percent to $42.44 and the S&P telecom sector index .GSPL rose 1.5 percent. Among other names in the news, Chesapeake Energy Corp (CHK.N) plans to sell its pipeline and related assets to Global Infrastructure Partners in three separate transactions worth more than $4 billion, as the company scrambles to plug an estimated $10 billion funding shortfall. In addition, Chesapeake shareholders delivered a broad rebuke of the company's board, withholding support for two members up for re-election in the wake of a governance crisis and poor financial performance. Chesapeake's stock gained 2.9 percent to $18.36. Best Buy Co Inc (BBY.N) founder and Chairman richard Schulze resigned from the retailer's board on Thursday and said he was exploring options for his 20.1 percent ownership stake, a move seen as a possible precursor of a Schulze-led private takeover.
Living Europe’s nightmare CHRISTOPHER T MAHONEY iSlaMabad: Pakistan Telecommunication Company Limited (PTCL) has won a rs.3.15 billion project of Universal Service Fund (USF) to provide basic telephony and data services in Mastung District of Balochistan province. Through an open bidding process, PTCL has won the rights for the rural Telecom Services Project. An agreement for the project was signed here this week between PTCL and USF, which was witnessed by Federal Minister for IT & Telecom, raja Pervaiz Ashraf. Through the rural Telecom Services Project, PTCL will benefit a population of 74,831 people residing in 102 un-served muzas of Balochistan. The covered area consists of Mastung, Nushki and Ziarat Districts, which will be provided basic telephony and data services by the telecom giant. “PTCL is committed to the Government of Pakistan’s vision for bridging the digital divide and creating an expansive growth of Broadband in Pakistan,” said PTCL Senior Executive Vice President Corporate Development, Sikandar Naqi on the occasion. “We are at the forefront of bringing modern Information & Communications Technology services to the people of un-served and under-served areas of our country.”
ISLAMABAD: Fahad Qadir, Director, Public Affairs and Communications, Coca-Cola Pakistan, along with media representatives and a group of students from various universities of Islamabad on a field trip at Nathia Gali, organised by Coca-Cola Pakistan in collaboration with WWF on World Environment.
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Losing a long war is always hard to accept. Hemmed in by the Americans and the russians in the final days of World War II, Hitler convinced himself that he had two armies in reserve to mount a counter-attack and win the war. Meanwhile, having lost the entire Pacific, Japan’s Imperial Cabinet believed that no enemy could set foot upon the country’s sacred soil. When the truth is unimaginable, human psychology finds an alternative reality in which to dwell. That describes the global situation today. The entire planet seems to be in denial about what is about to occur in the eurozone. Pundits keep expecting Germany to pull a rabbit out of the hat and flood the continent with Eurobonds, or that Mario Draghi will mount a coup at the European Central Bank and buy up every deadbeat country’s bonds. Either could happen, but both are extremely unlikely. Germany cannot guarantee the eurozone’s debt without control over the eurozone, which no one has offered, and Northern Europe will not permit the ECB to be hijacked by “Club Med” and turned into a charity organization. It is not just a matter of politics; it is also – as the Germans keep pointing out – a matter of law. Europe has a Plan A, whereby each country would reform its economy, recapitalize its banks, and balance its budget. But Plan A is not working: its intended participants, most notably France, are rejecting it, and there is an emerging southern European consensus that austerity is not the solution. Greece’s recent election has put it in the anti-austerity vanguard. Italy and Spain (which does not have enough money to bail out its banking system), have similarly called for an end to austerity, and Ireland will be voting on it soon. All have lost access to the bond market, and Portugal is
so far beyond hope that its sovereign debt is trading for cents on the euro. There is no well-thought-out plan for the orderly exit of the eurozone’s insolvent countries. There are no safeguards, no plans, no roadmap – nothing. The Maastricht Treaty, like the United States Constitution, did not provide for an exit mechanism. So, instead of realism and emergency planning, we get denial and more happy talk. But, just because something is “unthinkable” doesn’t mean that it can’t happen. In fact, it already is happening. Greece is rapidly running out of money; its residents are withdrawing their deposits and have stopped paying their taxes and utility bills. Even if the country can stay afloat until the June 17 election, a disorderly eurozone exit, default, and currency redenomination will follow. Greece will be dependent upon foreign aid for essential imports such as petroleum and food. Civil order will be difficult to maintain, and the army may be forced to step in (again). Once Greece goes, runs on bank deposits are likely to follow in Spain and Italy. There is nothing to stop Spanish and Italian depositors from wiring their euros from their local bank to one in Switzerland, Norway, or New York. At that point, the only thing still standing between the eurozone and financial chaos will be the ECB, which could buy government bonds and fund the bank runs. The scale of such an operation would be enormous, and would expose the ECB to huge credit risk. But it could, in principle, step in – if Northern Europe permitted. If the ECB does not step in, Italy and Spain, too, will be forced to exit the eurozone, default on their euro-denominated sovereign and bank obligations, and redenominate into national currency. Massive losses would be imposed on the global financial system. Given the opacity of banks’ exposures, creditors would be unable to discriminate between the solvent
and the insolvent (as was the case in September 2008). The US banks most likely to be affected by such a scenario would be the globalists: Citigroup, Bank of America, JPMorgan Chase, Goldman Sachs, and Morgan Stanley. They would require a rescue package similar to the US Troubled Asset relief Program, created after Lehman Brothers’ collapse in 2008. The US can afford a second TArP, but it would require Congressional legislation, which is not guaranteed (though the US Federal reserve can, of course, keep the system funded no matter what). Massive wealth destruction, combined with global financial chaos, would pose a challenge to monetary policymakers worldwide. Central banks would be tasked with preventing deflation, implying a major round of quantitative easing. But, since banks are the transmission mechanism for monetary stimulus, this presupposes functioning banking systems. Each country would need to restore confidence in its banks’ solvency, which would most likely require a blanket bank guarantee and a recapitalization scheme (such as TArP). The US financial system can withstand any shock, because the US can print the money that it needs. The Fed can maintain nominal prices, nominal wages, and growth if it acts heroically, as it did in 2008. The stock market will react negatively to the level of uncertainty caused by the collapse of the European financial system (as it did in 1931), and the dollar, yen, and gold should benefit. The fate of the British pound and Swiss franc is impossible to say; they could benefit as safe havens, but their banks are highly exposed to the eurozone. It is bad enough that the world is utterly unprepared for the future that can be foreseen. The unanticipated financial, economic, and political consequences of the coming crisis could be even worse. Courtesy: Project Syndicate
Banks instructed to ensure timely deposit of WHT KARACHI NNI
As the Financial year 20112012 nears conclusion, the Federal Board of revenue (FBr) has focused all efforts to reach the rs.1952 billion collection target. Chairman FBr has increased monitoring of Field offices on revenue collection and to remove obstacles hindering achievement of the revenue target. The Chairman FBr Mr. Mumtaz Haider rizvi and member With Holding Tax Mr. Sardar Amirullah Khan met Governor State Bank of Pakistan during their recent visit to Karachi to improve the revenue collection time. The meeting focused on WHT, which is not usually properly deducted nor deposited timely. It was agreed that SBP would instruct all Banks to ensure that WHT deducted under the Income Tax Ordinance per its section 149 pertaining to salaries, section 151 pertaining to profit on debt, section 152 pertaining to payment to non-residents and section 154 pertaining to exports is correctly deducted and timely deposited with the government with special attention to make good in June 2012 any shortfalls by banks during the year.