profitepaper pakistantoday 22nd october, 2012

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Monday, 22 October, 2012

Railways back on track?

Bilour to visit LCCI to discuss PR revival LAHORE NNI

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EDERAL Minister for Railways Ghulam Ahmad Bilour will visit Lahore Chamber of Commerce and Industry (LCCI) soon to brief the business community on measures being taken by the government for revival of Railways. The Federal Minister was talking to LCCI Vice President Mian Abuzar Shad at the inauguration of Business Inn & Business CafĂŠ at Railway Station. LCCI Executive Committee Members Aftab Ahmad Vohra and Mian Zahid Javed were also present on the occasion. The LCCI Vice President Mian Abuzar Shad informed the Federal Minister about the initiatives being taken by the Lahore Chamber of Commerce and Industry to rejuvenate economic activities. Mian Abuzar Shad said that the government would have to redraft all economy related policies in consultation with stakeholders to ensure their implementation in letter and spirit.

Both the public and private sector would have to work hand-inhand to get out of an inertia-like situation.

WALL STREET WEEK AHEAD

Investors face earnings blitz with dread US earnings started the quarter on the wrong foot, and things have only gotten worse NEW YORK AGENCIES

Expectations for the third quarter were dismal, with forecasts for a decline in profits from a year ago. But a recent flurry of high-profile reports has investors scowling at the weak revenue numbers, adding to worries about the state of the U.S. economy and the outlook for corporate America.

"The earnings season is not looking very bright," said Larry Peruzzi, senior equity trader at Cabrera Capital Markets Inc., in Boston.

International Business Machines (IBM.N), General Electric (GE.N) and Microsoft (MSFT.O) fell short of revenue expectations, creating a sour mood early in the third-quarter reporting period.

The third quarter is among the most important for investors and economists because it is when companies begin to give a better picture of what the following year may look like.

IT'S RAINING NUMBERS: The pace of earnings reports will accelerate next week, with eight Dow components and 155 S&P 500 companies scheduled to release results. Tech heavyweight Apple Inc (AAPL.O) will be among them.

Just 38 percent of S&P 500 companies beat expectations on revenue in the past week, compared with 41 percent since the start of the reporting period, and well below the 62 percent long-term average, Thomson Reuters data showed. On the earnings side, the data has been slightly more upbeat: 62 percent of companies that reported this week beat expectations versus 60.3 percent since the start of the earnings period, and the 62 percent long-term average, the data showed.

Investors have sold off shares after weak results, and more profit taking may be in store for stocks, given the big gains they've seen since the start of the year, Peruzzi said.

Friday's sell-off gave Wall Street its worst day in four months. The market's decline came on the

25th anniversary of Black Monday, when the Dow Jones industrial average plunged 22.6 percent in its worst one-day percentage loss ever.

The S&P 500 ended the week up just 0.3 percent. That's a modest showing when compared with its gain of 2.3 percent in the first three days alone. For the year, the benchmark S&P 500 Index is still up 14 percent.

Much is riding on Apple, especially given the weakness in technology earnings so far this reporting period. Besides IBM and Microsoft, Intel (INTC.O) and Google (GOOG.O) disappointed Wall Street with their results this week as well.

Google's big miss came as a shock to many investors. Apple "is certainly a bellwether, and today more than any other stock, sets the mood for investors," said Lawrence Creatura, portfolio manager at Federated Investors in Rochester, New York. Besides Apple, results are expected next week from Caterpillar (CAT.N), Yahoo (YHOO.O), United Parcel Service (UPS.N) and Whirlpool (WHR.N).

THE UGLY TRUTH: Based on results from 116 companies and estimates for the rest, earnings for S&P 500 companies are expected to decline 1.8 percent from a year ago - the first such decline in three years. Without Apple, that decline would be about 2.3 percent, according to Thom-

son Reuters earnings analyst Greg Harrison.

Outlooks from U.S. companies have added to worries. So far for the fourth quarter, there have been 17 negative outlooks from companies, no positive outlooks and one in line. That compares with 11 negative outlooks, two positive outlooks and two in line at a comparable period for third quarter guidance, Thomson Reuters data showed.

"Now is when the truth is revealed," Creatura said. "Now is when management teams begin to bracket what 2013 results might look like."

FED TO GRAB ATTENTION: Taking some of the focus away from earnings next week will be the Federal Reserve's policy meeting on Tuesday and Wednesday. After last month's meeting, the Fed announced its third round of aggressive economic stimulus, causing stocks to rally despite a slew of earnings warnings.

While investors welcomed the Fed's plan for more economic stimulus, known as quantitative easing, the move underscored worries that the U.S. economy may be in worse shape than feared.

Worsening macroeconomic conditions, namely sluggishness in the U.S. economy along with a dramatic slowdown in Europe and weakness in China, have been among the chief reasons cited by companies in their warnings about earnings and revenue.

Canada blocks $5.2b Petronas bid for Progress Energy Canada has blocked Malaysian state oil firm Petronas' C$5.17 billion ($5.2 billion) bid for gas producer Progress Energy Resources in a surprise move that could signal problems for a much larger Chinese deal in the country's energy sector TORONTO/ KUALA LUMPUR AGENCIES

Canada's announcement late on Friday, minutes before a deadline, was a blow to Petronas whose domestic oil supplies are shrinking and which has been seeking to boost its resources beyond Malaysia and volatile areas such as Sudan.

It also raises doubts over Chinese oil group CNOOC's C$15.1 billion offer for oil producer Nexen and could weigh on other Canadian firms hoping for foreign investment to tap their vast energy reserves.

Any rejection of the CNOOC bid would likely damage trade ties Canada has been trying to build with China, underlining political sensitivity to Chinese corporate expansion in North America.

"I have sent a notice letter to Petronas indicating that I am not satisfied that the proposed investment is likely to be of net benefit to Canada," Industry Minister Christian Paradis said in a statement.

The government, which has said C$630 billion investment is needed in Canada's energy sector over the next decade, has been trying to balance concerns over the deals with a need for foreign investment. The bid for Progress had not been expected to run into hurdles in a review process that asks whether a deal is of "net benefit" to Canada. But in a sign it was attracting greater scrutiny, Canada earlier this month extended its review of the bid by two weeks.

Petronas, which said on Saturday it was not ready to comment, has 30 days to make its offer more palatable. It was not clear what it could put on the table.

The Petronas deal attracted scrutiny after CNOOC made its bid for Nexen.

Some members of Canada's governing Conservative Party are wary of the CNOOC offer, in part because of what they say are unfair Chinese business practices.

Earlier this month, Prime Minister Stephen Harper said China's "very different" political and economic systems were a concern.

A CNOOC spokeswoman in Beijing said she had no comment on the ruling against Petronas or whether it could mean the Chinese company's bid for Nexen was in trouble.

WARNING: Last month, China's ambassador to Canada said the government should not allow domestic politics to affect its decision on whether to approve CNOOC's bid. However, some sources said the CNOOC deal need not necessarily be threatened.

"I don't think that kills the CNOOCNexen (deal) but we do hear there is still a lot of local opposition to overcome," one Hong Kong-based energy sector banker said. "It allows Canada to send a signal without upsetting a large trading partner.

Better to upset Malaysia than China in a way."

Chinese firms have more usually had difficulty doing business south of Canada's border, and this has come to the fore in recent weeks. The United States House of Representatives' Intelligence Committee issued a report earlier this month saying companies should stop doing business with Chinese groups Huawei and ZTE over security concerns.

On Thursday, the chief executive of U.S. aircraft maker Hawker Beechcraft, whose $1.79 billion sale to a Chinese firm fell through, said China-bashing by U.S. presidential candidates may have contributed to failure of the talks.

The United States has long been the largest market for Canadian energy exports. But with growing U.S. oil output from unconventional sources and the rejection this year of an initial application on the controversial Keystone XL pipeline project, Canada has been forced to try to build bridges with Asian markets that would welcome its energy supplies.

CNOOC, which has won approval from Nexen shareholders, has said it will retain all Nexen employees and make Calgary the headquarters for its Americas operations. Petronas had also attempted to highlight the benefit its deal offered to Canada, saying it would combine its Canadian business with that of Progress and retain all staff.

"Maybe Canada is using this to attach more conditions to the Nexen deal," said Gordon Kwan, head of energy research at

Mirae Asset Securities in Hong Kong. He thinks CNOOC will get the go-ahead.

Progress' share price has doubled since talk of the possible Petronas bid emerged in April, closing at C$21.65 on Friday. Nexen stock has also surged since CNOOC announced its bid in July, rising 48 percent to C$25.15.

Canada last blocked a foreign takeover in 2010, when it stunned markets by rejecting BHP Billiton's $39 billion bid for Potash Corp, the world's largest fertilizer maker.

BHP also had a 30-day period to come back with additional undertakings but withdrew its offer, sensing the bid was unlikely to be approved in the face of political opposition.

BIG DEALS?: Canada is grappling with concerns that approval of the deals could spark a flurry of takeovers of energy companies - the country is home to the world's third-largest proven oil reserves, most of them in the western province of Alberta.

Petronas, Malaysia's only Fortune 500 company, made a big push into

Canada's shale gas sector last year when it bought a $1.1 billion stake in a field from Progress. Petronas first bid for Progress in June to gain control of its 800,000 acres holdings in the Montney shale-gas region of northeastern British Columbia, reserves that could feed a planned liquefied natural gas facility on the Pacific coast.

It raised its initial offer of C$20.45 per share to C$22 in July after a rival bid from an unnamed suitor.

As its domestic supplies start to dwindle, Petronas has been expanding abroad, investing in Sudanese oil, South African petrol stations and European liquefied natural gas. It had seen the Progress deal as a crucial step to increase its presence in a more stable country after clashes on the border between South Sudan and Sudan this year all but shut its pipelines there.

On Thursday, Canada's broadcast regulator blocked BCE's C$3 billion bid for Astral Media, saying the deal would give too much power to BCE, Canada's biggest telecoms company and the owner of numerous TV and radio assets.

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Business 02 Europe’s flawed banking union

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HOWARD DAVIES

HE European Union is now the proud owner of a Nobel Peace Prize. When the choice alighted on Barack Obama three years ago, the Norwegian Nobel Committee was criticized for honoring someone whose achievements were still to come. The Committee took that criticism to heart, and this time decorated an institution with a proud past, but a clouded future.

The eurozone is distinct from the EU of course, but it is the Union’s most ambitious undertaking to date, and it is still struggling to equip itself with the structures needed to bolster a currency union. A common fiscal policy remains a distant dream, as does a genuine political union. But Europe’s policymakers claim to be making progress toward a so-called “banking union,” which means collective banking supervision, rather than a merger of banks themselves. In September, the European Commission announced a plan to make the European Central Bank the supervisor of all 6,000 of Europe’s banks.

The reaction among national politicians, central banks, and banks themselves was not universally favorable. The Germans want the ECB to focus only on large systemic banks, and leave smaller savings banks (like those that invested heavily in subprime mortgages) to national authorities. The United Kingdom and Sweden argue that they cannot be made subservient to a central bank of which they are, at best, semi-detached members.

The case for a pan-European supervisor is widely accepted, especially as the European Banking Authority (the EU’s banking regulator) proved feeble in carrying out financial stress tests: the first tests were so weak that even Spain’s now-bankrupt savings banks could pass with flying colors. Europe must break the vicious circle linking distressed sovereign borrowers with banks that are obliged, or at least encouraged, to buy their bonds, which in turn provide the funding for bank rescues.

But the method chosen by the Commission to implement a banking union is fatally flawed. Moreover, according to a leaked opinion from the EU Council’s chief legal adviser, the proposed reform is illegal, because, according to the Financial Times(which received the leak), it goes “beyond the powers permitted under law to change governance rules at the European Central Bank.”

Throughout the crisis, European leaders have tried to respond to the gaps in the monetary union without

proposing a new treaty, because they fear that any new treaty proposing more centralization of authority in Brussels would be rejected, either by national parliaments or by voters in a referendum. So they have tried to proceed by intergovernmental agreement, or by using existing treaty provisions.

In the case of the banking union, they plan to use Article 127(6) of the Lisbon Treaty which allows the European Council to grant authority to the ECB to perform specific tasks concerning “policies relating to the prudential supervision” of certain financial institutions in the Union. That is a thin legal basis for establishing a pan-European supervisor with direct responsibility for individual institutions, and it was clearly not intended for that purpose. Indeed, Germany agreed to the wording only on the understanding that the ECB could not be a direct supervisor.

The consequences of choosing this inadequate, if expedient, route are serious. For starters, the existing treaty cannot be used to create a single European resolution authority, leaving an awkward interface between the ECB and national authorities. Nor can it be used to establish a European deposit protection scheme, which is arguably the most urgent requirement, to stem the outflow of deposits from southern European banks.

There will also be potentially dangerous consequences for the ECB itself. The use of the Lisbon Treaty clause means that the ECB must be given these

additional responsibilities. But it is impossible to create a separate bank-supervision entity within the ECB, as has been done in France, for example, with the Prudential Control Authority, or in the UK with the new Prudential Regulatory Authority, which has its own board and accountability arrangements within the Bank of England.

The importance of these structures is that they insulate the central bank’s monetary-policy independence from corruption by the tighter accountability requirements that inevitably come with banking supervision. Because supervisors’ decisions affect individuals’ property rights – and their actions or omissions can put taxpayers on the hook to bail out banks – governments, parliaments, and the courts are bound to hold the watchdogs on a tight leash.

That is why Germany’s Bundesbank, which always guarded its monetary-policy independence so assiduously, has once again found itself in the rejectionist camp, expressing severe doubts about the route that the Commission plans to take. This time, they are right. There are other serious issues, too. According to the Commission’s model, the European Banking Authority will remain in place, and is charged with producing a single rulebook for all 27 EU member states.

But, while its work is carried out under the normal qualified majority voting system, the 17 eurozone countries will have a single supervisor, so will have a block vote. The Commission is trying to find ways to protect the rights of the non-eurozone countries. But the very complexity of what is proposed shows just how inadequate the scheme is.

Non-Europeans, in particular, may find the entire topic impenetrably abstruse. But it illustrates a simple point: Europe is trying to achieve a stronger federal model that responds to the weaknesses revealed by the eurozone crisis. But it is doing so without addressing the crucial need to bring its citizens along. Indeed, the devices that the EU is adopting are designed specifically to avoid having to consult them. The proposed construction of a banking union reveals this fundamental flaw at the heart of the European project today. It is difficult to be optimistic about the success of an initiative built on such flimsy legal foundations, and lacking democratic legitimacy. Europe’s banks and their customers deserve better.

Courtesy: Project Syndicate

BP backs Rosneft bid for stake in TNK-BP: Kommersant BP (BP.L) has approved Russian group Rosneft's (ROSN.MM) bid to buy out the British oil company's stake 50 percent stake in its Russian joint venture TNK-BP (TNBP.MM), Kommersant reported MOSCOW AGENCIES

Separately, the Financial Times reported that BP's board would continue its discussion on the matter over the weekend, adding the reception given to the bid was generally favorable. BP is ready to cede its stake in TNK-BP, Russia's third largest oil producer, to Rosneft, strengthening the Russian state company's grip on the energy sector. A source told Reuters on Friday while the offer was "clean" and there were no other plans on the table, the board could take time to consider it. Kommersant reported that an offer of $17 billion cash and nearly 13 percent of Rosneft stock had been approved outright. At Rosneft's market value of $73 billion, that would be a deal value of more than $26 billion for stake in TNK-BP. BP was not available for comment. Rosneft declined to comment.

Sources have said a three-way deal could soon emerge, with details to be hammered out during a visit to London this week by Rosneft chief executive Igor Sechin. They said BP and the AAR consortium of four tycoons - Len Blavatnik, Mikhail Fridman, German Khan and Viktor Vekselberg which owns the other 50 percent of TNKBP could emerge with minority stakes in an enlarged Rosneft plus billions of dollars cash in exchange for the highly profitable company.

CORPORATE CORNER kets Bank (2011)”. NBP Offer its customers the facility of payment of government taxes through online debit to their accounts, the Bank’s Account Opening has been made system based with complete elimination of paper based Account Opening Form (AOF). All account holders of NBP can now avail facility of NBP Cash (ATM) Card from all the branches. Payment of EOBI pension is made through online web-based access and efforts are underway to make payment of EOBI pension through direct credit to EOBI beneficiary’ account.

KARACHI: Pictured here is Mr. Naeem Yahya Mir, CEO & MD-Pakistan State Oil (PSO) receiving the Best CEO Award for the Oil and Gas sector at 2 nd CEO/CFO/CIO Award Ceremony organized by Mass Human Resource Services with the collaboration of Karachi Stock Exchange (KSE) and Pakistan Standard and Quality Authority (PSQCA).

NBP customers can pay govt taxes through online debit KARACHI: National bank of Pakistan has converted its entire network of 1283 branches online.

NBP is now with highest number of online branches in Pakistan, exceeding any other bank operating in the country. National bank of Pakistan currently enjoys widest branch network in the country and its services are available to Pakistanis living in far flung and most difficult to reach areas. People living in such remote areas will benefit the most from this development.

Through online facility, NBP customers holding an account at any online branch can deposit and withdraw cash from any of the 1283 online branches through inter branch transactions (IBT); Debit / ATM Card can be issued to all customers of online branches; centralized account opening; Know Your Customer (KYC) and better control and compliance. NBP is Pakistan’s largest international commercial bank. The recognition of NBP’s strength has been the fact that the Banker Magazine (UK) has awarded ‘Bank of the Year’ in 2008, 2010 and 2011 and is listed among the top 1,000 banks of the world for 2012. Global Finance Magazine has awarded NBP as the “Best Emerging Mar-

HEC, IBA jointly host Harvard University in E-Seminar KARACHI October 19:- An informative and well organized E-Seminar took place here at the Institute of Business Administration (IBA), Karachi by Harvard University. This event was part of Social Enterprise Seminar Series organized by South Asia Initiative at Harvard University in collaboration with Aman Foundation. The title was “Spurring Entrepreneurship: A Case for Inclusive Innovation in Emerging Markets—Lessons For Pakistan from China and India” The seminar featured Dr. Tarun Khanna live from Harvard University in Cambridge, Massachusetts USA. Dr. Khanna is a professor at the Harvard Business School, Director of South Asia Initiative and Faculty Chair for Harvard Business School activities in India. He is also the author of the book, “Billions of Entrepreneurs: How China and India are Reshaping Their Futures and Yours”. The event was attended by faculty and students of 20 universities including IBA, KSBL, Sukkar IBA, COMSATS and others across Pakistan through video conferencing. The seminar was moderated by Dr. Shahid Qureshi, Associate Director for the Center for Entrepreneurial Development at IBA, with technical facilities provided by Higher Education Commission in Pakistan. The CEO of Aman Foundation, Mr. Ahsan Jamil, introduced Dr. Khanna through his work on entrepreneurship in China and India and how it would help Pakistan in economic growth and job creation. Entrepreneurs are people who start or run their own businesses while taking financial risks.

PIA pre-hajj flights operation 2012 conclude successfully KARACHI: PIA Pre-Hajj operation of transporting intending pilgrims to Saudi Arabia concluded successfully with overall flights punctuality over 96 percent and seat factor of 99 percent. PIA Spokesman said here on Saturday. PIA carried 82, 823 intending pilgrims to Saudi Arabia through 196 Pre-Hajj flights from Pakistan; and 1,989 intending pilgrims through 04 charter flights from Rangoon.

While 9,207 intending pilgrims traveled through PIA regular scheduled flights; bringing the total to 94, 019 intending pilgrims to Saudi Arabia. The airline carried 9,931 intending pilgrims from Karachi through 20 Pre-Hajj flights, 17,347 through 35 flights from Islamabad, 17,462 through 35 flights from Lahore, 14,292 from Peshawar through 44 Pre-Hajj flights. PIA carried 13,294 from Quetta by 41 Pre-Hajj flights, 6,999 from Multan by 14 flights and 3,498 intending pilgrims from Sialkot by 07 Pre-Hajj Flights. On the satisfactory completion of Pre-Hajj flights, Managing Director PIA, Muhammad Junaid Yunus in a message to the employees has commended their efforts for serving the intending Hajj pilgrims to their best satisfaction and according to the expectations of PIA Management.

He hoped that the PIA employees will continue the efforts in the same zeal in serving the Hajjis on their return journey from Saudi Arabia to Pakistan.

VimpelCom CEO among 25 most powerful people in global telecom LAHORE: Jo Lunder, the Chief Executive Officer of VimpelCom, has been named amongst the top 25 of the ‘GTB Power100’, which ranked the 100 most powerful people in the global telecom industry for 2012. VimpelCom is the parent company of Pakistan Mobile Communications Limited (PMCL), also known as Mobilink. Jo Lunderhas emerged as one of the leading figures in the highly competitive landscape of the global telecom industry. He has

been instrumental in two of Europe’s most transformational deals, namely the merger with Ukraine’s Kyivstar, followed by the purchase of Wind Italy and a controlling stake in Orascom Telecom Holding. The top 25 of ‘GTB Power100’ for 2012 also includes other technology leaders such as Tim Cook, CEO of Apple and Larry Page, co-founder of Google.

The ‘GTB Power100’ is compiled by “Global Telecoms Business” (GTB), which was founded in 1993 by the Euro money Intitutional Investor group to provide industry leaders and stakeholders with a strategic perspective on issues affecting Telecom.

Photo-exhibition, lecture and documentary film about Moenjo Daro

KARACHI: Consul General of Germany in Karachi Dr Tilo Klinner has organized photo-exhibition, lecture and documentary film about archeological site of Moenjo Daro at Indus Valley School of Arts and Architecture, Clifton. In this event, the documentary film of Prof Dr Michael Jansen on archeological sites in Moenjo Daro was presented.

Consul General of Germany has translated the documentary from German to Urdu for local visitors. A 52 minutes long documentary title “The Mysterious Indus Civilization" by Ulrike Becker and Hannes Schuler with Prof. Dr. Michael Jansen, the visitors were informed about archeological site of Moenjo Daro civilization. The exhibition was started on October 16 and will remain open till October 28 for visitors. A photo-exhibition of the archaeological site Moenjo Daro was officially opened for visitors.

Monday, 22 October, 2012