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Thursday, 11 October, 2012
Carving out a fiscal beauty g
Equity investment fetching more than government securities, thanks to monetary policy easing
Cement sector bids 1QFY13 adieu on a high KARACHI STAFF REPORT
KARACHI
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ISMAIL DILAWAR
HE sharp rate-cut of 4 percent, carried out by the central bank in its monetary policy decisions during the last 15 months, has made the country’s otherwise volume-starved stocks market an attractive and heavilyyielding choice for the equity investors. The positives are dominating the Karachi Stock Exchange (KSE) and have started unfolding one after another since January 21 of this year when the federal finance minister had told a gathering at KSE that the investors would not be asked to declare their source of income under the new Capital Gains Tax (CGT) regime. Amid strong trading volumes the KSE 100-share index last Thursday hit the alltime high of 15,712 points after a lapse of 54 months with market observers foreseeing the benchmark index peaking to a historic 18,000 points level by may next year on the eve of general elections. The analysts at Topline Research, in the brokerage house’s Tuesday’s report titled “Pakistan Elections”, stated that viewed that the index would climb to 18,000 points by May 2013 up to elections. “We expect the benchmark KSE-100 index to climb to new high of 18,000 points in the run-up to elections by May
Oh the fragility! ‘Global financial confidence ‘very fragile’, euro crisis key threat’ TOKYO AGENCIES
The International Monetary Fund urged European policymakers to deepen the financial and fiscal ties within the euro area with some urgency to restore sagging confidence in the global financial system. In its semi-annual check on the world’s financial health, the Fund said the euro area’s debt crisis was a key threat and the risks to global financial stability had risen in the last six months leaving confidence “very fragile”. The euro area’s plodding progress means European banks are likely to offload $2.8 trillion in assets over two years to reduce their risk exposure, an increase of $200 billion from a prediction six months ago, the IMF estimated. “Despite many important steps already taken by policymakers, this agenda remains critically incomplete, exposing the euro area to a downward spiral of capital flight, breakup fears and economic decline,” the IMF said in its GFSR released on Wednesday.
2013, providing 14% return amid expectations that economic and political issues may resolve as the new government steps in,” said Nauman Khan, author of the report. The analyst believes that the stocks investors, who are fed up with the governance-related issues, are likely to cheer the elections related developments promising to hold solutions to country’s structural issues. Other market observers, like Abdul Azeem of InvestCap Research, expect the index booming to the 16,000 points level saying the benchmark was still consolidating. “The KSE-100 index remains in consolidation phase,” said Abdul Azeem. The analyst said if the free-float index closed above 15,765 points then a bull run was expected towards 16,000 points levels. “Otherwise 15,530 points is the nearest support levels,” he added. Abdul Azeem said the KSE 100-share index above 15,850 points might trigger further buying interest towards the projected 16,000pts. However, he said, short term selling pressure was expected on closing below 15,550 points levels.
This, however, is unwise to say that the referred “consolidation” is coming from the much-awaited market reforms undertaken by the federal government since the start of this year. A gradual reduction of 400 basis points made by the State Bank in the discount rate over the past one year or more is said to be one of the major attributable factors for the market recovery, especially in terms of dividend yields. The above factor, along with strong corporate earnings, has helped the country’s equity market trading at an attractive
one year forward earnings yield of 16 percent. “Pakistan market is trading at attractive one year forward earnings yield of 16% which is far higher than 1-yr T-bill which is close to 10 percent,” said Farhan Mahmood of Topline Research. The analyst recalled that since the in-
famous 2008 market crash, when the Index had slid to a record low of 4,800 points, gap between earnings yield and benchmark yield had narrowed. “But thanks to sharp reduction in interest rates recently, market yield is attractive again after 4 years,” he said. Wednesday saw the Karachi stock market upping to 15,753.82 points, gaining 65.58 points against Tuesday’s 15,688.24 points. At one point, the index skyrocketed to the intraday high of 15,830.17 points but then dipped to 15,688.24, the intraday low. The investors traded well with turnover at the ready-counter standing at 132.83 million shares compared to 110.96 million of the previous session. “Stocks closed bullish with higher trades after the Supreme Court approved draft letter in NRO implementation case easing concerns for ongoing proceedings of Govt. with the judiciary,” viewed Ashen Mehanti, senior market analyst and a director at Arif Habib Securities. The analyst said factors like higher global commodities on Middle East tensions and strong earnings outlook for the quarter end played a catalyst role in bullish sentiments at KSE. This, he said, was despite concerns for security situation in the volatile city. “Investor took position in selected blue chip leveraged stocks amid concerns for gas shortfall in fertilizer sector,” said Mehanti.
Zardari looks to UK for eU trade concession ISLAMABAD ONLINE
President Asif Ali Zardari has said that Pakistan is looking towards UK for support in the EU for trade concessions and for inclusion in GSP Plus list. This he said while talking to British Member of Parliament, former UK Foreign Secretary David Wright Miliband, who called on him at the Aiwan-e-Sadr here on Wednesday. On the occasion UK High Commissioner Adam Thomson and Secretary General to the President Salman Faruqui were also present. President said that Pakistan attaches great importance to its relations with the UK as a friend and a genuine development partner. “Our friendly relations based on mutual respect, trust and cooperation,
there was a need to undertake concerted efforts for translating the strength of our equation into economic terms and to achieve the mutual trade targets set under Pakistan-UK Trade and Investment Roadmap” Zardari added. . He said that Pakistan has abiding interest in peace and stability of Afghanistan and would continue to
support Afghan-owned and Afghan led reconciliation process in Afghanistan. The President reiterated government’s resolve to continue its fight against the militants till its logical conclusion and said that the militants through their dastardly acts were showing their true face to the entire world. He also referred to the menace of illicit drugs and narco-trade which was serving as financial backbone for the militants. The President said that Pakistan would be hosting a regional conference in November this year on counter narcotics to promote a realtime substantive regional cooperation for effectively addressing the issue of drug production and trafficking. David Miliband thanked the President for meeting and appreciated the sacrifices of the people of Pakistan in the war against militants.
The dispatches of cement sector during the month of September showed an impressive growth of 13 percent Year-onyear compared to corresponding month last year, said the analysts at InvestCap Research in its latest report issued Wednesday. Quoting industry sources, the report said the increase in monthly sales was expected to be a result of 19%YoY hike in local dispatches to stand at 1,778k tons. The local dispatches from South are expected to grow by 53%YoY. According to InvestCap analyst Sanam Rasool, this is primarily due to boom in construction activities on the back of spurring housing demand coupled with government infrastructure spending (flood reconstruction). Exports on the other hand, she said, were expected to reflect a flattish trend during Sep-12 and register a marginal increase of 2%YoY as manufacturers have started orienting their sales on the local front amid higher local demand and impressive local retention prices; enduring an increase of 19%YoY to Rs6,988/ton. The cement dispatches for 1QFY13 are expected to clock in at 7,678ktons, up by meager 2%YoY due monsoon effect. The growth in total dispatches is expected to stem primarily from 5%YoY increment in local dispatches, which are expected to clock in at 5,419k tons. “This is particularly due to surging real estate demand coupled with increased construction activities,” said Sanam. Hence, she said, local dispatches from south are expected to witness a surge of 17%YoY to 1,110k tons during the said quarter. Exports are expected to dampen by 3%YoY during the period under review due to spike in inland transportation cost incurred by the firms coupled with lower demand on the export front and unattractive export prices. As mentioned above, the real estate market is back in the limelight after years of hibernation, due to surge in remittances and increased urbanization. Despite higher cement prices, downward revision in cost of borrowing due to monetary easing is expected to pull down the over all cost of different projects and is expected to rejuvenate construction activities as a result. This is foreseen to act as an impetus for increased cement demand going forward. The approaching winter season is expected to subdue cement demand, however, post winter, demand is expected to escalate. This, according to Sanam, was mainly because the government is likely to increase infrastructural development spending in the run-up to the upcoming general elections.
OVERSEAS PAKISTANI WORKERS REMIT OVER $3.5B IN 1QFY13 KARACHI STAFF REPORT
It augurs well for the country’s external account as Pakistanis working abroad keep remitting on average a billion dollars every month to take remittances to over $ 3.599 billion during the first quarter of current fiscal year ranging from July to September 2012‐13. This, the central bank reported Wednesday, shows a growth of 9.16 percent or $301.91 million compared with $3.297 billion the country had received during the corresponding period of last financial year. The state bank attributes this unprecedented increase in the inflow of worker remittances to Pakistan Remittance Initiative (PRI), a joint initiative launched by the federal government through the central bank and the ministries of overseas Pakistanis and finance
some three years back in April 2009. “The continued growth in workers’ remittances is the result of the efforts made by Pakistan Remittance Initiative (PRI) in collaboration with other stakeholders to facilitate both Overseas Pakistanis and their families back home,” the State Bank said Wednesday. The inflow of remittances in the review period from Saudi Arabia, UAE, USA, UK, Gulf Cooperation Council (GCC) countries, including Bahrain, Kuwait, Qatar and Oman, and EU countries amounted to $ 961.09 million, $753.08 million, $623.72 million, $500.15 million, $396.14 million and $97.05 million, respectively. The same quarter in FY12 had seen inflows worth $854.18 million, $746.62 million, $627.75 million, $369.36 million, $354.61 million and $101.73 million from the respective destinations. The remittances received from Nor-
way, Switzerland, Australia, Canada, Japan and other countries amounted to $ 267.88 million as against $242.95 million received in last year’s first quarter. The monthly average remittances for the quarter in review total at over $1.199 billion compared to $1.099 billion received during the corresponding period of last year. Last month, over $1.135 billion were sent back home by overseas Pakistanis as against $ 890.42 million they remitted in the same months of FY12. This depicts a month-on-month growth of 27.52 percent, the bank said. In September (2012), the inflow of remittances from Saudi Arabia, UAE, USA, UK, GCC countries and EU countries was recorded, respectively, at $303.31 million, $247.28 million, $177.11 million, $166.09 million, $122.05 million and $33.48 million compared to lat year’s $252.56 million, $ 194.51 million, $169.30 million, $86.91 million,
$103.85 million and $26.76 million. The foreign exchange received from Norway, Switzerland, Australia, Canada, Japan and other countries during the said month totaled at $86.10 million as against $56.53 million received in September FY12. T h e central bank said since its inception, the PRI has taken a number of steps to enhance the flow of remittances through formal channels which include: (a) preparation of national strategies on remittances (b) taking all necessary steps to implement
the overall strategy (c) playing the advisory role for financial sector in terms of preparing a business case, relationship building with overseas correspondents, creating separate efficient remittance payment highways and (d) becoming a national focal point for overseas Pakistanis through round the clock call centre (021‐111‐222‐774) with toll free lines, separate web site etc. The PRI, it said, had been taken to achieve the objective of facilitating and supporting faster, cheaper, convenient and efficient flow of remittances.
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Shares fall, dollar rises, amid earnings gloom SINGAPORE
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AGENCIES
SIAN shares fell on Wednesday, with Japan’s stocks sliding more than 1.5 percent to a two-month low, and the safe-haven dollar firmed on concerns that the corporate results season will reveal weaker earnings in the face of flagging global economic growth. Equity markets have been rallying since hitting their 2012 low in early June, with action from major central banks to support fragile economies giving a renewed lift last month, but caution has set in as the third quarter results season begins. “History is not on the side of those who expect the market to continue to prosper once the earnings cycle has turned,” said John Higgins, senior markets economist at Capital Economics, in a note. The euro slipped, with a rise in Spanish bond yields as Madrid keeps markets guessing over whether it will request an international bailout and violent protests greeting German Chancellor Angela Merkel on a visit to Greece underlining how far the region’s debt crisis is from resolution. Growth-sensitive commodities such as oil and copper and currencies like the Australian dollar were under pressure, while the retreat from riskier assets boosted safe-haven government debt, with Japanese government bonds (JGB) following U.S. Treasuries higher. Japan’s Nikkei share average fell 1.9 percent, while MSCI’s broadest index of Asia Pacific shares outside Japan fell 0.5 percent. U.S. stocks fell around 1 percent on Tuesday, with shares of Intel, the world’s largest semiconductor maker, losing 2.7 percent after downgrades from at least two brokerages. S&P 500 futures traded in Asia
slipped 0.2 percent. Asian technology stocks were hit by Intel’s weakness, with the tech sub-index the biggest drag on the MSCI Asia ex-Japan with a 1 percent decline. South Korean heavyweight Samsung Electronics fell 2.0 percent. EARNINGS WARNINGS: Companies including FedEx Corp, Caterpillar Inc and HewlettPackard Co have warned about earnings, citing weak demand in Europe and China. Thomson Reuters data shows analysts expect quarterly earnings for S&P 500 companies to decline about 2.3 percent from the year-ago period, the first fall in three years. The International Monetary Fund said in its semi-annual check on the world’s financial health on Wednesday that the euro area’s debt crisis was the main threat and the risks to global financial stability had risen in the last six months, leaving confidence “very fragile”. The report adds to the gloomy backdrop ahead of the IMF’s meeting to be held in Tokyo later this week. On Tuesday, the Fund said the global slowdown was worsening and cut its growth forecasts for the second time since April.
Business 02 Let’s trust each other
Major Gainers
Asia’s future success depends on building much greater mutual trust, confidence among its major economies
oPen ComPany Nestle Pakistan Ltd. 5000.00 Colgate Palmolive 1230.20 Indus Dyeing 428.15 Abbott Lab. 197.92 Packages Ltd. 140.60
ISLAMABAD ONLINE
The Asian Development Bank(ADB)has said that Asia’s future success depends, inter alia, on building much greater mutual trust and con?dence among its major economies, which was vital for regional cooperation. The Bank said industrial development and trade were key tools for driving growth and reducting poverty in Asia as intraregional trade accounts for 55 per cent of Asia’s total trade, sharply up from about 43 per cent in the early 1990s. “Intraregional trade in Asia is higher than the 46 per cent figure for the North American Free Trade Area and only slightly below the 62 per cent figure for the 15 European Union countries,” the Bank said, adding that trade between Asia and Latin America/Caribbean grew at over 20 per cent a year in the past decade, reaching an estimated $442 billion in 2011. It said as of January 2012 there were 18 free trade agreements amongst countries in Asia and Latin America/Caribbean. This figure may rise to 30 by 2020. By 2040, some economists estimate that the combined gross domestic products (GDP) of the PRC and India will be 10 times larger than Europe’s entire annual output. Developing Asia’s service sector is to play a growing role as economies that graduated from agriculture to industry evolve further into service economies. “Lack of human capital, inadequate infrastructure and restrictive regulations are major bottlenecks for developing a modern service sector. Small and Medium Enterprises play a key role in employment and income generation in Asia, accounting for an estimated 90 per cent of all businesses and 60 per cent of the workforce,” the Bank further added.
Crude down in Asia on global economic worries SINGAPORE AFP
Crude sank in Asian trade Wednesday on concerns over the world economy after the International Monetary Fund (IMF) cut global growth forecasts. New York’s main contract, light sweet crude for delivery in November fell 27 cents to $92.12 a barrel and Brent North Sea crude for November delivery shed 50 cents to $114.00. The IMF’s slashing of its global growth forecasts for this year and next ended an overnight rally, said Victor Shum, senior principal of Purvin and Gertz energy consultants in Singapore. “Given that we have continuing concerns over the global economy and the IMF has also
adjusted its economic forecasts downward for the world... so we are seeing the corrections,” he told AFP. Crude had soared late Tuesday, but concerns over a slowdown in the global economy brought prices back down. The IMF on Tuesday cut its global growth forecast for this year to 3.3 percent from its July estimate of 3.5 percent. Growth will also only hit 3.6 percent next year — lower than the 3.9 percent predicted in July — as even powerful emerging economies like China, India and Brazil hit the brakes, the Fund said. The World Bank and the Asian Development Bank have also slashed their growth forecasts for Asia, a region often seen as a key engine for the world economy as Western economies falter.
HIgH 5250.00 1290.00 439.99 207.81 147.63
Low 5200.00 1230.20 439.99 198.00 142.00
CLoSe CHange 5200.00 200.00 1290.00 59.80 439.99 11.84 205.94 8.02 147.63 7.03
TuRnoveR 200 2,750 100 101,300 257,000
422.11 385.00 238.00 107.00 97.70
381.91 380.00 231.05 101.65 97.65
381.91 380.01 231.05 101.65 97.70
-20.10 -19.99 -5.95 -5.35 -5.05
3,600 700 700 1,500 1,500
47.99 20.18 5.75 6.56 16.06
45.25 19.71 5.51 6.21 15.58
45.47 19.80 5.52 6.36 15.67
-1.23 0.03 0.05 0.05 0.09
14,544,500 11,180,500 7,684,500 6,827,500 6,027,500
Major Losers Shezan Inter. Mithchells Fruit Atlas Battery Ltd. Fazal Cloth Mills Mehmood Tex
402.01 400.00 237.00 107.00 102.75
Volume Leaders Hub Power CoXD P.T.C.L.A K.E.S.C. Fauji Cement Askari Bank
46.70 19.77 5.47 6.31 15.58
Interbank Rates US Dollar UK Pound Japanese Yen Euro
95.5087 152.7757 1.2198 122.8242
Dollar East US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar
Buy
SeLL
95.10 121.90 151.42 1.2055 96.20 12.09 25.82 25.27 96.37
95.60 122.90 152.63 1.2150 97.47 12.25 26.00 25.45 98.59
Goldman Sachs in bid to change Volcker rule: report NEW YORK AFP
Goldman Sachs is seeking changes to the Volcker rule, which keeps banks from speculative trades in their own accounts, to protect its merchant-banking unit, The Wall Street Journal reported Tuesday. The rule, named after former Federal Reserve chairman Paul Volcker, was part of the sweeping reforms introduced in the wake of the 2008 recession and aimed at preventing another meltdown of the financial sector. It forbids banks from actively trading in their own accounts to boost profits, what is known as proprietary trade. Goldman is lobbying US regulators to allow its merchant banking unit’s credit funds, which mostly concern pension funds and insurers, to be exempted from the rule, the Journal said, citing people briefed on the matter. In meetings with and letters to regulators, the firm has argued that the credit funds function like banks, though with a different structure, according to the report. Goldman also claims the funds help the struggling US economy by making more credit available, and says the credit funds present less risk than other investments affected by Volcker limits. Regulators have yet to respond definitively to Goldman’s requests, according to the Journal. The newspaper noted that the credit funds are a significant part of Goldman’s business. Its two main credit funds are GS Loan Partners, with $10.5 billion in investments, and GS Mezzanine Partners, at $13 billion.
CORPORATE CORNER ‘BISP providing safety net to 25% bottom population of Pakistan’
ISLAMABAD: Federal Minister and Chairperson Benazir Income Support Program (BISP), Madame Farzana Raja has said that the purpose of development is to reduce poverty, inequality and unemployment so that the basic needs of underprivileged of society could be provided. The growth without addressing the root causes of inequality can result in larger gulf between the haves and haves not. She said this while addressing at the annual Dr. Akhter Hameed Khan Memorial Lecture 2012 here on Wednesday. Madame Farzana Raja said that BISP is providing a safety net to the bottom 25% population of Pakistan as cushion against the rising prices if food and fuel. She said that this initiative is aiming to enable poor families to maintain essential consumption pattern.
Ruba’s first electronic outlet
The floral fragrance of water
Ruba Digital, a project of Ruba SEZ Group held the inaugurated ceremony of their first retail electronic outlet at KRL foundation, Rawalpindi. On behalf of Ruba SEZ Group, Mr. Waseem Afridi (Director) along with Mr. Imran Yusufzai (GMOperations) graced the occasion with their presence welcomed by Dr. Aftab (MD Foundation) and Col. Fida Hussain (General Manager Admin, Foundation). Event started with Holy Quran recitation followed by ribbon & cake cutting ceremony. The event was a real success and attended by KRL foundation members & society residents.
KARACHI: Issey Miyake launches three of its fragrances in a star studded event at Art Chowk, Clifton Karachi. The Japenese designer perfume was brought to Pakistan by none other than Multitech. A well established name for bringing famous beauty brands in Pakistan. Unique, timeless and universal, Issey Miyake’s L’Eau d’Issey now has the coveted status of a reference in international perfumery. With 14 years of success and an ever-increasing number of fans and devotees, L’Eau d’Issey has proven it powers of attraction and enchantment, winning the admiration of everyone who tries it. Is it any wonder? Conceived by a Japanese designer and the product of a culture in which fragrance must always be as discreet as possible, L’Eau d’Issey defies convention, imposing its own unique style.
Thursday, 11 October, 2012