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profit.com.pk
Wednesday, 07 March, 2012
India bans cotton exports to shield textile industry g
Pakistani textile industry to benefit KARACHI
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STAFF REPORT
He international cotton prices have resumed their upward march as the world’s second largest cotton producer, india, has decided to ban export of cotton to keep prices stable in the country to provide support to their local textile industry. The global rise in cotton prices also provides relief to Pakistani textiles industry facing energy issues, said the analysts at investCap research. They said after rising pressure from the local textile manufacturers, the indian government decided to place a ban on cotton exports aiming to keep prices stable at home to provide a sort of privilege to the textile products’ manufacturers. india has already
exported 9.4mn bales (1 bale = 170kgs) of cotton so far against a surplus of 8.4mn bales while the country still has pending export orders of around 2.6mn bales. On the other hand, depleting trend in the indian cotton stocks along with China’s increasing cotton stock (india’s 80 per cent exports are headed to China) to stabilise domestic prices to support local textile manufacturers has already created global supply vacuum yet again. Being the biggest consumer of cotton, China imported 15.4mn bales in FY11, while by Feb-12 the Chinese government is reported to have imported a total of 21.8mn bales vs 56.3mn bales of consumption estimated for FY12. “However, reversal in cotton prices may be considered a phenomenon as the global cotton demand is estimated to go down by 4 per cent YoY in FY12 while the supply is expected to
improve by 6 per cent YoY,” viewed Abdul Azeem of investCap. Furthermore, he said, recent cuts in growth estimates by the two emerging giants, China and india, to multi-year low are expected to keep cotton prices within a reasonable range. At the local front, cotton prices remained bottomed after the bumper crop was estimated at 14.2mn bales for FY12. As against last year’s sky-high levels of rs13,000/maund, FY12YTD’s cotton price remains below rs6,000/maund (at average rs5,864/maund). Thus, ban by the indian government on cotton
export is expected to result in fueling the local cotton prices in Pakistan (prices of may-12 futures delivery have also reached US 93.23 cents/maund in int’l market). The local textiles sector, which has already accumulated whole year cotton inventory, would be key beneficiary, as soaring local and int’l cotton price difference would improve local textile companies’ margins (see table for revised earnings forecast). recent sharp pullback in cotton prices is expected to improve textile sector margins from 4QFY12 onward as the local companies had already accumulated stocks for FY12 at an average rs5,500/maund. As such, any further rise in international cotton prices would only improve the local textile sector companies’ profitability.
PM directs solar power to off grid villages ISLAMABAD STAFF REPORT
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rime minister Syed Yusuf raza Gilani on Tuesday directed the ministries of finance and water and power to provide solar electricity to villages of the far flung areas, which were located away from the national grid. Prime minister gave this direction while chairing a meeting to review the renewable energy development projects on Tuesday. He said the government has initiated a number of projects in the power sector to overcome energy shortages in the country. He said apart from hydel power generation, the country possessed enormous potential of power generation through other renewable energy resources of wind, solar, geothermal and bio-fuel energy. He said wind energy could produce 350,000 mW, solar 2.9 million mW and geo-thermal 2,500 mW. Chief executive Officer Alternate energy Development Board, Arif Alludin said in view of the vast potential of the renewable energy in the country, this sector has become investor’s choice. Private sector was already investing for generating 1500 mW of electricity through these resources. He apprised the meeting that projects of 400 mW would start this year and the units would start generating electricity early next year. He said the project of 150 mW of wind Jhimpir in the province of Sindh is already under construction and would start operation during the first half of 2012. Waste to energy sector projects are under various stages of development and would start production of electricity in the next two years. Pm directed to provide solar electricity to villages of the far flung areas, which were located away from the national grid, when CeO ADeB informed it was a cost-effective project for the remote villages and will be instrumental in social development through poverty alleviation and job creation. Pm also directed off-grid application like solar water heater, biogas and water pumping be implemented through renewable resource. its application would result in significant saving of gas, electricity and also provide organic fertilisers for the farmers, he said. The meeting was attended by minister for water and power, minister for finance, Deputy Chairman of Planning Commission, Senator Syeda Sugra imam, secretaries of ministries of water and power, eAD, finance, planning and development, petroleum and natural resources and other senior officials.
Banks bad debts ease down to Rs623.193b as 200bps rate cut improves repayments KARACHI ISMAIL DILAWAR
AD debts of the commercial banks and Development Financial institutions (DFis) eased down by one per cent Quarter-on-Quarter (QoQ) as the economic observers see the banks reaping fruits of 200 basis points cut in the discount rate by the central bank. The State Bank reported Tuesday that during second quarter of the current fiscal year, October-December FY201112, Non-Performing Loans (NPLs) of the banks and DFis reduced to rs623.193 billion. The central bank had calculated these
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bad debts at rs629.555 billion during the previous quarter, July-September FY12, as of September 30, 2011. “After a consistently rising trend, NPLs of the banking sector have gone down by 1 per cent,” said Khurram Schehzad, Head of investCap research. “i think 200 basis points cut was the factor for improved repayments,” viewed the senior analyst. During the said quarter, the central bank said, the banks’ net NPLs to their net credits shrank to 6.14 per cent from 6.53 per cent of the last quarter. During the review period, DFis saw their NPLs decreasing to rs16.048 billion against rs16.336 billion of the previous quarter, whereas, the bad
debts of the banks declined to rs607.145 billion from rs613.219 billion. The local private and foreign banks, however, were an exception, whose gross NPLs, respectively, grew by 0.3 per cent and 4.8 per cent to rs378.369 billion and rs7.574 billion against the previous quarter’s rs377.334 billion and rs7.230 billion. As the analysts see improvement in the repayments of bank loans due to 200bps discount rate cut, the banks’ and DFi’s cash recovery against their NPLs shows a positive trend and ballooned to rs20.252 billion against rs13.779 billion of the previous quarter.
The banks recovered rs19.228 billion against rs13.657 billion, the commercial banks rs15.906 billion against rs12.736 billion, the public sector banks rs3.677 billion against rs2.134 billion, the local private banks rs12.095 billion against rs10.476 billion, the foreign banks rs126 million against rs134 million and the specialised banks recovered rs3.322 billion against rs921 million during the quarter in review. DFis were also able to recover more as their recovery stood at rs1.024 billion compared to the previous quarter’s rs122 million. The bankers, however, are still uncomfortable with the percentage of
banks’ bad debts saying the net NPLs of the banks should not swell beyond five per cent. “This is not good. They should keep NPLs below five per cent. it should be between three to four per cent of their net loans,” said a former central banker. The bankers believe that the six plus per cent growth in the bad debts was not a good omen for the economy. The central banker also said the banks should do more provisioning against their NPLs. There are some analysts who believe the present interest rate regime, 12 per cent, in the country as higher, saying a double-digit inflation was rendering the borrower unable to repay the bank loans.