PRO 12-07-2012_Layout 1 7/13/2012 6:17 AM Page 1
Friday, 13 July, 2012
China craves the Apple pie Page 02 WHaT aBoUT inFLaTion?
Another feather in SBP’s cap g
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Government’s budgetary borrowings from SBP exceed those from scheduled banks Declining commodity prices in international market rids government of inflation woes Budgetary loans from SBP cross Rs 597 billion compared to Rs 592 billion from commercial banks SBP expected to keep discount rate intact at 12pc in near future KARACHI
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ISMAIL DILAWAR
HE cash-strapped federal government has increased its budgetary reliance on the central bank as the prices of commodities, specially the oil, on international market have shown some ease during the recent months.
Fearing a direct inflationary impact of its borrowings from the State Bank, which caters to the same through printing more currency notes, the funds-starved government has been showing enough restraint during first half of FY2 in borrowing from the State Bank of Pakistan. Instead, it depended heavily on the scheduled banks to finance its ever-widening fiscal deficit. According to offi-
cial figures, the Consumer Price Index inflation in month of June (2012) stood at 11.26 percent against 12.29 percent in May. Further, on average during FY12 the CPI inflation stood at 11.01 percent, lower than SBP expected range of 11-12 percent as well as the average inflation of 13.66 percent last year. “The subdued number in the month of June is a reflection of soft food prices and decline in the petroleum prices on account of decline in international oil prices,” viewed Topline analyst Nauman Khan. Now when the easing international commodity prices, specially that of the oil constituting the costliest head on Pakistan’s import bill, have started unfolding its positive impact on inflation rate at home, still in double-digit however, the government seems to have rolled up sleeves to borrow directly from the State Bank. The SBP data show that during July-June 22 (FY2012) the funds-starved government’s budgetary borrowings from the central bank accumulated to over Rs 597.6 billion, up 90 percent or Rs 6 billion from Rs 592.04 billion the government bor-
rowed from the scheduled banks during the review period. Compared year-on-year (YoY), the government’s budgetary borrowings from the state and commercial banks depict a respective increase of Rs 439.9 billion or 279 percent or Rs 88.7 billion or 18 percent over corresponding months in FY11. In total, during the period under review the government raised over Rs 1.279 trillion from the banking system against last year’s Rs 645.33 billion. This shows a mammoth growth of Rs 634 billion or 98 percent over last year. The borrowing from scheduled banks was made through the auction of the heavily-weighted and risk-free government papers in which the risk-averse banks invested heavily to earn billions without, what an analyst aptly pointed out, “lifting a finger”. This huge investment in the government securities, according to SBP figures, has skyrocketed the Net Domestic Assets (NDA) of the banks to over Rs 1.074 trillion compared to last year’s Rs 583.118 billion. The analysts also cite an improved private sector off-take as a contributing factor in the NDA growth. “This positivity was overshadowed by persistent increase in borrowing for budgetary support,” said Mazhar A. Sabir of InvestCap Resreach. This trend, however, does not augur well in the long run for country’s already
‘Massive trade deficit’ scares Mining sector to grow by 3% this year the daylight out of ICCI ISLAMABAD ONLINE
The current increase in trade deficit will drag our economy towards major downturn which is already in doldrums due to various core issues that need to be addressed by the Government on urgent basis. Asad Farid, Acting President, Islamabad Chamber of Commerce and Industry (ICCI) expressed deep concern over the increasing trend in trade deficit. He said that the country could not afford rise in trade deficit for long term with the current level of foreign exchange reserves. He was responding to the reports that trade deficit has increased by 36.3 percent and crossed the benchmark of $21billion during fiscal year 2011-12 as compared to $15.60 billion in the previous corresponding period. ICCI Acting President said that our export oriented industries have failed to maintain export target due to severe energy shortage and our exports were on decline and recorded at $23.64 billion compared
with $24.81billion in the same period last year, depicting a decline of 4.71 percent which would also put the country in a balance of payments crisis. He said that the higher trade deficit leads to outflow of capital resources from the country and increases economic dependency. To control over the trade deficit, Government should improve the competitiveness of the domestic industries by ensuring uninterrupted power supply which would also improve the exports of the industrial units. Asad Farid said that widening trade deficit would bring pressure on the current account deficit, which could ultimately press the rupee value down and this will further deteriorate the situation. ICCI Acting President called upon the Government to take urgent measures to bring some stability in rupee value against dollar so that rapid increase in import bill could be controlled as it was the major cause of widening trade deficit. He cited the example of China, who was continuously trying to maintain its trade balance by controlling value of its currency.
ISLAMABAD: The growth rate of mining sector of the country has been set at 3 percent during the current fiscal year (2012-13), according to official sources. Focus of the mineral policy is on oil, gas, coal, iron ore, copper, and chromites to reduce import dependence, official documents revealed adding Public Sector Development Programme (PSDP) allocation of Rs.268 million has been made for mining this year. During the year 201213 an area of about 3,900 sq. km is planned to be mapped in different parts of the country whereas about 300 samples will be collected and analyzed under geochemical surveying. Efforts will be concentrated on exploration and evaluation of coalfields in Punjab, Sindh and Balochistan. These studies aim at enhancing coal resource base and supplementing power generation and substituting furnace oil in different industrial units in the country. According to the document, copper, lead-zinc sulphide and iron ore occurrences in Chagai and Lasbela-Khuzdar Districts in Balochistan will be further explored. A total of 2 bore holes are tentatively planned to be drilled for a cumulative depth of 500 meters under different development projects. The ongoing projects namely including Up gradation/strengthening of Geosciences Advance Research laboratories, Accelerated Geological mapping and Geo chemical exploration of the out crop areas as well as the project review/updation of Mineral Policy will continue in the year 2012-13. AGENCIES
troubled economy which, the analysts say, is still grappling with challenges like an enhanced money supply, the resultant double-digit inflation and reduced bank advances to the private sector, considered to be the engine of growth in developing economies. The economic observers believe that the Broad Money supply figures show a “dramatic rise” in money supply by Rs 181 billion during last week of June, posting the cumulative increase of 14.4%YTD till June 29. “The current trend in M2 growth is single-handedly driven by massive surge in the government borrowing,” said Mazhar. The analyst said, cumulatively, the government’s budgetary borrowings had contributed 67.2 percent in incremental supply growth compared to the previous year. The positives like improving Pak-US ties and expected inflow of $ 1.1 billion under Coalition Support Fund and the current declining trend in international commodity prices, would provide the government with an alternative source of budget financing and keep the price hike lower in the coming months. “The monetary mechanism could get some relief, however, we expect that the SBP would hold the current stance and maintaining the DR at current in near future,” Mazhar observed.
Romanian aid?
Romania can help Pakistan tap EU market: envoy ISLAMABAD APP
Ambassador of Romania to Pakistan Emilian Ion has invited Pakistani business community to participate in Romexpo to be held in Bucharest, to explore business opportunities aimed at boosting bilateral trade. He said that improved links between the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and the Federal Chamber of Romania was his dream which would come true soon. Ambassador Emilian Ion was talking to Chairman of the FPCCI Standing Committee on Diplomatic Affairs Sheikh Humayun Sayeed, who called on him here. Chairman Media FPCCI Malik Sohail, First Secretary Romanian Embassy Dragos Cosmin Luca and others were also present on the occasion. The envoy of the largest market in the South-Eastern Europe said that historical and friendly nature of the relations between the two states since 1964 called for more concentrated efforts to work together at all levels and promote cooperation in the political, economic, trade and cultural arenas. Pakistani and Romanian business communities should take advantage of the huge opportunities offered by the two economies, the representative of the seventh largest EU market underlined. Pakistani businessmen can export their products especially textile, garments, leather etc. to Romania and also to other EU countries through Bucharest, Emilian Ion informed. On the occasion, Chairman FPCCI Standing Committee on Diplomatic Affairs Chairman Sheikh Humayun Sayeed assured participation of business community in Romexpo. He thanked Romania for taking interest in Pakistan’s coal, energy, pharmaceutical, hydropower and other sectors. Sayeed offered full support of FPCCI to Romanian investors in exploring opportunities, developing linkages, holding exhibitions and exchanging business information.
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Friday, 13 July, 2012
Bulls take judicial cue Bulls edged out the bears, as KSE-100 witnessed a 21-point hike, courtesy SC reaction on NRO judgment implementation KARACHI
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STAFF REPORT
HE bulls kept dominating Karachi stocks market on Thursday with benchmark, KSE 100-share index gained 21.28 points. The day saw the index closing up by 0.15 percent at 14, 401.74 points against 14, 380.46 points of Wednesday. Pakistan Stocks closed higher amid cautious activity by investors in the lead up to the Supreme Court reaction on NRO judgment implementation, This was viewed by Ahsan Mehanti, Director at Arif Habib Investments Limited. On Thursday, the trading volumes at the ready-counter were recorded higher at 109.104 million shares against 80.603 million shares of
43.06, followed by Engro Foods Limited, Fauji Cement, NIB Bank Limited and Jahangir Siddiqui Bank Limited with turnover of 7.903 million, 5.508 million, 5.478 million and 5.253 million shares respectively. According to analyst the institutional support witnessed in blue chip stocks in oil, banking and cement sector on improvement in Pak-US relations and speculations ahead of release of US Coalition Support Fund of $1.5bn. On the future market, the turnover recovered remarkably by over 4 million shares to 9.434 million against 5.782 million shares of Wednesday. The Rafhan Maize Prod and Nestle Pakistan Limited, up Rs 100.00 and Rs 91.50, led highest price gainers while, UniLever Pakistan and Sanofi-Aventis Pakistan, down Rs 185.19 and Rs 9.55 respectively, led the losers.
the previous day. The trading value increased to Rs 4.629 billion compared to Rs 2.372 billion of the previous session. The intraday high and low, respectively, stood at 14, 500.61 and 14, 363.24 points. He added that the profit taking witnessed in the corporate earning announcements session at KSE as global markets uncertainty persists. The market capitalization increased to Rs 3.671 trillion from Rs 3.663 trillion a day earlier. Of the total 360 traded scrips, 163 gained, 109 lost and 88 finished as unchanged. The free-float KSE-30 index also gained 5.19 points to close at 12, 492.03 points against the previous 12, 486.84 points. D.G.K Cement was the day’s volume leader counting its traded shares at 12.394 million with the opening and closing rates standing at Rs 42.94 and Rs
European shares weaken on Fed disappointment
‘High oil prices, volatility hit producers, consumers’ PARIS AGENCIES
Oil prices in recent years have been marked by rapid and very wide fluctuations, causing problems for both producer and consumer nations, the International Energy Agency said on Thursday. Over the past three months, the price for the European benchmark, Brent North Sea crude, has varied between a high point of $125 per barrel in March and a low of $89 in late June, the IEA said in its latest monthly report. Such price volatility can hit “fiscal revenues, investment and confidence in the economy” for exporters, while it “can have negative impacts on inflation and growth prospects” for importers. The G20 of developed and major developing countries has called for efforts to combat such price swings but the IEA said price “volatility itself is not the main problem ... the main challenge is (current) elevated price levels combined with higher volatility.” The IEA said this had become more prevalent since the 2008 global financial crisis, with Brent oil that year hitting a July high of $144 even as it
averaged just under $97 for the 12 months period. In 2011 and in 2012 so far, it has run at much higher levels of more than $111 and $113, respectively, it noted. “Given the fragile state of the global economic recovery, the impact of high oil prices on global growth, especially in oil importing countries, is potentially more severe now than in 2008,” the IEA said. “High oil prices already threaten to aggravate global economic slowdown by widening global imbalances, reducing household and business income, and boosting inflation.” The IEA said that while prices and volatility cannot be separated from each other, persistently higher oil costs were the real concern, especially for importers for which they dampen the economy. Accordingly, “policies to deal with high oil prices should arguably be given priority over policies dealing with volatility,” it said. The IEA said in the report that while it expected oil prices to hold at about current levels for the rest of 2012, they could fall by about 7.0 percent next year, based on current market indications and anticipated sluggish demand.
China craves the Apple pie SHANGHAI: Apple Inc’s next-generation iPhone has not even been released yet, but opportunistic sellers on China’s largest e-commerce platform, Taobao, are already accepting pre-orders, complete with mockup pictures and purported technical specifications. The hotly anticipated iPhone 5 is widely expected to be released sometime between August and October this year, although Apple itself has been tight-lipped about it. Sources have said the iPhone 5 would have a bigger screen than previous models, while Taiwanese media reported the phone’s voice recognition software, Siri, would have more powerful functions. Sellers on Taobao, a unit of Alibaba Group, are accepting orders for the iPhone 5, in some cases asking for a deposit of 1,000 yuan ($160) for the new phone. One seller, “Dahai99888”, who started accepting pre-orders this week, is asking for full payment upfront, at a cool 6,999 yuan ($1,100). Taobao sellers that Reuters spoke with said they planned to buy the iPhone 5 in Hong Kong or the United States and then bring it to mainland China. Apple products are often available in Hong Kong before they are released on the mainland. The sellers could not promise a specific delivery time. The pre-order activity comes despite the mystery around the iPhone 5 and highlights the intense demand for new Apple products in China. Apple has not confirmed the specifications, details or price of the latest iPhone but the Internet rumour mill has been in overdrive, churning out photo renderings and pictures of purported iPhone 5 engineering samples, and speculating endlessly on its technical specifications and functions. AGENCIES
China criticises EU trade ‘discrimination’ BEIJING: China on Thursday criticised Europe’s refusal to ease two longtime trade restrictions as “discrimination”, following a highlevel meeting between the two sides this week. “We believe that the two issues are actually an embodiment of the discrimination against China by the European side,” Hua Chunying, a foreign ministry councillor handling European affairs, told reporters. “The two issues reflect a lack of trust by the European side,” she said. “If the European side can take a small step forward in solving these two issues, then we can make a major step forward in enhancing mutual trust.” AGENCIES
Forex reserves drop to $14,909b KARACHI: Country’s foreign exchange reserves have dropped by $ 328 million to more than $ 14,909 billion on July 12, 2012 on foreign payments. According to State Bank of Pakistan here Thursday, the foreign exchange reserves held by the Central Bank decreased to $ 10.496 billion while reserves held by banks improved to about $ 4.413 billion during the week. APP
Euro slumps to two-year low LONDON: The European single currency fell below $1.22 on Thursday, striking a fresh twoyear low amid the eurozone crisis and as traders saw receding prospects of US Fed stimulus measures. At about mid-day, the euro dived as low as $1.2185, striking the lowest level since June 30, 2010. That compared with $1.2238 late in New York on Tuesday. AGENCIES
LONDON AGENCIES
European shares weakened on Thursday in a broad-based sell-off after minutes of the U.S. Federal Reserve’s June meeting dampened hopes for more risk-assetboosting stimulus in the near term. The Fed minutes showed the world’s biggest economy would have to worsen before the central bank eased monetary policy further. A few officials thought more stimulus was justified, but the majority were unconvinced. “With the Fed holding back on QE3 (a third round of quantitative easing), perhaps in anticipation of darker days ahead, the short sellers are coming out in force,” Mike McCudden, head of derivatives at Interactive Investor, said. “Thinning volumes as we trudge through the summer months will bring increased volatility in the markets and right now, the picture is looking pretty bleak.” The FTSEurofirst 300 was down 1.1 percent at 1,027.66 by 1057 GMT, in volume just 29 percent of the 90-day daily average. The index was trading below its 100-day moving average, a solid support which it breached earlier in the day. Consistent closes below that level at the end of April saw the index plunge 9 percent as euro zone debt and global growth worries intensified, although the 200-day moving average is on the rise, currently at 1,014. U.S. stock index futures pointed to a lower opening on Wall Street on Thursday, with futures for the S&P 500, the Nasdaq 100 and the Dow Jones down 0.7 to 0.9 percent, ahead of U.S. weekly jobless claims data at 1230 GMT. “There’s still a tug of war between weak macro — the most recent data we have seen in Europe and the U.S. has been poor —and hope for policy intervention,” Emmanuel Cau, strategist at JPMorgan, said. “The Fed minutes yesterday did not provide much clarity, in the sense that they kept the door open to intervention but we think there is a big question mark about timing.
02 Business Major Gainers COMPANY
OPEN
HIGH
LOW
CLOSE
CHANGE TURNOVER
Rafhan Maize Prod. Nestle Pakistan Ltd. Colgate Palmolive Bata (Pak) Limited Mithchells Fruit
3100.00 4012.50 1150.00 640.01 289.00
3210.00 4150.00 1203.99 672.01 303.45
3195.00 4030.00 1105.01 640.01 300.00
3200.00 4104.00 1202.88 669.00 302.76
100.00 107 91.50 26 52.88 245 28.99 40 13.76 13,893
Major Losers UniLever Pak Sanofi-Aventis Pak Siemens Pakistan Engro Foods Ltd. Burshane LPG
7398.69 194.05 685.05 73.41 52.43
7249.99 190.00 709.00 74.40 52.80
7200.00 184.35 680.00 69.74 49.81
7213.50 184.50 680.40 69.86 49.97
-185.19 83 -9.55 2,154 -4.65 114 -3.55 7,903,770 -2.46 102,093
Volume Leaders D.G.K.Cement Engro Foods Ltd. Fauji Cement NIB Bank Limited Jah.Sidd. Co.
42.94 73.41 5.89 2.05 14.32
43.67 74.40 6.03 2.30 14.63
42.85 69.74 5.74 2.04 14.16
43.06 69.86 5.79 2.19 14.23
0.12 12,394,128 -3.55 7,903,770 -0.10 5,508,815 0.14 5,478,110 -0.09 5,253,124
Interbank Rates US Dollar UK Pound Japanese Yen Euro
94.3544 145.9002 1.1895 115.2822
Dollar East BUY US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar
94.50 114.68 145.38 1.1830 91.66 12.03 25.68 25.18 94.89
SELL 95.20 116.21 147.28 1.1984 93.37 12.25 25.99 25.45 97.59
CORPORATE CORNER NBP wins ‘Top Corporate Finance House’ award KARACHI: Based on the value of transactions closed in 2011 by NBP Investment Banking the CFA Association of Pakistan has declared NBP the winner of the ‘Top Corporate Finance House (Fixed Income) Award of the Year 2011’. Based on a competitive process an independent panel of judges determined that the volume, number, transaction complexity and other criteria made NBP the winner of the award. NBP was also declared the winner for the “Transaction of the Year-2011” award by the CFA Association of Pakistan for the Private Placement and Offer-forSale of Engro Foods Limited. The CFA Association of Pakistan’s panel of judges, based on the innovativeness of structure, suitability to customer’s requirements, transaction size, width of distribution and the transaction’s impact on Pakistan’s financial markets, determined that NBP’s investment banking advisory made it eligible to win the award.
Fast paced development at Bahria Enclave
RAWALPINDI: Bahria Enclave has fast paced development for its land and amenities over a short span of time. The first batch of plots is ready for possession before time. A quick paced work for the provision of electricity & natural gas connections, has resulted in the availability of both at the moment. Trafalgar square monument is already completed and other amenities are also in place for the ready for possession site. Moreover, Bahria Enclave School & Mosque is also under construction to meet the basic necessity of the residents. Furthermore, Margalla Villas which is exclusive community of more than 50 Villas, are under construction at rapid pace.
Standard Chartered inaugurates flagship Islamic Banking Branch KARACHI: As part of Standard Chartered’s commitment to provide high quality Shariahcompliant banking products and services to its customers, the Bank inaugurated its flagship Islamic banking branch at a new location at Sharah-e-Faisal, Karachi. Al-Tijarah is the second flagship branch in Karachi and third in country for Standard Chartered Saadiq. The branch was inaugurated by Steve Bertamini, Group Executive Director and CEO Consumer Banking. This further portrays that Standard Chartered Saadiq is committed to providing its customers convenient, effective and rewarding Shariah compliant banking. It also offers its customers unique Priority Banking solutions through a dedicated Priority Banking Centre for its customers. PRESS RELEASE
KARACHI: Nauman Fakhar, VP Customer Services, Warid Telecom (right) giving cheque of Rs. 10,000,000 to Arshad Ali of Hyderabad who won the grand prize in Warid ‘SMS Crore Ka’ promotion.
KARACHI: Aviation enthusiasts look on as Qatar Airways’ Boeing 787 Dreamliner takes off as part of the flying display on the first three days of the daily programme at Farnborough Air Show.