profitepaper pakistantoday 21st october, 2012

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Sunday, 21 October, 2012

US war reimbursements keep Pakistan’s external account in check 8

KARACHI

C/A balance continues to set in green zone, surplus swells to $432m during first quarter of FY13

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Trade gap widens to $3.63b against last year’s $ 4.15b

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Remittances balloon to $ 3.59bn from $3.29b of FY12

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Dollar reserves keep shrinking to $14.31b, of which SBP owns only $9.8b

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ISMAIL DILAWAR

HE country’s current account balance after braving a whole year of deficits in FY12 is moving ahead in the green zone marking a $ 432 million surplus during the first quarter on the back of, what the official and unofficial quarters agree, receipts of war reimbursements from the United States in early August.

However, a monthly account of Pakistan’s Balance of Payment shows a negative trend as the month of September marked a deficit of $ 331 million against $ 1.084 billion surplus in August, the month during which the Americans had reimbursed the war expenses.

Washington, Islamabad’s non-Nato ally, had released to the dollar-hungry Pakistan on August 1 some $1.118 billion under the long-denied Coalition Support Fund (CSF) after a months-long strain in bilateral ties relaxed through an on-andoff process of negotiations between the two countries on civilian, military and intelligence level.

The inflows, the SBP chief spokesman Syed Wasimuddin had confirmed, had put the country’s current account balance into a surplus of $ 919 million during the first two months of FY13, July-August.

Quarter-wise, the central bank reported the surplus ballooned to $ 432 million during July-September against a deficit of $ 1.339 billion the cash-strapped country had faced during the corresponding months in FY12.

In percentage terms, the surplus constitutes a negligible 0.7 percent of the country’s gross domestic product (GDP) accounting for $ 61.674billion.

Senior analysts like Khurram Schehzad had also seconded the central bank’s view saying the positive was attributable mainly to the dollar inflows on account of CSF and Kerry Lugar from the US. The receipts under KLA have been meager with Washington reported to have transferred only Rs 20.356 billion during FY12 against a projected receipt of Rs 34.164 billion. Under the KLA, Pakistan has the US’s word for receiving a civilian

Leather industry faces aridity

PTCL launches 3G EVO Wingle- Pakistan’s first Wi-Fi enabled USB

KARACHI STAFF REPORT

The suspension of water supply in the Tannery Zone of Korangi Industrial Area has put the country’s leather exports under a serious threat, said the industrialists Saturday.

The warning came from Chairman Pakistan Tanners Association (S.Z), Amanullah Aftab in a statement who expressing concern said the largest national cluster of exporting leather and leather made-up units located on Sector 7/A, KIA, was

ISLAMABAD STAFF REPORT

As first from Pakistan Telecommunications Company Limited (PTCL) now introduces Pakistan’s First Wi-Fi enabled USB ‘3G EVO Wingle’ that connects multiple Wi-Fi enabled devices simultaneously at hyper speeds of up to 9.3 Mbps. PTCL 3G EVO Wingle is a perfect work and travel companion providing a powerful Wi-Fi experience on the go, connecting 5 Wi-Fi enabled devices to PTCL’s revolutionary 3G EVO Wireless Broadband. The tremendous ease and comfort of 3G EVO Wingle with its state of the art Wi-Fi capability and fast internet browsing brings an unparalleled experience for PTCL customers. “3G EVO Wingle will revolutionize the way people connect and surf on the go”, said Senior Executive Vice President (SEVP) Commercial, Naveed Saeed. “Being the largest telecommunication company in Pakistan PTCL has always been the trendsetter for other companies”. 3G EVO Wingle launch comes with a special bundle offer of 3 months unlimited internet and free Wingle device for just Rs 7,500.

PTCL also offers customers the flexibility to opt for various post and prepaid packages based on their needs and requirement and access to broadband internet anywhere anytime. “We are constantly bringing products that provide maximum utility to our customers” said ¬ Executive Vice President (EVP) Wireless, Omer Khalid. “PTCL has specially taken this initiative so that our valued customers can work play and surf on the go”. PTCL 3G EVO Wingle provide customers seamless roaming experience at speeds up to 9.3 Mbps in over 200 cities, with auto switch over to 3.1 Mbps speeds in over 250 cities. The devices come with secure password protection to ensure optimal connection security.

aid of $ 7.5 billion till 2014, $ 1.5 billion per annum.

However, the funds transfer under CSF augured well for the funds-starved Pakistan which, in FY12, had braved a current account deficit of over $ 4 billion, pushing the economic managers closer once again to a fresh IMF bailout package.

The country’s trade balance also showed a restraint and widened to $ 3.634 billion compared to the corresponding quarter of FY12

which had seen the same head increasing beyond $ 4.15 billion.

A break up of trade deficit depicts that during the quarter in review the country exported goods worth $ 5.994 billion compared to $ 6.142 billion in July-Sep of the last fiscal. Compared with last year’s $10.300 billion, the imports totaled at $ 9.628 billion.

Oversea Pakistanis continue to do well by sending back home $ 3.599 billion during the review period as against $ 3.297 billion of last year.

The central bank says that the country on average receives over a billion dollars every month from Pakistani compatriots. The disbursements from the foreign financers, another noteworthy indicator on the current account balance list, set in the red zone and remained confined to long-term project loans totaling at $ 355 million. Last year, the foreign disbursements under the same head had amounted to $ 372 million.

The C/A surplus also reflected well on the country’s booming stock market where, despite investors’ concern for an uncertain law and order situation in the protests-hit city, the benchmark KSE 100-share index closed bullish on Friday, last trading day of the week.

The equity investors showed an across-the-board interest in stocks owing to the country’s current account witnessing a surplus for first quarter of the current fiscal year, said Ahsen Mehanti, a senior equity analyst and director at Arif Habib Securities.

However, despite these positives the economic managers have still a lot ot worry about owing to the country’s falling foreign exchange reserves that now have contracted to $ 14.31 billion, of which only $ 9.8 billion belong to the State Bank. The remaining $ 4.5 billion are owned by the commercial banks.

tantalizing for water due to suspension of supply through tankers. The local tanneries are totally dependent on supply of water through tankers in absence of water supply from KW&SB for years.

“Now since hydrants have beenclosed by KW&SB, the tanneries are feeling being stifled for want of water,” said Aftab.

He warned that the peak season of tanneries has already begun and during Eidul Azha, the largest chunk of hides and skins would be brought to this zone by the charity organizations and the tanneries would require water in abundance for their processing. He further warned that if the water is not supplied by the KWSB, the hides and skins worth crores of rupees may be destroyed.

Aftab said that he water intensive tanneries are being threatened to default in shipment of leather to customers abroad on stipulated delivery dates since it will not be ready in time for want of water, he said adding that the workers may also gradually lose job due to closure of units and lower production in absence of water which is the main input in this industry, he added. He appealed to Governor Sindh Dr Ishrat ul Ebad to order KWSB to make some arrangements for water supply to tanneries whether it is through pipeline or tankers.

IMF says pace of Irish austerity remains appropriate The International Monetary Fund (IMF) said on Saturday that the pace of austerity prescribed in Ireland's bailout program is appropriate and that a number of other factors have also proven to be a drag on growth NEW YORK AGENCIES

The IMF, one of a trio of lenders overseeing Ireland's 85 billion euro bailout, said it was restating its position in response to media queries regarding its research on the impact of fiscal adjustment on economic growth.

The IMF issued a similar statement in relation to fellow bailout recipient Portugal last week, urging it to continue a tough budget adjustment that was imperative for the country to return to finance itself in debt markets.

"The pace of consolidation under the program has struck an appropriate balance and continues to do so for the period ahead, enabling Ireland to

make steady progress," Ajai Chopra, the IMF's deputy director for Europe said in a statement.

"Although there is uncertainty around any estimate of fiscal multipliers, there is no compelling evidence that a higher multiplier was at work in Ireland than the one assumed under the program.

"With overburdened bank, household and SME balance sheets, and weak growth in trading partners, a number of factors besides fiscal consolidation have been a drag on growth in Ireland." The IMF, European Commission and European Central Bank, Ireland's so-called troika of lenders, will give their latest quarterly bailout assessment next week with few issues foreseen in a period when Ireland resumed borrowing on long-term bond markets and continued to meet its program targets.

Call to include kinno in export list SARGODHA APP

Kinno Growers Association said on Saturday the government should include kinno (orange) in the export list with India. In a press relase, Kinno Growers Association Secretary Syed Munir Hussain appreciated the federal government for boosting trade with India. He appealed to parliamentarians of district Sargodha to work for inclusion of kinno in the export list with India. He said if kinno was included in the list, it would help earn huge foreign exchange for the country.

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GE, McDonald’s give Wall Street a black eye on ’87 crash date Stocks ended the week with their worst day since late June after Dow components General Electric and McDonald's, both barometers of the overall economy's health, added to a disappointing earnings season.

NEW YORK

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AGENCIES

ECHNOLOGY shares kept up a pattern of recent weakness, hurt by anemic results from Microsoft (MSFT.O) and another losing day for Google (GOOG.O). The Nasdaq closed down 2.2 percent.

For the Dow, Friday's slide marked its biggest loss since June 21 - with the sell-off coming on the 25th anniversary of Black Monday, when the Dow plunged 22.6 percent in its worst single-day percentage drop ever.

For the week, though, the Dow still managed to squeak out a gain of 0.1 percent, while the S&P 500 gained 0.3 percent despite Friday's losses.

Wall Street's mood was sour, given that a large number of companies have fallen short of top-line expectations. Of the 116 S&P 500 companies that have reported results so far, 58 percent have missed on revenue expectations, according to Thomson Reuters data.

"Traders are going to look at things that mimic the U.S. economy - and currently, everything that mimics the economy has been performing awfully," said Todd Schoenberger, managing principal at the BlackBay Group in New York.

General Electric Co (GE.N) shares fell 3.4 percent to $22.03 after quarterly revenue fell short of estimates.

McDonald's Corp (MCD.N) lost 4.5 percent to hit $88.72. Chipotle Mexican Grill (CMG.N) fell 15 percent to $243 after quarterly profits missed analysts' expectations. The technology sector has been a drag on the stock market, which is a concern because it is seen as a leading indicator of market direction. The S&P information technology sector index .GSPT has dropped 5.3 percent in the last 10 days, compared with a 1.9 percent decline for the S&P 500 in that time period.

"Tech has been lagging for almost a month now. It is obviously very sensitive to the U.S. economy, and the global economy for that matter," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio. Microsoft (MSFT.O) dropped 2.9 percent to close at $28.64 after it said it fell short of revenue expectations because of poor sales of PCs. "The fact they are missing consistently is bringing up a 'sell first, ask questions later' mentality," Detrick said.

Tepid results are being met with particular disap-

pointment because expectations were low to begin with this season, with 95 negative pre-announcements for earnings per share and only 24 positive pre-announcements issued by S&P 500 corporations, Thomson Reuters data shows. Earnings are expected to drop 1.8 percent in the third quarter from a year ago.

The Dow Jones industrial average .DJI lost 205.43 points, or 1.52 percent, to close at 13,343.51. The Standard & Poor's 500 Index .SPX fell 24.15 points, or 1.66 percent, to 1,433.19. The Nasdaq Composite Index .IXIC slid 67.24 points, or 2.19 percent, to close at 3,005.62.

For the week, the Nasdaq lost 1.3 percent.

The sharp decline took the S&P 500 from within striking distance of its highest close of the year - at 1,465.77 set on September 14 - to testing its 50-day moving average. On Friday, the S&P 500 appeared to be testing its 50-day moving average at around 1,433. If the S&P 500 falls below that level, it could trigger more selling.

"The S&P 500 has broken trend-line support at 1,441, and is slipping a bit below its 50-day moving average of 1,433," said Stifel Nicolaus option market strategist Elliot Spar. Near-term volatility is expected to rise. The CBOE Volatility Index .VIX, Wall Street's gauge of investor anxiety, rose 13.5 percent to close at 17.06, off its session high at 17.60. Options expiration added a bit of volatility to Friday's trading. Volume was roughly 7.27 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the yearto-date average daily closing volume of 6.52 billion. Decliners outnumbered advancers on the NYSE by a ratio of more than 3 to 1. On the Nasdaq, about four stocks fell for every one that rose.

Business 02 Euro slips vs. dollar as uncertainty on Spain persists The euro fell against the dollar, retreating from the top of its recent trading range as a lack of visible progress on a Spanish bailout request reminded investors of the headwinds facing Europe NEW YORK AGENCIES

Expectations that Spain will ask for a bailout had helped the euro rally to a one-month high this week, but uncertainty about when such a request might come has made investors wary.

European leaders moved closer to establishing a single euro zone banking supervisor at a summit on Thursday, but talked little about the problems facing debt-ridden Spain and Greece. A bailout request from Spain would enable the European Central Bank to buy Spanish bonds and drive down Madrid's borrowing costs. That would probably increase investor appetite for perceived riskier currencies against the safe-haven dollar.

"We are feeling the effects of no real catalysts, indecision within the EU, and a large technical range," said Marc Principato, director of SMB Forex Trading And Education in New York. "The euro/dollar is still trading within the 1.2800 to 1.3160 range, and I believe will continue to do so until after the U.S. election."

The euro was last 0.3 percent lower on the day at $1.3021; it hit a onemonth high of $1.3139 on Wednesday.

It has traded in the same range since mid-September.

On the week, it was up 0.5 percent against the dollar Traders reported bids around $1.3000 to $1.3020 that could provide support.

"We are missing the decisive news that might push us out of this range. It is most likely going to be some political news like a move from Spain," said Ulrich Leuchtmann, head of FX research at Commerzbank in London. Against the yen, the euro slipped 0.3 percent

to 103.25, after touching a five-month peak on Thursday, and was up 1.6 percent this week.

Strategists said many remained cautious and were looking to profit by selling the euro near the top of the range.

"Our survey of euro/dollar positioning suggests a market betting on a wide rangetrading environment strategically, while tactically looking to sell euro/dollar on rallies," Societe Generale strategist Sebastien Galy wrote in a client note from London.

Other analysts said the euro's rally since late September was overdone given the weak economic outlook for the euro zone. The dollar traded up 0.1 percent 79.31 yen, near a twomonth high set on Thursday. It gained 1.1 percent this week, the best weekly performance in two months.

Speculators have recently sold the yen on expectations the Bank of Japan will take another easing step at its policy meeting on October 30, following up on its easing last month. However, the dollar's advance is likely to slow as Japanese exporters are waiting to sell, and immediate resistance is seen at its August peak. A report showing U.S. home resales fell in September, a reminder that America's housing sector is a long way from a full recovery, weighed on the euro in the New York session and helped bolster the U.S. currency against the yen. Currency speculators boosted their bets against the U.S. dollar in the latest week, according to data from the Commodity Futures Trading Commission released on Friday. The value of the dollar's net short position rose to $8.14 billion in the week ended October 16 from a net short position of $6.43 billion the previous week. The Australian dollar fell 0.4 percent to $1.0323, off a three-week high touched on Thursday.

World stocks, oil fall on US results, economy fears World stocks and crude oil fell as investors took a dim view of US corporate earnings after General Electric and McDonald's disappointed, while Europe's debt crisis and ongoing concerns about global growth also weighed on sentiment NEW YORK AGENCIES

The dollar climbed against the euro and the yen as a perceived lack of progress on a Spanish bailout request reminded investors of the headwinds facing the world economy.

Gold fell more than 1 percent, its biggest one-day slide in more than three months, as bullion was hit by technical selling and the decline on Wall Street, which erased most of the week's gains.

The CBOE Volatility Index .VIX, the so-called fear gauge, jumped 13.5 percent to 17.06, its highest level since September 5. The stock market sell-off occurred on the 25th anniversary of the Black Monday crash of 1987, when the Dow plummeted 22.6 percent - its worst single-day percentage loss ever. "This selloff is definitely earnings-driven but there is also an element of profit taking after several strong days," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York. Revenue missed analysts' expectations at GE (GE.N) due to unfavorable exchange rates, while McDonald's (MCD.N) profits also missed expectations because of the weak global economy.

GE fell 3.4 percent to $22.03 and McDonald's slid 4.5 percent to $88.72.

Of the 116 S&P 500 companies that have reported so far in the U.S. earnings season, 60 percent have exceeded ana-

lysts' estimates, a rate lower than the 67 percent pace of the previous four quarters, according to Thomson Reuters data.

The Dow Jones industrial average .DJI was down 205.43 points, or 1.52 percent, at 13,343.51. The Standard & Poor's 500 Index .SPX was down 24.15 points, or 1.66 percent, at 1,433.19. The Nasdaq Composite Index.IXIC was down 67.24 points, or 2.19 percent, at 3,005.62.

"We've had a nice run up and you start seeing these earnings miss. It may be time to take some money off the table," said Larry Peruzzi, senior equity trader at Cabrera Capital Markets Inc in Boston.

European shares snapped a four-day winning streak as signs of disagreement among European Union leaders over how to help the region's debt-ridden banks hit financial stocks. Equities in Europe might be prone to a bigger fall because of the perceived lack of progress in finding longlasting solutions to the euro zone debt crisis, said Luc Bocahut, a portfolio manager at Monaco-based Tiverton Trading.

"I would be quite bearish here. They really haven't made much progress," Bocahut said. U.S. stocks extended their slide to more than 1.5 percent as earnings from large multinationals underscored the ef-

fect of the global economic slowdown.

MSCI's all-country world equity index .MIWD00000PUS was down 1.3 percent at 333.96. In Europe, the FTSEurofirst 300 index .FTEU3 of leading regional companies closed down 0.8 percent at 1,111.85, while the pan-regional Euro STOXX 50 closed down 1.24 percent at 2,542.24.

The euro slipped against the dollar as a perceived lack of progress on a Spanish bailout request curbed demand. Risk appetite also eased on a report showing U.S. home resales fell in September, a reminder that America's housing sector is a

long way from a full recovery.

The euro was last down 0.3 percent at $1.3021, close to a session low of $1.3018.

U.S. Treasury prices edged up as selling pressure that has hurt the market the past four days subsided. Recent stronger U.S. economic data and hopes that European leaders are taking steps to resolve their debt crisis caused a dramatic jump in Treasuries yields this week amid heavy selling of the debt. The market is also pricing in an expectation that the U.S. Federal Reserve will start raising rates in 2014, instead of 2015, for the first time since Fed Chairman Ben Bernanke's speech in Jackson Hole in August, said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee.

"The question everyone is asking is 'Was QE3 even necessary?' given that we are already seeing evidence of a nice third-quarter rebound," he said.

The benchmark 10-year U.S. Treasury note was up 18/32 to yield 1.7677 percent. Brent and U.S. crude futures fell more than 1 percent on concerns about the European debt crisis, a stronger dollar and the decline in equity markets.

December Brent crude oil futures slid $2.28 to settle at $110.14 a barrel. U.S. crude settled down $2.05 at $90.05 a barrel. U.S. COMEX gold futures for December delivery settled down $20.70 an ounce at $1,724. Spot gold was down 1.2 percent at $1,720.80 an ounce.

Sunday, 21 October, 2012