PRO 26-04-2012_Layout 1 4/26/2012 12:41 AM Page 1
CM aims one stone at two birds… hits neither Page 02
profit.com.pk
Thursday, 26 April, 2012
CoMMEnt
Dr Sheikh and the IMF
f
tHE CHRonICLES oF gAS AnD EnERgY
OGDCL reduces LPG price by
LPG prices reduced by
RS7,000 pER tonnE
RS 10 pER Kg
LAHORE
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STAFF REPORT
He Oil & Gas development Company Limited has reduced its base stock price of LPG by Rs. 7000 per ton due to depressed sale and reduced upliftment of LPG by marketing companies. LPG companies had reduced their prices five times in the current month and have been operating at negative margins. This had lead to a severe curtailment in lifting of product from LPG producers who were left with no choice but to reduce their price. “LPG companies are not in a position to reduce their prices any further. However
this latest reduction in Producer price will allow them to continue to expand and make investments in the market” said Belal Jabbar the spokesman for the LPG Association of Pakistan. Retail rates are expected to remain stable till the end of the month when the new Saudi Aramco Contract price will be announced. Belal said that LPG prices in different parts of the country would be as follows: Punjab Rs. 115 per kilo, Sindh and Balochistan Rs. 110 per kilo, AJK, Rs. 120 per kilo and Northern Areas Rs. 125 per kilo. “LPG prices have declined by more than 30% since March and are currently at their lowest level since October of last year” said Belal.
ISLAMABAD ONLINE
L
iquefied Petroleum Gas (LPG) marketing companies decreased LPG prices by Rs 10 per kg and price of domestic cylinder has been reduced to Rs 100 while on commercial cylinder price reduced to Rs 400. This decrease would be implemented immediately. After this decrease in prices new prices of LPG in Karachi would be Rs 100 per kg, Lahore Rs 105, islamabad and Rawalpindi Rs 115 and Murree Rs 120 per kg. Chairman LPG distribution irfan Khokhar told that prices of LPG in future would further reduced and in this regard federal Minister for Petroleum and natural resources dr Asim has assured to further reduced the prices. He said that another major decrease of Rs 10 to15 is expected on May 03. He said that provision of cheap gas is our top priority.
iNANCe minister dr Sheikh and the fund are no strangers, and no doubt he reads their posture better than most, especially in testing times when repayment has begun, bulkier tranches are due shortly, and talk of refinancing has had to be brought up. Yet he continues with his all-is-well smile, which will be met much the same way in editorial columns as it was in the halls of the iMf. Nice try but no cigar. Maybe its election year compulsions, but islamabad really shouldn’t sit comfortably in the four-something growth expectation. it’s not nearly enough to warrant any serious thinking on refinancing, especially in light of our “spotty record”, as the fund duly noted (another hint dr Sheikh perhaps failed to notice). And with $1.2 billion due by year end, and next year’s number requirement being near four and a half billion, there is simply no way to prevent financial collapse. The government will either come back from the elections to a very different fiscal environment (compounded by a peoplefriendly budget), or leave the anvil to fall on its successor’s feet. Another thing the election confounds is the government’s unbelievable resort to borrowing. They must spend more in the run up to the vote. understandable, but they must make efforts to trigger private offtake in the process. failing that, unemployment and inflation will murder the middle and lower income groups. Though the fund has agreed to keep talking, there is little likelihood of refinancing unless a visible shift in policy is incorporated. Remember the iMf is important not just as a lender. Other bi- and multilateral donors invariably take cue from the fund, always distancing themselves from clients it no longer graces. That is the stuff of dr Sheikh’s thoughts at least all the way on the flight from Washington. Once in islamabad, of course, attention must turn to fiscal largesse and the masses, and the general election. There’s the doctor and the fund, then there’s the doctor and the party.
tHE RULE oF tHUMB
SECp’s no-nonsense approach towards rules and regulations g
Approves rules for derivatives market, regulations for index option contracts at KSE ISLAMABAD
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STAFF REPORT
He Securities and exchange Commission of Pakistan (SeCP) has approved regulations governing index option contracts of the Karachi Stock exchange (KSe) for developing the derivatives market segment and providing investors with more diversified range of investment in hedging alternatives. According to an SeCP spokesman the regulations have been framed in line with best international practices to provide a framework for the launch of trading in cash-settled index option contracts. All over the world underlying assets for which option contracts are offered include single stocks, commodities and renowned market indices. More developed derivatives markets offer
options on commodity, stock and index futures contracts as well. The concept of options is not new to the Pakistani market, as market participants have historically been known to trade on the market sentiment on the indices and listed securities termed as Tezi, Mandi. However, such trades were being executed bilaterally between members, outside the centralized trading platforms of the stock exchanges. The regulations approved by the SeCP regularize such trading activity and would ensure that trading of standardized index based option contracts now takes place on the Karachi Automated Trading System (KATS). These contracts having indices as the underlying assets would give the buyer a right to buy or sell a specific level of the underlying index. SeCP approved regulations
prescribe that while any investor can buy or sell option contracts, option writing will be limited to brokers and financial institutions that fulfill the criteria to be approved by the KSe and SeCP. A criterion would also be devised for determining eligibility of the underlying indices on which option contracts would be offered by the exchange. At present options have become an indispensable tool for the securities industry globally and provide various benefits such as helping create orderly, efficient, and liquid markets, and giving flexibility, leverage and risk minimization to investors. Because of their unique risk, reward structure, options can be used in many combinations with other option contracts and financial instruments to create a hedged or speculative position.
An option contract essentially gives its holder a right, but not the obligation to buy or sell an underlying asset on a future date at a predetermined price. Based on his expectations and prevailing market conditions, the option holder can either exercise this right and book profits from buying or selling the underlying at a favorable price than the market price or let the right lapse if he thinks the same will not benefit him. Like other derivative instruments, options are also tradable and the option holder can sell them to exit the market earlier than maturity. Options are broadly classified into two types, call and put. Option contracts that give the buyer the right to buy an underlying asset are called call options, whereas contracts which give the buyer the right to sell the underlying asset are
called put options. The buyer of the option contract must pay a nominal price called premium to the option writer to become entitled to the rights conveyed by such contracts. The options market operates on the principle that risk of the holder of the option contract is limited to the extent of premium, thus promising limited downside losses and unlimited upside gains. introduction of options in the Pakistani capital market would not only improve its outlook, but would also further diversify the existing product portfolio for investors and allow them to leverage positions for large diversified portfolios. The avenues for the launch of options contracts on single stocks would also be assessed once the index-based options are launched after requisite system developments at the KSe.