PRO 18-10-2012_Layout 1 10/18/2012 2:56 AM Page 1
Thursday, 18 October, 2012
Violence eradicating investment optimism Security unrest keeps foreign investors away from Pakistan KARACHI
F
ISMAIL DILAWAR
ISCAl year 2012-13 is no exception when it comes to the inflow of foreign investment into terrorism-hit Pakistan. According to central bank, during the first three months of FY13, July-September, the troubled country could attract net foreign investment of $ 200 million only. last year too was not that fascinating as the corresponding months in FY12 had seen a meager inflow of $ 217.2 million, registering a decline of 7.9 percent or $ 17.2 million when compared with this year’s figures. The ever worsening security unrest happens to be the major attributing factor for the foreign investors shying away form Pakistan. “Owing to law and order situation and unrest in Pakistan, US companies are often reluctant to come to Pakistan,” James Fluker, senior commercial counsellor at the US Embassy in Islamabad, told the traders and industrialists at Karachi Chamber of Commerce and Industry (KCCI) here Wednesday. The US official said several American firms were in contact with US Overseas Private Investment Corporation (OPIC). His government, in collaboration with private sector, however, had planned to pool a special $ 80 million fund, Pakistan Private Investment Initiative Fund, for assisting the Small and MediumSize Enterprises (SMEs) in Pakistan. To be managed by the USAID, Fluker said funding under the fund was likely to be increased upon working well. The Foreign Direct Investment (FDI) appeared to be the worst affected. Foreign investment under the above head dropped to $ 87.2
Uncle Sam eyes SME sector US government, private sector plan $80m fund for SMEs in Pakistan KARACHI STAFF REPORT
million from last year’s $ 263 million during the months in review. This shows a decrease of $ 176 million or 67 percent over the same period of FY12. According to State Bank, the review period saw $ 287 million FDI inflows against the $ 200 million outflows. The same months in FY12 had marked $ 580 million and $ 317 million flowing in and out of the country, respectively. The portfolio investment, however, was an upset. The private portfolio investment rose by $ 143 million or 305 percent to $ 96.3 million against negative $ 47 million of last year’s corresponding period. The international investment in equity securities from public sector also marked an upsurge of $ 15.5 million or 1354 percent over the same quarter of FY12. During July-Sep FY13 the country’s equity market received portfolio investment worth $ 17 million against $ 1.1 million of the first quarter of FY12. The economic obs e r v e r s believe that the current downward trend in foreign investment was very critical for the resource-constrained country. They said the inflow of international investment was the only permanent factor that could rid the dollar-hungry Pakistan of its balance of payment woes that are ultimately to be addressed through a fresh IMF debt package. Intensified by the post-May 2 diplomatic entente between Washington and Islamabad, the investment climate in the terror-stricken Pakistan has long been non-conducive with a deteriorating law and order and ever-present political instability being the permanent reasons for the negative.
The government and private sector of the United States have planned to pool an initial $ 80 million fund under the Pakistan Private Investment Initiative Fund to be implemented and managed by the USAID. “This Fund would target and assist the SME sector and should be extremely beneficial for it,” said James Fluker, senior commercial counsellor at the US Embassy in Islamabad, during his visit to the Karachi Chamber of Commerce and Industry (KCCI). Accompanied by Jonathan Ward, US economic and commercial consul in Karachi, and Malik Attiq, commercial specialist US commercial service, Fluker said upon working well such funding were likely to be increased. About the law and order situation, the US official said owing to the unrest in Pakistan, the American firms were often reluctant to come to the country. “Several companies are in contact with US Overseas Private Investment Corporation (OPIC),” he said. Fluker said the US Commercial Section had an aim to promote commercial activities, US companies and was working as a trade promotion agency. The US Commercial Service, he said, provides export counselling, promotes US products and services in Pakistan, in addition to counselling and advocating US Commercial interests in the country. Services offered are wide range of trade promotion services to both American as well as Pakistani firms. He said US commercial specialists could help US companies in identifying potential trade opportunities and trade partners by providing valuable market intelligence, potential and qualified business partners, and thus enabling a profitable busi-
ness in Pakistan. Business delegations are composed and trade shows are also organized for business matchmaking and integration. To a query about US single country exhibition in Pakistan, he replied that catalogue show and multimedia presentations could be made. On GSP, he said, 12 items of textiles were included in GSP list, however, US market was open for all Pakistani products and tariffs vary for different products. Earlier exchanging views with Fluker, KCCI president Muhammad Haroon Agar urged Washington to reciprocate Pakistan’s contributions as a frontline state in the global War Against Terror by helping the troubled country address its economic challenges through shifting its support from conventional aid to market access, investment, technology transfer, health, education and training, scientific research, power generation and infrastructural development. Agar articulated that Pakistan’s role in combating terrorism had not been materialized in terms of increased economic cooperation between Pakistan and US. He said American companies in Pakistan were enjoying successful business opportunities while contributing revenue for national exchequer and similarly the said companies also have created thousands of jobs in the country, however he said, these contributions do not reflect the real magnitude and true potential and the exemplary friendship and harmony shared by our two countries. Agar urged the commercial counsellor to motivate US investors to invest in Pakistan because no single multi-national corporation has wrapped up its business from Pakistan and enjoying profitable business successfully. Also attended the meeting were former KCCI presidents Anjum Nisar and Majyd Aziz, Senior Vice President KCCI Shamim Firpo, Vice President Nasir Mehmood and managing committee members.
STRONG CEMENT SECTOR ESSENTIAL FOR STOCK MARKET UPTREND SHAHAb JAfRy Maintaining cement sector strength has become necessary for sustaining the uptrend in the equity market, especially as low growth and erratic input costs cramp the real economy, according to analysts and investors associated with the industry. After oil and gas, cement is the second biggest trading cluster at the KSE, and its strong showing in the last fiscal was central to the Index’s strength in H2-FY12. Mounting political and security threats, coupled with chronically low GDP growth, has left the bourse as the only platform still attracting meaningful foreign investment, something Islamabad would naturally like to see continuing. Yet lately the cement sector has come under increasing scrutiny, with technical traders warning of overbought levels, and producers pointing at election year expansionary compulsions and likelihood of greater export revenue as enough to sustain the uptrend. At stake is not just industry cash flow at a time of unprecedented infrastructural upgradation across leading plants, but also the KSE index itself, which is heavily reliant on just four or five sectors to drive its growth. After months of slowdown, both local cement dispatches and exports picked up in September, by 19.8 and 3.6 per cent respectively, hinting at renewed electionyear demand at home and improved export prospects in Afghan and Indian markets. Yet with capacity utilisation at 68.86 per
cent (that too after a stellar ’12), exports still on a downward year-on-year trajectory, and the local macro environment not favouring growth, questions have arisen about the sector’s ability to sustain last year’s strength.
InPuT cOST AnD buLL-Run The last fiscal saw the industry’s main input cost cut dramatically due to a sharp drop in coal prices. The downtrend continued till the new year’s first fiscal, with prices dropping 20-25 per cent yoy for Q1FY13. “Both production and consumption are falling, while cement end-price increased 30 per cent last year,” says Sarfaraz Abbasi, senior analyst at Summit Capital, Karachi. “Excitement in company scrips owed to reduced input cost, mainly coal, whereas both local demand and export fundamentals remain weak”. Producers, on the other hand, point at the government’s election year spending compulsions as providing sufficient bid in prices through FY-13. “local demand increased nine per cent last year,” according to Waleed Saigol, who sits on Maple leaf Cement’s board of directors. “Now, with the election element, we expect increased demand. However, there is always the risk of knock-on effects of unstable input cost, like fuel, etc”. There is also the possibility of a reversal in international coal prices as Quantitative Easing III (QEIII) and subsequent dollar debasement to spur growth across
the Atlantic is expected to raise commodity prices over coming quarters. Overbought or more upside room? “It’s difficult to accurately speculate on immediate price movement. There are a number of factors that must play out first”, says Faisal Merchant, chief investment officer at National Asset Management Company (namco), a mutual fund that manages approximately Rs900 million in investments. “FY-12 earnings were super solid, prompting producers to invest heavily in capacity utiliastion, further reducing fixed input expenditure. Personally I feel good about holding cement a little longer”. last year’s bull run led to heavy reinvestment by industry majors. DG Khan Cement (DGKC), lucky Cement (lUCK) and Maple leaf Cement (MlCF) have installed waste heat recovery plants and invested in capacity enhancement, making them more cost effective. “Following adjustments we deem necessary to maintain the uptrend, Maple leaf’s replacement value has increased to around $500-600 million,” according to Waleed Saigol. Yet despite these measures, techincals remain unimpressed. “I’ll need to see more to give a convincing buy-and-hold call,” says Mohammad Tahir, technical analyst at First National Equities, a Karachi based brokerage with net capital value exceeding Rs1.3 billion. “It’s tricky, but for the moment technicals hint at overbought levels just around the corner. Failing clear signs of increased
local demand, and sorting out of export related issues, we might see a drop. But if the government and industry come through, there is definitely more upside. Presently, he sees crucial support for DGKC at around 43 (currently around 50). lucky has strong support at 115 (now at 130-131), but failure to rebound will expose it to 90-95 levels. However, Maple leaf (9.25) has very strong support, and possibly a rebound, at 8.5. “The reason is a clear turnaround in its EPS numbers (earnings per share), indicating a management overhaul, and outdoing its contemporaries where numbers matter,” says Hammad Malik, who currently heads First Pakistan Securities ltd, a lahore-based brokerage house. “Whereas EPS trends for most majors have remained more or less the same, Maple leaf seems midway in engineering a text-book turnaround story.”
SbP AcTIOn, SWIng FAcTORS Recent monetary easing came at a good time for the cement sector. The 200bp drop in interest rates over the last fiscal helped reduce the industry’s debt burden, one of the most leveraged. But with incessant government borrowing diluting the easy money, private sector offtake has been minimal because industry remained crowded out, cement being no exception. Buoyed by the rate cut, cement industry profit grew 152 per cent yoy last year, its 114 per cent increase in stock prices out-
performing KSE by 81 per cent. And there are concerns that the stock price is inflated, helped by exogenous influences as opposed to intrinsic demand. There are also concerns of cartel-like behavior, reflected in retail-level price anxiety. “We expected such large profit (brought about by coal price and SBP rate cuts) to lead to price rationalisation at the retail level. But we see no such signs yet,” says a cement contractor, worrying that high prices will eventually lead to demand contraction. “I’m not surprised few people are able to sift through this mess clearly,” continues Hammad. “It’s not very complicated at all once you break it down to bare numbers”. Simply put, the index is trading at record levels, a trend whose continuation is in everybody’s interest. And to sustain these levels, volumes need to pick up, which have been near dry for a good two months running. At such times, favourable corporate results matter more for market pundits than the macro framework. In this regard, it seems cement majors are right up to mark. They undertook a dangerous gambit – heavy reinvestment and deleveraging at peak levels – but it seems it is just such measures that tilt the local bourse. It is these trends that technicals price in, rather than fundamental news. That means there might be some life in cement yet, and by proxy the market, perhaps till after the election. The writer is a financial journalist covering MENA and Pakistan
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Business 02 ‘We’re ready to take on the Indian goods’ ISLAMAbAD OnLInE
T
HE Federation of Pakistan Chambers of Commerce and Industry (FPCCI) said trade liberalisation with India will benefit the consumers of both countries. Pakistani industry has been competing with Chinese products and we are ready to compete with Indian goods, said Haroon Rashid, Acting President, FPCCI. Talking to Presidents of various chambers of Punjab and Khyber Pakhtoonkhwa here, he said competition is the critical driver of performance and innovation, it benefits everyone. Consumers stand to gain the most from greater competition as it encourages lower prices and greater choice. Former President FPCCI Mian Habibullah, President Attock Chamber Dr. Khalid Sayeed Khan, President Islamabad Women’s Chamber Farida Rashid, SVP Tribal Chamber Shahid-urRehman, Chairman Media FPCCI Malik Sohail, Samina Fazil, Alia Akram, Tariq Mehmood, and others were also present on the occasion. Haroon Rashid said that fair and open competition means lower prices and greater choice while limiting consumers’ freedom of choice stalls innovation and encourages dangerous trends. Studies show that regional and global economies benefit from an environment of fair and open competition.
AFP
Asian markets were boosted Wednesday on increased confidence in the eurozone after Moody’s held off cutting Spain’s credit rating, while Madrid looked to move closer to asking for a bailout. A successful bond auction for Greece added to the sense of optimism, while the euro maintained its gains seen in late trade Tuesday as investors sought out riskier assets. Tokyo jumped 1.33 percent by the break, Hong Kong rose 0.82 percent, Sydney added 0.69 percent and Seoul was 0.83 percent higher while Shanghai lost 0.18 percent. Moody’s gave debt-addled Spain some much-needed room on Tuesday when it held the country’s rating at Baa3, one notch above “junk”, citing the European Central
COMPANY Bata (Pak) Limited Siemens Pakistan Shezan Inter.SPOT Indus DyeingSPOT National FoodsXD
OPEN 1155.00 725.51 429.97 426.58 285.30
HIGH 1212.75 761.78 451.46 439.98 299.56
LOW 1150.01 725.51 451.46 406.10 279.00
CLOSE CHANGE 1190.00 35.00 750.00 24.49 451.46 21.49 439.63 13.05 297.52 12.22
TURNOVER 950 750 300 400 56,100
5300.00 3700.00 9900.00 1375.00 383.00
5225.00 3700.00 9700.00 1375.00 380.95
5225.00 3700.00 9900.00 1375.00 381.79
-275.00 -100.00 -41.66 -25.00 -19.21
100 100 380 150 500
20.19 100.00 59.40 9.49 50.00
19.15 95.01 57.75 9.13 48.70
19.24 95.39 58.02 9.31 48.90
-0.51 -4.18 -0.71 -0.01 -0.58
10,246,000 4,506,100 4,097,500 3,050,500 2,944,000
Major Losers Nestle Pakistan Ltd. Rafhan Maize Prod. UniLever Pak Colgate Palmolive Mithchells Fruit
5500.00 3800.00 9941.66 1400.00 401.00
Volume Leaders P.T.C.L.A 19.75 Engro Corporation 99.57 Nishat Mills Limited 58.73 Maple Leaf Cement 9.32 D.G.K.CementXD 49.48 He said that national business leaders Tariq Sayeed and Iftikhar Ali Malik have spent decades for normalisation of relations between two major Saarc countries as they knew that it will not only industry but also the masses at large. He said that non-tariff barriers by India have become a cause of concern among Pakistani exporters; such problems are blocking enhanced intra-Saarc trade which is less than 6 per cent. Haroon Rashid said that issue of energy has emerged as biggest threat to industry, import of
energy cannot be realised due to host of reasons while disagreements over Thar Coal has been barring country to rationalise energy mix, cut oil import bill and spend more on welfare of masses. He said that the losses in the power sector are unsustainable while restructuring is painfully slow which is making situation worse. A turnaround is only possible by privatising the entire power sector. Efficient private sector management is the only way to cull circular debt and put the ailing power sector is on the right track, he remarked.
Europe hopes lift Asian markets HONG KONG
Major Gainers
Bank’s willingness to buy government bonds to stabilise its borrowing rate. It also pointed to Madrid’s commitment to implementing fiscal and structural reforms necessary to improve its fiances as well as efforts to restructure the banking sector and strengthen the banks. However, the agency kept it on a “negative outlook”. Also, a senior Spanish official has said that Madrid was considering a request for a line of credit from Europe’s European Stability Mechanism (ESM) rescue fund, the Wall Street Journal reported. The comments soothed investors fears over Spain as Prime Minister Mariano Rajoy has so far refused to ask for help, despite the parlous state of the economy, saying he wanted to study the terms of a rescue. “The latest headlines from
Madrid imply that a formal request for aid is inevitable,” said Ashraf laidi, chief global strategist at City Index. Greece managed to complete a successful short-term bond auction at lower rates as hopes rise that it will be given a little more breathing space to carry out much needed reforms to get its economy back on track. And in Germany, Europe’s key economic driver, the closelywatched ZEW institute’s calculator of investor confidence rose for the second month in a row in October, in line with a slight easing in regional debt concerns. The news out of Europe sent the euro surging against the yen and dollar. And in early Asian trade the single currency managed to hold those gains. It bought $1.3100 and 103.26 yen in Tokyo, compared with $1.3096 and 103.31 yen in New York late Tues-
day. The dollar was at 78.82 yen compared with 78.89 yen. Wall Street provided a healthy lead thanks to impressive earnings reports from Mattel, Coca-Cola and Johnson & Johnson. The Dow climbed 0.95 percent, the S&P 500 rose 1.03 percent and the Nasdaq added 1.21 percent. But the main focus this week is on China, where third quarter growth figures are due to be released on Thursday, with investors hoping for improved figures and the beginning of a pickup after a slowdown for most of the year. Oil prices were mixed. New York’s main contract, light sweet crude for delivery in November rose 35 cents to $92.44 while Brent North Sea crude for December delivery shed four cents to $113.96. Gold was at $1,752.95 at 0250 GMT compared with $1,740.00 late Tuesday.
Interbank Rates US Dollar UK Pound Japanese Yen Euro
95.3238 153.2384 1.2113 123.8446
Dollar East US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar
BUY
SELL
95.00 122.80 151.70 1.1888 95.17 12.03 25.68 25.13 96.27
95.40 124.29 153.50 1.2028 96.81 12.24 25.96 25.41 98.87
PTCL gains 7% growth in revenue for 1st quarter for FY2012-13 ISLAMABAD: Pakistan Telecommunications Company limited (PTCl) has announced financial results for 1st quarter of FY2012-13 for the period endedSeptember 30, 2012. The financial results were announced at the company’s quarterly Board of Directors meeting held at a local hotel in Islamabad. The PTCl group posted a steady growth of 7 % amounting to Rs 29 billion for 1st quarter of FY2012-13 while Gross Profit stood at Rs 9.6 billion. During the quarter PTCl offered Voluntarily Separation Scheme in order to rationalize the employee’s strength with the business needs. The scheme resulted in benefits for the employees and their families. “PTCl has a long time tradition of differentiating itself from its competitors by offering unique product to its customer” said President & CEO PTCl Mr. Irshaid, while addressing BoD meeting “The success of PTCl broadband internet has triggered an information revolution in the country”, He further said. The company continues to increase its market share in the broadband, wireless and specialized telecom solutions segments by introducing state-of-the-art products and unmatched affordable services. PTCl is also steadily bringing Information Telecommunications services to underserved areas. STAFF REPORT
CORPORATE CORNER LSTM is among ISB’s most successful offerings in India
established world class institutions of higher learning. The collaboration with the Indian School of Business ISB- a magnet for attracting top faculty from advanced countries — will expose the Pakistani corporate managers to leading scholars and practitioners from the world and help in acquiring new knowledge and tools. Hopefully, this exposure will equip them to play a critical leadership role in the future. We look forward to many such joint ventures in the coming years.”
Cinnabon even sweeter with introduction of cupcakes KARACHI: The Institute of Business Administration (IBA), Karachi and the Indian School of Business (ISB), Hyderabad today announced the commencement of their first joint executive education program in Pakistan. The program titled ‘leadership Skills for Top Management’ is currently underway in Karachi. This initiative is an outcome of the MoU signed between IBA, Karachi and ISB on April 13, 2012, aimed at bringing world-class executive education programmes to Pakistan. ‘leadership Skills for Top Management’ (lSTM) is the first among the planned series of programmes aimed at the business leaders in Pakistan. It has been specially designed to help CXOs, business heads and government officials to hone their leadership skills and drive growth through exceptional performance in a challenging and ever-evolving global market. lSTM is among ISB’s most successful executive education programmes in India, having been delivered to more than 1000 senior leaders in the last 11 years. Commenting on the program, Dr. Ishrat Husain, Dean & Director, IBA said “Pakistan can benefit immensely from its proximity to India which has
KARACHI: After 26 years of making the world’s best cinnamon rolls, Cinnabon Pakistan is reinventing cupcakes. The launch event took place at Dolmen Mall Karachi hosted by popular VJ Anushay and other celebrities. “Cupcakes are well-known and well-loved, you can enjoy them sitting down or on-the-go, and they fit perfectly with our current baked goods and specialty beverages,” said Yasser Khawaja. “We went back to our roots and worked with the creator of our famous Classic Roll to bring our new product line to life. We spent a full year testing over 550 different recipes and a secret ingredient to get our cupcakes just right – meaning they’re moist, irresistible, high quality and worthy of the Cinnabon name.” Baked fresh daily in store, for now the new line includes three delicious flavors: Chocolate Passion: Moist, decadent chocolate cake topped with rich, chocolate buttercream frosting Vanilla Bliss: Moist, divine vanilla cake topped with luscious, vanilla buttercream frosting Red Velvet: Moist, red velvet cake – a cross between vanilla and chocolate in flavor – topped with Cinnabon signature cream cheese frosting and garnished with sprinkles and candy polka dots.
MCB Bank Profit Increases by 7% announces Interim Dividend of Rs. 3 KARACHI: MCB Bank has announced an interim dividend of Rs 3 for the quarter ended on September 30, 2012 while posting outstanding results with 5% increase in profit before tax of Rs. 25.459 billion and 7% increase in profit after tax of Rs. 16.673 billion. The Board of Directors under the chairmanship of Mr. Mian Mohammad Mansha reviewed the performance of the Bank and approved the financial statements for the nine months ended September 30, 2012. Financial position of the Bank strengthened with Rs. 108 billion rise in asset base over December 2011 and was reported at Rs. 761.282 billion as on September 30, 2012. Net investments increased by Rs. 98.6 billion to Rs. 415.212 billion whereas gross advances also increased by 1% to Rs. 250.722 billion. Earnings per share (EPS) for the period increased to Rs. 18.13 compared to Rs. 16.87 for September 30, 2011. Return on assets and return on equity were recorded at 3.14% and 26.87% respectively and book value per share improved to 94.07. NBP has the Fastest Growing Overseas Alliances base for Home Remittances – Khalid Bin Shaheen NBP has the fastest growing overseas correspondent base for home remittances. In just around two years time NBP has made alliances with almost all leading Financial Institutions/Money service Business providing remittance services, for facilitation of overseas Pakistanis across the globe. “NBP’s focus has always been the facilitation of overseas Pakistanis and encouraging them to use legal channels for sending their hard earned money to their loved ones at home. The team at NBP has made it possible by launching new, innovative and state of the art remittance products
which are compatible with the technology available globally resulting in easy integration with overseas counterparts while staying complaint with domestic and overseas regulations. The services offered by NBP are satisfying to the customer needs which is the basic reason for NBP’s phenomenal success in the home remittance business” said Khalid Bin Shaheen SEVP/Group Chief-NBP and Chairman NBP Exchange Co. ltd. in a recently held ceremony.
Mangrove plantation by UBL Funds KARACHI: The Karachi wing of UBl Fund Manager embarked on a mission to plant hundreds of mangrove saplings along the coastal areas of Karachi in collaboration with WWF Pakistan. Mangroves along the Karachi coastline have been vastly damaged due to land grabbing and the need for fuel as well as wood, affecting not only the marine breeding grounds but also severing the chances of hurricanes, floods and land swamping. Working with the international NGO, UBl Funds plans on not only to keep track of the planted trees’ progress throughout the year but to turn it into a regular activity with corporate social responsibility in mind. As per recent Government of Pakistan estimates the number of skilled, semi skilled and unskilled workforce going abroad every year will touch around 700,000 in 2012. The increase in overseas correspondent base especially in key remittance markets for Pakistan will enable these expats to remit money home through fast, convenient, reliable and absolutely free channels. NBP is truly the nation’s bank and the growth in global coverage for remittance business is line with its core objectives to serve the national cause by facilitating overseas Pakistanis.
Thursday, 18 October, 2012