PRO 27-08-2012_Layout 1 8/27/2012 12:20 AM Page 1
Monday, 27 August, 2012
Indian group
Gold posts best week
to open business in Pakistan
G
NEWS DESK
ODREJ, the Indian consumer goods group, plans to establish operations in Pakistan and Myanmar, in a sign of deepening trade between India and two of its largest neighbours. Adi Godrej, the billionaire head of the Godrej conglomerate, told the Financial Times that his 115-yearold group, which had revenues of Rs185bn ($3.3bn) in 2011, will begin exporting to Pakistan this year. “We will be setting up businesses before the end of the calendar year in Pakistan,” Mr Godrej said. “Pakistan is the sixth largest country in the world in terms of population, so the opportunity is reasonably good.” The move is one of the most prominent signs of increased trade between the two nuclear-armed states, and follows a wider rapprochement that included a visit by Asif Ali Zardari, Pakistan’s president, to New Delhi earlier this year. Last month, Pakistani tycoon Mian Mohammad Mansha told the FT he was looking to expand his. The move by Mr Godrej’s family-controlled group, which includes four listed entities and more than a dozen private subsidiaries with interests ranging from real estate to industrial engineering, is part of an expansion aimed at increasing revenues to $33bn over the next decade. Legal changes agreed between the two countries earlier this year allowed the export of certain products from India into Pakistan. Although direct investments are not yet permitted, Mr Godrej says he anticipates this being allowed in the near future. Godrej is the world’s largest producer of packaged hair dye, and has a number of non-listed joint ventures with prominent western businesses including Godrej Hershey with the US confectioner and Godrej Tyson with the American meat processor. Its plans to invest directly in later this year come amid growing interest from foreign groups following economic and political reforms and on the south-east Asian country. “In Myanmar we are looking to establish both our agri and consumer businesses,” Mr Godrej said. Godrej Agrovet, the group’s agribusiness division, had
revenues of Rs24bn in the last financial year. Large Indian industrial conglomerates, including the $83bn Tata group, are examining ways to expand their operations into Pakistan and Myanmar. Mr Godrej, who is also president of the Confederation of Indian Industry, led a delegation of more than 40 Indian business leaders on a trip to Pakistan in May as part of broader attempts to increase bilateral trade, which totalled less than $2bn last year according to figures from India’s commerce ministry. “Businessmen on both sides of the border have been very keen to find ways to explore each other’s markets, first through exports and then directly,” said Rajiv Kumar of the Federation of Indian Chambers of Commerce and Industry. “The fact that Godrej plan to do this is a significant step forward. “India has announced that they will admit Pakistani investment and have afforded Pakistan most favoured nation status, but Pakistan has been blowing hot and cold on this.” Courtesy: Financial Times
since January on stimulus hopes NEW YORK AGENCIES
Platinum posted a second strong week of gains, up 5 percent, and is up nearly 9 percent this month after an outbreak of violence at a platinum mine in South Africa left 44 people dead. The African nation supplies about 80 percent of the world’s platinum. Bullion was up 3.4 percent on the week, its biggest weekly gain since the last week of January, spurred by minutes of the U.S. Federal Reserve’s August meeting released Wednesday which showed policymakers were ready to deliver more stimulus “fairly soon” unless the economy improves considerably. A new round of quantitative easing — printing money to buy government bonds to keep longterm interest rates low — fueled fears of inflation further down the track. The first two rounds of U.S. quantitative easing have fuelled a doubling of gold prices in the last four years. The news lifted gold out of the near $100 range it had held since mid-May and above its 200-day moving average for the first time since March. However, gold’s relative strength index suggests the market might be slightly overbought following a seven-session rally that was snapped on Friday. “Gold has this week broken out of its well-defined, multimonth downward trendline. That resistance which kept gold in a range in the last several months should become a new level of support, suggesting gold is not going down but going higher,” said Adam Sarhan, CEO of Sarhan Capital. Spot gold was down 3 cents at $1,670.01 an ounce by 2:22 p.m. EDT (1822 GMT). It hit $1,674.80 o n Thursday, i t s highest price since April.
Gold prices ended flat as the market took a breather after surging to a four-month high on fresh hopes for a new round of US monetary stimulus U.S. gold for December delivery settled down 10 cents at $1,672.90 an ounce. Trading volume was about 35 percent below its 30-day average, preliminary Reuters data showed. Holdings of gold exchange-traded funds, which issue securities backed by physical metal, hit a record 71.253 million ounces, Reuters data showed on Friday. “The perception that the Fed is closer to QE than any time since this time last year has helped drive gold higher. The preservation-of-capital type money managers will likely find gold more attractive now than they had any time in the past four months when price had been stuck in a range,” said Carlos Perez-Santalla, trader at PVM Futures. Other precious metals retreated along with gold, with platinum up 0.5 percent at $1,545.49 an ounce, off Thursday’s near fourmonth high of $1,558.49 an ounce. World No. 1 platinum producer Anglo American Platinum () said on Friday 100 workers had refused to go underground at its Thembelani mine in South Africa, a sign that simmering discontent in the sector has not been contained. Silver was up 0.4 percent at $30.64 an ounce, while s p o t palladium slid 0.2 percent to $648.47 an ounce.
wall street week ahead
S&P to rise after wild ride to Jackson Hole The streak is over, but is the trend intact?
NEW YORK AGENCIES
A six-week string of gains in the S&P 500 ended on Friday amid shifting expectations for central bank stimulus. Next week could bring clarity on that issue, and that could determine whether the recent rally that took the index to four-year highs will persist. “The streak is broken, but the trend isn’t, and I think the next major move on the S&P will push us up towards 1,450 or
1,500,” said Mark Arbeter, chief technical strategist for Standard & Poor’s in New York. “Small- and mid-cap stocks are near their all-time highs, and if they break those highs, I think that will prompt the market to really rip higher.” Still, the market could be in for a bumpy ride next week ahead of Friday’s meeting of central bankers in Jackson Hole, Wyoming. Investors are looking for clues on whether Federal Reserve Chairman Ben Bernanke will announce a third round of quantitative easing. Bets on aggressive action to increase growth have spurred most of the market’s recent gains, meaning any disappointment could stop the rally in its tracks. The CBOE Volatility index or VIX, .VIX, a measure of investor anxiety, jumped almost 13 percent this week. While many analysts expect QE3 - and Bernanke wrote a letter to a congressional panel that the Fed has room to deliver it - the odds seemed to decline following comments on Thursday from James Bullard, a non-voting member of the Federal Open Market Committee. He said the latest Fed minutes, which indicated the central bank might be ready for more stimulus, were “stale. “Rhetoric is going back and forth about what we can expect, and we could see some big gyrations going into the meeting, depending on the latest rumor,” said Michael Matousek, senior trader at U.S. Global Investors Inc. in San Antonio. IS QE3 BAKED INTO THE CAKE?: In the recent six-week winning streak, the S&P’s longest since January 2011, the index climbed 4.7 percent. That could indicate QE3 has already been priced into shares. “I think we’re priced so that we won’t see a major move if something is announced,” Matousek said. “But if the status quo persists, which is what I’m expecting, that could be a big disappointment.” Daily trading volume, which has been
among the lowest of the year recently, is expected to remain muted ahead of the meeting. Low volume could amplify stock swings in both directions, and there is little other news to otherwise drive trading. Following the Jackson Hole meeting, there will be a market holiday on September 3 for Labor Day. Trading is expected to pick up after that, with a major catalyst seen on September 6, when the European Central Bank has its next meeting. The ECB recently pledged to “do whatever it takes” to address the euro zone’s debt crisis, comments that contributed to recent positive sentiment. Earnings season is winding down, with only five S&P 500 components scheduled to report next week, including Tiffany & Co (), Joy Global Inc () and H.J. Heinz (). With 98 percent of S&P 500 companies having reported results, 67 percent have topped expectations by an average surprise factor of 4.3 percent, according to Thomson Reuters data. The 67 percent beat rate is higher than the long-term average of 62 percent. However, there have been some notable disappointments lately, including Hewlett-Packard Co (). Economic indicators includes August reads on consumer confidence and sentiment, the latest read on Chicago PMI and July pending home sales. The Fed’s Beige Book, a collection of anecdotal information on current economic conditions, will also be released. “The market is torn between macroeconomic concerns on one hand, and relatively good and business trends on the other,” said John Carey, who helps oversee $260 billion as a portfolio manager at Pioneer Investment Management in Boston. “I’m encouraged by the fundamentals out there, but unquestionably, the economy has slowed.” The S&P 500 fell 0.5 percent this week, a relatively mild decline after six weeks of gains.
PRO 27-08-2012_Layout 1 8/27/2012 12:20 AM Page 2
Business 02
BankIng InduStry’S role
in preventing rupee capitulation Comment
I
KUNWAR KHULDUNE SHAHID
T is generally believed that with depreciation of a country’s currency, its exports become cheaper thus getting it more orders for exports which translate into among other things more domestic jobs which in turns translate into more disposable income and prosperity – but this is hardly the case for Pakistan. Since we are producing low tech traditional products such as textiles, the depreciation in currency gets quickly translated into increase in input prices which account for more than 80% of total costs in most cases. Thus our profit margin gets eroded with forced upward revision in export prices and nominal increase in export orders. As such, there are no apparent benefits of depreciation of currency to the Pakistani economy and to the common man in general. In Pakistan’s case a stable and relatively strong ‘Rupee vs Dollar’ outlook provides more benefits to the economy and prevents inflation from increasing rapidly as one of the factors. Pakistan’s economy is heavily dependent upon imports for essential items and any adverse change in its currency against world’s leading currencies directly impacts the buying power of common man. There are hosts of factor which affect the exchange parity of Rupee vs Dollar such as widening trade deficit, repayment of foreign loans, decrease in foreign financial/capital investments (FDI), etc. These factors put negative pressure on the currency as the outflow of Dollars (FX) is more than the inflow thus affecting the currency rate in a negative manner. In Pakistan’s case one of the major source countering the negative pressure on exchange parity is the growth in Home Remittances from overseas Pakistanis as remittances account for the second largest source of inflow of Dollars (FX). The continuous growth in remittances over the last few years has consistently kept a check on free fall of rupee against the dollar. In FY 2012, expat Pakistanis sent around US$ 13.186 billion as remittances through formal channels. Home Remittances have grown at an average rate of around 20% in the last few
years with banking sector contributing around 89% of the inflows. Exchange companies have contributed the remaining 11% in bringing remittances from the overseas Pakistanis. This tremendous growth in remittances is mainly attributable to the following factors: 1. SBP and government efforts to channelize remittances through the banking system. 2. Improvement in system and technology by banking sector making it possible to receive money from overseas in minutes (conditions apply) and in most cases within a day. 3. Decrease in the cost of sending funds due to incentives offered by the government. 4. Reduction in the kerb market premium. 5. Increase in the skill level of workers. 6. Support from expatriates for flood affected households. 7. Lack of investment opportunities abroad due to global economic slowdown. 8. Crackdown on some of the exchange companies involved in dubious activities. Realizing the importance of home remittances almost all Pakistani banks are now venturing into remittance business and have invested a great deal both in terms of financial and human resources, a business area previously ignored. Large Pakistani banks have taken the lead with HBL, UBL and NBP contributing around 50% of the total inward remittances. National Bank of Pakistan has deployed the most extensive resources in the remittances business by establishing an independent Group for pursuing home remittances. In just over two years time NBP has increased its global coverage and outreach by 300% resultantly its free of charge remittance business increased to over 150,000 remittance transactions per month from just 1,900 transactions per month a couple of years back. The need of the hour is to further promote the Home Remittance business as it is estimated that even today almost US$ 10 billion are being sent by overseas Pakistanis through illegal Hawala/Hundi channel every year. At present Pakistan is receiving around US$ 1.10 billion per month in terms of Home Remittances through official channels. This inflow of foreign exchange is not to be repaid as compared to foreign loans which also have associated costs in the form of mark up and are not received against strict and difficult terms such as Coalition Support Fund (CSF) which was only US$ 1.18 billion annually, received after lengthy negotiations. If only we educate our expats
End of the Greek Odyssey? Is Greece on the verge of a spectacular comeback, or a sorry exit? SnAKeS & LADDeRS KUNWAR KHULDUNE SHAHID
I
S it game over for Greece, as far as its future in the eurozone is concerned? That is the question hogging the minds of European thinktanks as Greece Prime Minister Antonis Samaras heads to P a r i s vying to get the deadline
extended for cutting off the billions of euros from the nation’s budget. Samaras has also been given a cause for optimism (read delusion) following Angela Merkel reiteration that she wanted Greece to continue being a part of the eurozone. Economists’ opinions, swelling debt numbers, Greece’s lack of credibility and the past two years, however, suggest that it’s all but over for Greece. Sympathizing for the Greek people who are bearing the brunt of the economic turmoil maybe one way of perceiving the Greek tragedy, but it is pretty clear that Athens has done absolutely nothing to deserve another chance. Greece has missed every possible deadline that was laid out in front of it, been as imprudent as a spoilt teenager as far as fiscal management is concerned and yet it wants more time and more opportunities. It’s a viciously endless circle and something would have to give; either Greece comes up with enough economic wherewithal to back Samaras’ claim of a “spectacular comeback” or it would have to bid adieu to the monetary union – you don’t have to be an eco-
and promote the home remittance business in a way to capture the remaining US$ 10 billion per year, among other things our currency will become strong as there will be no repayment pressure resultantly contributing to a stronger Pakistan. Last but not the least Pakistan has a large, young, energetic and talented pool of human resource with around 60% of its total population of 187 million falling under the age of 25 years. Serious efforts need to be made to inculcate desired skills as per international requirements and export human resource to traditional as well as new markets. If committed, coordinated and focused efforts are made, receiving home remittances of US$ 30 billion/annum in the next five years is very much possible. Pakistan is facing severe energy shortages which are bound to affect both the agriculture sector due to shortage of fertilizers and exports because of frequent outages of electricity and gas. A substantial increase in Home Remittances will certainly improve the economic situation of the country with positive impact on among other things on standard of living of common man and on law and order situation. Unfortunately the concerned quarters are not giving the due importance to Home Remittances that it deserves. The writer is an experienced banker with over 30 years of experience and has served for around 10 years in the Middle East as Director Global Home Remittances. Currently he is serving as the SEVP/Group Chief – Global Home Remittances Management Group at National Bank of Pakistan and Chairman NBP Exchange Company Limited.
nomic connoisseur to realize that the safe money, by far, is on the latter. In fact expecting Greece to meet any of its deadlines was delusional on the part of the eurozone hierarchy, simply because the targets were never really realistically achievable in the first place. Greece should have left the eurozone as soon as it was evident that Athens had forged its membership application, because it also divulged the simple fact that the numbers on the application were fallacious. And now as unemployment soars, the Greek economy collapses and the masses in the country suffer, there unfortunately is no other option but for Greece to exit the zone and save everyone the trouble of another continuum of unfulfilled promises and inflated expectations. Disjointed from the eurozone, Greece would then have to come up with its own currency, and while that wouldn’t exactly ease up the national pain, it’d save the masses from unrealistic expectations and undue favors from the leading nations of the eurozone, that, if the Greek media is to be believed, “aren’t doing enough” to save the Greek cause. Moving on to the German – the nation at the apex of the aforementioned ‘leading nations’ in the zone – side of things and how they could deal with the Greek tragedy in the coming days. Mrs Merkel might have said that she wants Greece to stay in the eurozone, but if the noise from her own political party is anything to go by, not everyone tends to agree with this stance. And for the first time since the German chancellor came to the helm, she now has to take a radical decision. Had she taken this decision a couple of years back in lieu of coming up
PTCL concludes its Landline and Broadband loyalty campaign ISLAMABAD: Country’s largest integrated telecommunications services provider, Pakistan Telecommunications Company Limited (PTCL) has successfully concluded its Landline and Broadband loyalty campaign. The campaign provided every new PTCL Double-up unlimited subscriber to avail free cordless sets after first bill payment. Thousands of customers availed free cordless sets through this unique offer. The promotion which ran for one year concluded with remarkable results in Ramadan of 2012. PTCL’s double-up unlimited packages facilitate customers with many benefits like Free WIFI, Unlimited Downloads, Unlimited Local and NWD On-Net minutes, Free Smart TV and Rs. 1.25 per minute Mobile call charges. “PTCL believes in rewarding the loyalty & trustworthiness of its customers”, said Senior Executive Vice President Commercial, Naveed Saeed. “We sincerely hope that our customers will continue to put your faith in PTCL and will avail its unmatchable products, services & promotions in the future as well” “PTCL’s top priority is to facilitate our customers to the maximum,” said Executive Vice President Wireless Business, Aasif Inam. “We are constantly striving to bring products and services that meet our customers’ needs and empower them to experience the future today.” PTCL Landline and Broadband remain the most widely used voice and data communications services in the country connecting millions of satisfied customers every day.
with short-term fixes at regular intervals, Greece’s capitulated economy things would have panned out a lot better on its shoulder. It really is game over for Greece. for not only the eurozone but also for Greece. Now Mrs Merkel has no other option really; she has to agree with the opinion of her party members and eject Greece out of the zone. Greece is bankrupt, there are no two ways about that, and in all practicality there are no two ways about its future – or rather lack thereof – in the eurozone. Even the traditional supporters of Greece and the flag-bearers of EU unity have grown sick and tired of the shambolic circus surrounding Greece, simply because Athens hasn’t really played ball as far as its side of the deal is concerned and has only been clamoring about the support from other members of the zone. There are other nations like Spain that are hankering after a bail out and the eurozone can no longer Comments and queries: afford to carry khulduneshahid@gmail.com
Monday, 27 August, 2012