PRO 25-07-2012_Layout 1 7/26/2012 6:24 AM Page 1
Thursday, 26 July, 2012
A cry beyond borders Only improved foreign inflows can help as cash-strapped govt keeps borrowing billions from risk-averse banks KARACHI ISMAIL DILAWAR
H
AvInG borrowed a record Rs 1.2 trillion from the banking system, the cash-strapped government keeps its focus intact on the central and scheduled banks for bridging its ever-widening fiscal deficit that in FY12 accumulated to over Rs1.7 trillion, above 8 percent of GDP. According to central bank, the fundsstarved federal government has set a rounded off target of Rs 1.590 trillion to be borrowed from the scheduled banks during first quarter of the FY13, July-September. In its bank borrowing spree that, the analysts warn, has a highly inflationary impact on the economy, the government had borrowed Rs 1.085 trillion during the fourth quarter, April-June, and Rs 777 billion during the third quarter, January-March, of FY12 to cater its ever increasing budgetary needs. “Domestic structural weakness like low tax to GDP ratio and higher subsidy coupled with restricted external flows forced government to rely highly on the banking channel to fill the escalating budget deficit,” viewed
Topline Research analyst nauman Khan. The analyst observed that contrary to last few years’ trend, the onus had shift towards inflationary central bank borrowing. The official data show that the government’s budgetary borrowing from the State Bank accumulated to an alarming Rs 505 billion in FY12 against the retirement of Rs 8 billion in FY11. “This record borrowing from the central bank to fund the fiscal deficit is a major cause of concern which has also been pointed by State Bank in its recent publications,” said Khan. Wednesday, too, saw the resource-constrained federal government raising over Rs 360 billion from the banks through auctioning Market Treasury Bills (MTBs) of 3-, 6- and 12-month maturity period. The new budgetary loan, having a total face value of Rs 360.269 billion, was taken at a cut-off yield ranging from 11.8283 percent to 11.8745 per-
cent and 11.8894 percent, respectively, for the 3-, 6- and 12-month T-bills. The borrowed amount was against the otherwise liquidity-starved primary dealers’ (mostly banks) offer of Rs 441.177 billion. During the current quarter, the government would borrow over a trillion rupees from the banks through selling the T-bills, Pakistan Investment
Apple goes bAnAnAs Profit jumps to $8.8 bn, but misses forecasts SAN FRANCISCO: Apple on Tuesday reported that quarterly profit grew to $8.8 billion on hot iPad sales but the results came up short of lofty expectations. Apple said that its revenue hit $35 billion in the quarter ended June 30, a figure shy of Wall Street expectations despite nearly doubling iPad sales and selling 28 percent more iPhones than in the same period a year earlier. With results below analyst forecasts, Apple shares slid 5.4 percent in after-hours trade to $568.45. “We’re thrilled with record sales of 17 million iPads in the June quarter,” Apple chief Tim Cook said in a release. “We’ve also just updated the entire MacBook line, will release (the computer operating
syste) Mountain Lion tomorrow and will be launching (mobile operating system) iOS 6 this fall.” Cook added that the Cupertino, California-based company has “amazing new products” on the way. Some analysts believe that the blistering pace of iPhone sales growth faces a temporary cooling as potential buyers wait for the release of a new-generation iPhone, perhaps later this year. Apple’s share of the US smartphone market was expected to inch up a percent to 31 percent this year, while the share for handsets powered by Googlebacked Android software was expected to hit 41 percent, according to eMarketer. Apple used the earnings report to declare a cash dividend of $2.65 per share of common stock. AFP
Bonds (PIBs) and the Ijara Sukuk, Islamic bonds. Of the total Rs 1.5 trillion targeted amount, Rs 12.897 billion would be raised as an additional requirement of the government. Such inflationary borrowings, Khan said, would be a major factor in the minds of authorities regarding the future direction of the interest rates that currently stands at the pre-2008 level of 12 percent. “We believe the materialization of Coalition Support Fund could reduce the government’s borrowing at least in early part of FY13,” the analyst said. Further, the analyst said, there was still a room of 50 to 100 basis points rate cut in the discount rate at least in early FY13, if the foreign flows materialized. The United States would, reportedly, this week transfer over $ 1.2 billion under the CSF to the dollarhungry Pakistan which in FY12 faced a $ 4.2 billion current account deficit. “With external account under pressure in FY12, the onus of financing the fiscal deficit
fell squarely on the domestic sources and that particularly on central bank borrowing,” Khan said. Dubbing it against the spirit of SBP Act passed by the parliament in April 2012, the analyst said in FY12 the government financed approx. 70% of its budget deficit from the banking channel as against 52% in FY11. The economic observers call it a sort of cyclical debt as the central bank, on one hand, is raising billions of rupees from the banks for the government and injecting heavy liquidity into the system on the other. The SBP believes many of the small banks would fail if it stopped pumping cash in the system. The economic observers are concerned as the cash-strapped governments, both in the center and provinces, whereas are relying almost totally on the banks for catering their burgeoning budgetary requirements, the banks’ advances to the private borrower are depleting to a nominal level. The analysts’ concern is that much of the banking liquidity being sucked up by the cash-strapped government is being used for non-productive purpose: running of the government. This trend, they warn, would leave the private sector sans cash thus dealing fresh blow to the government’s growth targets.
Bulls in Islamabad! The bulls in the capital aren’t quiet as devastating but ISE-10 gains 12 points anyway… ISLAMABAD APP
Islamabad Stock Exchange (ISE-10) here on Wednesday witnessed bullish trend as the index was up by 11.67 points when compared to the previous day’s trading. Talking to APP, Stock Analyst M.M Hassan said that the result announced by Fauji Fertilizer Corporation (FFC) led the bullish rally in the local stock market. The FFC has recommended Rs.5.00 per share or 50 per cent second interim cash divided for the half year ended June 30, he said, adding this is an addition to first interim dividend already paid at Rs.3.00 per share or 30 per cent. “This was total Rs.8.00 per share or 80 per cent cash dividend for half year ended on June 30, which was the positive and beyond the expectation of the market despite the various challenges was faced
by the FFC”, he added. He said that the volume in the bourse had also witnessed an increase against the earlier’ day because the investors had taken major positions in the market owing to this positive development. Total volume of shares traded was 38,200, which was up by 27,200 as compared to a day earlier’s closing. Out of 101 companies’ shares traded, the price of 65 was increased while the price of 36 decreased. The price top gainer Millat Tractors was increased by Rs.6.76, while the price top loser Unilever Pakistan decreased by Rs.25.00. Silk Bank Limited, Soneri Bank and Bank of Punjab remained volume leaders on Wednesday, with volume of 6,000, 2,000 and 2,000 shares respectively.
Let’s capitulate collectively, shall we? SNGPL-based fertiliser plants face collective revenue loss of Rs 5.5 billion LAHORE ONLINE
In first half of year 2012 all SnGPL based plants that include Agritech, DH Fertilizers, Pakarab and Engro’s new plant faced a collective loss of Rs. 5.5 billion in terms of revenue. The total urea sales by SnGPL based plants stood at 150KT, 166KT less than 316KT urea sold in 1H of 2011 showing a decline of 52% and revenue loss of Rs.5.5 billion. The total urea production by SnGPL based plants in first half of 2011 stood at 297KT which declined by 33% to 198 KT in 1H of 2012. SnGPL based plants were only operated at 18% of their capacity in 1H 2012 vs 25% last year. During 1H 2012 SnGPL based fertilizer plants faced an estimated gas curtailment of 82% in which Agritech and Pak Arab got gas for 63 days each while Engro Enven and DH
Fertilizers got gas for 33 days of operations in first 6 months of 2012. In first quarter of year 2012 all SnGPL based plants that include Agritech, DH Fertilizers, Pakarab, Engro’s new plant as well as SSGC based FFBL faced a loss of revenue by 53% compared with 1Q of 2011, generating Rs. 8.16 billion revenue in 1Q 2012 compared to last years’ Rs. 17.29 billion rupees. In 2012, SnGPL based four plants as well as SSGC based FFBL lost profitability by 125% and made a collective loss of Rs 1.076 Billion, whereas the same plants had made profit of Rs. 4.3 billion in first Quarter of 2011. According to fertilizer sector official, SnGPL based plants are facing the worst-ever crisis of their history as 82% gas curtailment was never witnessed before 2012. He said that despite making an investment of US$ 2.3 Billion in last 4 years on new production capacity, mak-
ing Pakistan world’s 7th largest urea manufacturer country is sitting on an idle urea capacity of over 3.0 million tonnes. Fertilizer sector official said that if the same gas curtailment continues during remaining 5 months of 2012, the SnGPL based fertilizer plants would be forced to shut down permanently resulting laying off highly skilled manpower, in addition to huge burden on GoP exchequer, to import urea to meet the urea shortfall. Fertilizer sector official said that it’s not just Fertilizer plants that will face the burn, the whole farmers’ community as well as the government would be the ultimate losers if fertilizer plants with over 2 million tonnes of capacity are shutdown. He said that Government needs to support fertilizer industry to ensure cheap local urea to farmers and import fuel for the power sector and the industry which is more cost effective.
PRO 25-07-2012_Layout 1 7/26/2012 6:25 AM Page 2
Thursday, 26 July, 2012
KSE conjures up a scissor
oh the horror! (Part II)
Cuts security deposit for market makers to Rs25,000
Banks haunting interest rate corridor by holding over Rs70bn excess cash
KARACHI
KARACHI
STAFF REPORT
ISMAIL DILAWAR
The Karachi Stock Exchange (KSE) Wednesday slashed significantly the minimum refundable security deposit for the market makers by Rs 125,000. “The Exchange has decided to significantly reduce the subject deposit amount for market makers,” said a KSE notice issued to the members Wednesday. The market makers would now have to submit only Rs 25,000 instead of the previous Rs 250,000 as a minimum security deposit that is refundable. Backed by the regulations governing the Market Makers Clause 3(i), the move is aimed at encouraging the stock members to become market makers in the derivative segment, specially the cash-settled single stock and stock index futures markets.
Asian shares down on Europe woe HONG KONG: Asian markets fell Wednesday and the euro sat near multi-year lows amid growing fears that Spain will need a full bailout, while tech shares were hit by Apple’s disappointing earnings report. Japanese shares were also hurt by news it had posted a record trade deficit in the first six months of the year as energy costs soared and exports to key markets tumbled while the strong yen also weighed. AFP
Major Gainers COMPANY Shezan Inter. Millat Tractors National Foods P.S.O. Abbott Laboratories
OPEN 196.52 503.72 197.81 241.02 146.15
HIGH 206.34 512.50 203.10 245.50 151.50
LOW 200.00 505.00 192.52 241.00 147.90
7399.99 72.21 170.00 267.00 210.00
7325.00 72.09 167.00 264.00 204.00
CLOSE 206.34 510.48 202.50 244.89 149.74
CHANGE 9.82 6.76 4.69 3.87 3.59
TURNOVER 1,800 24,300 2,500 552,200 62,900
Major Losers UniLever Pak Hinopak MotorXD Exide (PAK) XD Indus Motor Clariant Pak
T
HE central bank’s concern for ensuring a smooth functioning of the country’s interest rate corridor seems far from being allied as the banks, both conventional and Islamic, continue to maintain huge reserves of excess liquidity that by the start of this month accumulated to over Rs 70 billion. The State Bank of Pakistan (SBP) has warned that the banks, by sitting on significant Excess Cash Reserves (ECR), adversely affect the interest rate corridor in the country’s banking system. “Excess cash reserve also has implications for the banks’ own liquidity management,” observed the regulator in a statement. However, the central bank’s alert seems to have fallen on deaf ears in the banking circles where, according to the SBP data, the banks are holding billions of excess cash aggregating to Rs 70.490 billion during the week that ended on July 5. A breakup for the week under review depicts that the conventional banks’ cumulative cash holdings amounted to Rs 52.412 billion while that of the Shariahcompliant Islamic banks stood at Rs 18.079 billion. During the week, from June 29
02 Business
7350.00 75.88 171.00 266.66 207.50
7325.00 72.09 167.30 264.25 205.23
25.00 3.79 3.70 2.41 -2.27
60 17,500 1,800 6,000 1,900
Volume Leaders Jah.Sidd. Co. D.G.K.Cement Nishat Mills Limited Fauji Fertilizer Askari Bank
15.17 44.94 52.20 117.43 15.36
15.75 45.60 53.55 119.70 15.70
15.26 44.96 52.45 117.43 15.40
15.59 45.31 53.45 118.69 15.50
0.42 0.37 1.25 1.26 0.14
5,232,500 4,511,500 4,486,500 3,944,100 3,374,500
Interbank Rates
to July 05, the State Bank counted the conventional and Islamic banks’ daily average excess cash collection at Rs 10.070 billion, the former holding Rs 7.487 billion and the latter Rs 2.583 billion. A day-to-day account of ECR showed that the banks possessed additional cash worth Rs 36.776 billion on June 29, Rs 20.426 billion on June 30, July 01 and July 02, negative Rs 12.753 billion on July 03, negative Rs 4.347 billion on July 04 and negative Rs 10.464 billion on July 05. Whereas the well-performing Sharia banks were able to keep their excess reserves mostly in the green zone, except for July 04, their counterparts in conventional banks saw three negative figures on their balance sheets during the week.
The above amount is inclusive of the pre-mature encashment the banks reported to the central bank in line with the notification issued by the latter in July 2006. Sensing its adverse impact on the interest rate corridor, the central bank has started making public, on weekly basis, the banks’ liquidity that they possess in addition to their Cash Reserve Requirement (CRR). “To bring more efficiency in the money market operations of banks, the State Bank of Pakistan has decided to publish the weekly data of Excess Cash Reserves maintained by commercial banks over and above the minimum required CRR,” said an SBP circular. The ECRs is an amount that the banks posses over and above the minimum required CRR.
US Dollar UK Pound Japanese Yen Euro
94.5639 146.5079 1.2085 114.6871
Dollar East BUY US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar
94.50 113.71 146.13 1.1978 92.22 12.02 25.67 25.17 96.44
SELL 95.30 114.83 147.54 1.2091 93.61 12.20 25.89 25.34 98.82
Japan posts record first-half trade deficit TOKYO: Japan Wednesday posted a record trade deficit of about $37.3 billion in the first half of the year as soaring energy costs weighed on the world’s third-largest economy and key European exports slumped. The finance ministry said the country saw a shortfall of about 2.9 trillion yen ($37.3 billion) in the first six months of 2012. AFP
CORPORATE CORNER Samina Khawar Hayat appointed OMD most medaled AHAN Chairperson of BoD agency at CANNES 2012
JS Bank tops SBP’s list of Government Securities PDs
WARID: international roaming and IDD discount
LAHORE: Samina Khawar Hayat Member Provincial Assembly has been appointed as Chairperson of Board of Directors of Aik Hunar Aik nagar (AHAn). AHAn is a not for profit company registered with Securities and Exchange Commission of Pakistan (SECP) under section 42 of Companies Ordinance 1984.
KARACHI: The State Bank of Pakistan recently, 2nd year in a row has declared JS Bank as the number 1 Primary Dealer of Government Securities for the year 2011-12.JS Bank was also the number 1 Primary Dealer of Government Securities for the year 2010-2011.
KARACHI: Keeping in view the sanctity of the holy month of Ramadan when pilgrims from all over Pakistan travel to the Middle East to perform Umrah, Warid introduced discounted international roaming and international calling rates for Saudi Arabia.
PTCL introduces revised ‘3G EVO Unlimited’ packages KARACHI: OMD had its most successful Cannes competition in history! With 17 Lions – including The Grand Prix. The leading media agency network, Omnicom Media Group showed outstanding results at the Cannes Lions International Festival of Creativity, making it the most medaled media network at the 2012 festival.
ISLAMABAD: NHA Chairman Syed Muhammad Ali Gardezi has said that sufficient funds have been provided to NHA for the financial year 2012-13, which will enable NHA to carry on all its projects. He added that province-wise allocation of funds will help NHA to allocate more funds for near completion projects and complete them in time. Chairman NHA said this while addressing the executive Board meeting at NHA headquarters.
Tier II issuance differentiates Standard Chartered in market KARACHI: Standard Chartered Pakistan successfully closed a ten year PKR 2,500Mn Unsecured Subordinated TFC issue as a Sole Lead Arranger. The issue represents the largest offering in Pakistan by any financial institution in 2012.
‘Shan Foods wins third consecutive Superior Taste Award’ KARACHI: Shan Foods (Pvt) Ltd. is the first Pakistani Company to win third consecutive “Superior Taste Award” from ITQI. International Taste and Quality Institute (ITQI) is the leading independent Chef- and Sommelier- based European organization dedicated to testing and promoting superior tasting food and drink from around the world.
Abraaj Capital exits investment in IHH Healthcare Berhad ISLAMABAD: Abraaj Capital, a leading private equity manager investing in global growth markets, announced today the exit of its investment in IHH Healthcare Berhad (IHH) through an initial public offering (IPO) of one of the largest private healthcare providers in the world.
USAID firms project assists 45 SMEs in pilot programme
1041 PhDs Placed at Public Universities LAHORE: Through Higher Education Commission’s Interim Placement of Fresh PhDs (IPFP) Programme, 1041 Pakistani PhDs have been successfully placed as Assistant Professors at public sector and leading private sector universities across the country.
The 8th balloting for nomination of an employww to perform Umrah by the organization was conducted on 3rd Ramadan.
ISLAMABAD: Pakistan Telecommunication Company Limited (PTCL) has introduced revised packages for its ‘3G EvO Wireless Broadband’, the country’s most popular Broadband Wireless Internet service. The popular EvO Truly Unlimited, EvO Postpaid, EvO Max and EvO Wi-Fi Cloud shall now be available with an addition of Rs.100 service charges at Rs.2,100. The new charges shall be applicable from August 1, 2012. Offering true mobility and superior 3G Internet experience, PTCL 3G EvO Wireless gives hyper fast speeds of up to 3.1Mbps with 3G EvO, and up to 9.3Mbps with 3G EvO nitro. PTCL 3G EvO unlimited package is ‘unlimited’ with no data capping and no speed throttling giving you absolute freedom to download as much data as you want for a month. This year, PTCL celebrated 1 million Broadband subscribers mark, the first ever by any telecommunication service provider in the history of Pakistan.
KARACHI: Muhammad Azfar Ahsan, Nutshell Forum CEO, & Rotary Club Karachi President meeting with US Consul General Michael Dodman,
KARACHI: The US Agency for International Development (USAID) through the USAID Firms Project is launching a pilot program to assist date farming and processing small and medium enterprises (SMEs) from Khairpur and Sukkur, Sindh. Khairpur and Sukkur are Pakistan’s chief dateproducing districts, contributing to around 40 to 45 percent of the country’s date production.
1st meeting of OGDCL new Board of Directors being presided under the Chairmanship of Mr. Shafi Arshid at OGDCL House, Islamabad.