profit epaper 29 january, 2012 by Profit Epaper

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Sunday, 29 January, 2012

Government making headway towards improving finances: SBP KARACHI

ONLINE

eCeNt fiscal figures show that government has been making some headway towards improving its finances. the budget deficit for the first quarter of FY12 was 1.2 per cent of GDP, as compared to 1.5 per cent during the same quarter last year, says state Bank’s first quarterly report on the state of economy released here on saturday. it said this reduction in budget deficit was caused primarily by 29.7 per cent growth in FBr revenues, on the back of increased tax collection efforts and higher revenues from imports. Non-tax revenues also recorded impressive growth of 50.4 per cent, it added. However, on the basis of seasonal trend in FBr revenues, the amount collected up to end-Dec 2011, falls short of the amount needed to meet the annual target of rs1,952.3 billion, it said, adding that meeting endyear revenue targets would also depend upon the realisation of CsF and sale of 3G licences (worth around rs150.0 billion), in absence of which, it would be difficult for government to contain fiscal deficit within its annual target. the report said federal government has budgeted a surplus of rs125 billion on the part of provinces; however, due to 52.8 per cent increase in their expenditures, provinces managed only rs11.6 billion surplus up to Q1-FY12, which was 85.7 per cent lower than corresponding period last year. ‘Any short fall in the contribution by provinces would make achievement of fiscal deficit target more challenging’, the report cautioned. According to the report the lack of external funding has put the burden of financing the deficit disproportionately on banking system, which has led to crowding out of private sector and is acting as a disincentive for banks to perform their role of financial intermediation. Government borrowing from the

banking system up to end-Nov 2011 was rs736.8 billion, against rs336.1 billion in the corresponding period last year. this amount includes rs391.0 billion borrowed from banks to retire Pse debt, which has now been transferred on to government’s books, it said, adding that unfortunately, Pses continue to hemorrhage as a credible restructuring plan has not been put into action. As a result circular debt issue is likely to persist, the report stated. it said government’s efforts to keep its borrowing from sBP in check during the initial months of FY12, helped in keeping demand-driven inflationary pressures at bay, which was supplemented by the easing of food prices. As a result, YoY CPi inflation declined to single digit (9.7 per cent) in December, 2011 after remaining in double digits for the last two years. While the increase in energy prices, recent weakening of rupee and the base effect may increase inflation in the coming months, the end-year average inflation is likely to fall close to 12.0 per cent as projected earlier, the report added. While sBP has shown its willingness to relax its policy to support the private

sector as it did in July and October, 2011, it cannot add to the stress on the economy arising from weaknesses in other sectors. the most recent policy decision to keep the policy rate unchanged was influenced among others, by the weakness in external accounts during Q1-FY12, the report observed. it said Pakistan was fortunate in FY11 that its current account ended up in a surplus and, despite the drying up of FDi and other foreign investments; there was a net increase in its FX reserves. ‘Given the rigidities in the trade account and the vulnerability of the financial account, sustaining this performance in FY12 was always going to be difficult. Nevertheless, the pace at which the current account deteriorated during the first quarter of FY12 took many by surprise. specifically, the current account deficit for sep 2011 alone was over $ 1.0billion,’ the report added. it said that in the past, Pakistan has sustained larger current account deficits without losing its foreign reserves due to healthy inflows in the financial account. Unfortunately, owing to both domestic weaknesses and international financial

upheaval, financial flows have almost dried up, adding to the country’s economic vulnerability, it said, adding that while some financial inflows are expected, a part of the current account deficit is likely to be financed through reserves as was the case during July-October FY12. this has important implications for monetary management and price stability, the report observed. the report noted that the government is, however, optimistic that the 3G telecom licence fee will be realised. in addition, due to recent developments, there is still optimism that parts of CsF, bilateral assistance from Us, and the privatisation proceeds of PtCl will be received. Furthermore, currency swap arrangements, which were recently formalised with the central banks of turkey and China, will also facilitate bilateral trade and investment, easing the stress on the country’s reserves. Nevertheless, sBP remains aware of the fact that pressure on the rupee is not translated into market speculation, which could become self-fulfilling, the report said and added that striking a balance in managing a flexible exchange rate driven by economic fundamentals and by market speculation (within the context of sharp currency movements in the global economy) is challenging. “sBP will continue to monitor the forex market closely to remove any excessive volatility in the rupee,” the report added. it also said the policy makers are hopeful that the country would put up a better economic performance in FY12 after last year, which was a difficult one for the economy; not only due to the devastating floods that hit the country early in the fiscal year, but also due to the lack of external financing and energy shortages. the report observed that realising the 4.2 per cent growth target for FY12 GDP looks difficult due to a host of factors that include, among others, gas shortages, high oil prices and decline in global prices of agricultural commodities.

Rs49.3b plunge in banks’ excess cash reserves KARACHI

ISMAIL DILAWAR

OMMerCiAl banks have got their excess Cash reserves (eCrs) down by a massive 70 per cent or rs49.324 billion, ostensibly due to a stricter stance on the part of regulators from the central bank. excess liquidity of the banks contracted to rs21.140 billion during the week that ended on January 12 from rs70.464 billion they possessed during the week ranging from December 23 to December 29. the central bank warns that excess cash holdings by commercial and islamic banks, which are pocketing handsome amounts through investing massively in the risk-free and heavily-weighted government securities like MtBs, Pakistan investment Bonds and ijara sukuk, adversely impacts

smooth functioning of the country’s existing interest rate corridor. A breakup, reported by sBP, shows that during the week under review cumulative excess cash of the conventional and shariah-compliant banks decreased to rs17.002 billion and rs4.137 billion, respectively. this depicts a slump of 58.5 per cent and 86 per cent in the eCrs of the conventional and islamic banks when compared to the previous week that saw these banks holding rs41.023 and rs29.442 billion, respectively. state Bank reported that while conventional banks’ collection, on daily average basis, of excess cash came down from rs5.860 billion to rs2.429 billion that of their competitors in islamic banks shrank phenomenally to rs591 million from the previous rs4.206 billion. During the week under review, banks raised additional liquidity to the tune

of negative rs11.241 billion on January 6, 7 and 8, negative rs7.762 billion on January 9, rs22.656 billion on January 10, 16.521 billion on January 11 and rs23.447 billion on January 12. these amounts also include premature encashment that the banks reported to central bank in line with BsD circular no 09 issued by sBP in July 2006. Cautioned by banks’ increasing eCrs, central bank believes that the banks, by sitting on huge excess liquidity reserves, were putting adverse impact on the interest rate corridor in the banking system. “excess cash reserve not only adversely impacts smooth functioning of the interest rate corridor but it also has implications for the banks’ own liquidity management,” said sBP in a previous statement. the regulator has, therefore, decided to make public on weekly basis the banks’ possession of liquidity that is in

excess of the Cash reserve requirement (Crr). “to bring more efficiency in the money market operations of banks, state Bank of Pakistan has decided to publish weekly data of excess Cash reserves maintained by commercial banks over and above the minimum required Crr,” the bank said. state Bank is also concerned over the country’s growth prospects as the riskaverse banks are extending extensive loans to the fundsstarved central and provincial governments instead of lending to the growth-oriented private sector. eCrs is an amount that the banks posses over and above the minimum required Crr.

Fertiliser sales down 3pc in 2011 KARACHI STAFF REPORT

ertiliser offtake in Pakistan declined by three per cent to 8.4 million tonnes during CY2011. “interestingly, urea sales posted a decline of three per cent to 5.9 million as nonavailability of urea remains the major issue due to lower production of urea, down five per cent to 4.9 million tonnes, and subdued imports during most of the period,” said Farhan Mahmood of topline securities. similarly, the analyst said, DAP sales remained dipped by 15 per cent to 1.1 million tonnes during 2011 primarily due to higher prices. On the other hand, sales of other fertilisers CAN, NP and NPK posted a cumulative increase of 11 percent to 1.3 million tonnes mainly stemming from nonavailability and higher prices of mainstream fertiliser products that forced farmers towards relatively cheaper alternatives. in December 2011 alone, according to NFDC, urea sales were up 12 per cent to 704,000 tonnes as against 626,000 tonnes in the same month last year. While DAP sales were up 26 perc ent to 114,000 tonnes from 90,000 tonnes for the same period under review. On MoM basis, total fertiliser offtake improved by 35 per cent, with urea sales rising by 55 per cent as better urea availability, thanks to higher import of 331,000 tonnes in December, led farmers to build stocks before getting into peak winter season when most of the plants are expected to remain closed due to gas curtailment. Moreover, urea production plunged by 15 per cent to only 369,000 tonnes in December 2011. On the other hand, DAP sales posted a decline of 29 per cent to 114,000 tonnes. Company wise data reveals that FFC’s urea sales declined by three per cent in 2011, with December sales decreasing by 16 per cent YoY to 201,000 tonnes. engro posted an increase of 33 per cent in urea sales during 2011 due to added production from its new enVen plant with December sales at 107,000 tonnes. For FFBl, DAP sales remained almost flat during 2011 (December sales down 20 per cent YoY to 57,500 tonnes) while urea sales declined by 17 per cent in 2011 (December sales down by 47 per cent to 32,300 tonnes) primarily due to higher gas curtailment on sui network.

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Sunday, 29 January, 2012

news

Policy decisions boost investor confidence in KSE g

Record turnover at KSE on CGT reforms 221 advance, 61 decline, 78 remain unchanged of total 358 scrips traded KSE-30 also finishes in green zone

Index loses 46 pts as investors play cautious game Blue chip stocks gain despite tumble

g g

Bourse loses 41 points ending bull-run 106 advance, 136 decline, 93 remain unchanged of total 335 scrips traded KSE-30 index loses 49.28 points

KARACHI

STAFF REPORT

Ver the weekend Finance Minister visited the Karachi stock exchange along with seCP chief and FBr officials. Dr sheikh accepted the recommendations of the seCP chief which provided a boost to investor sentiments. the jubilant investors entered the market on Monday registering a gain of over 263 points with volume of around 230m shares. the relaxation in reporting and no question asked over the source of income was the key towards the revival of the capital market. the anomaly created by tax exemption which lasted

for over 36‐years with no documentation requirement resulted in an undocumented wealth generated over a long period. the relaxation in documentation may provide ample time to investors to declare the wealth generated from capital appreciation over a longer period of time. the major reason behind such popular decision may aim at improving the views about the current regime before the general election. the quarterly result season kicked‐off with PPl that announced its financial result for the 1HFY12 inline with analyst expectation, whereas FFBl CY11 results outwit the analysts’ expectations. lOtPtA result was well below analyst expectation, consequently

the share price depreciated substantially. engro recovered substantial ground along with FFC riding on the back of bonus expectation while hike in domestic prices of cement likely to boost the profitability of lucky and DGKC. the cash rich banking sector is likely declare cash payout along with a share dividend with annual result announcement. the decline in yield in the money market instruments predict a possible cut in discount rate in the upcoming monetary policy statement, which can be termed as a fuel injector for the stock market. the result season may continue to dominate the market sentiment in the upcoming week, where FFC, lucky and POl are

Bulls regain momentum at bourse, index rises 76 points Cement stocks retain momentum

Index loses 65 points as correction sets in 94 advance, 137 decline and 93 remain unchanged of total 324 scrips traded KSE-30 index loses 23.25 points

schedule to declare their financial results, said Bilal Asif at HMFs. Money Market: During the week sBP conducted t-bill auction where it raised rs120.3b against the target of rs75b creating the net drainage of rs51b. the auction witnessed a sequential decline in cut-off yield with highest participation in 12M paper. Highest rate cut was witnessed in 3M paper by 22bps to 11.56 per cent followed by 6M and 12M paper by 20bps and 16bps to 11.63 per cent and 11.73 per cent respectively. Downward shift in curve of secondary yields also communicates stance the monetary authorities may opt in the upcoming MPs. the central bank announced a new schedule of monetary policy review

citing inclusion of preceding month’s inflation data in overall assessment as a core reason with MPs to be held on February 11, 2012. ease-off in inflation and trend in market yields have ignited the hopes of further Dr cut in the upcoming MPs to propel the growth engines. However such a move remains contentious with 4.97 per cent FYtD depreciation of PKr against greenback and monetization owing to heavy government borrowing. For the weekending January 13, 2012, government retired fund resulting in contraction of NDA while foreign outflow caused decline in NFA whilst expansion in M2 decelerated to 4.28 per cent FYtD basis, said salman Vidhani at HMFs.

Oil industry sees China winning, west losing from Iran sanctions SwItzeRlAnd

REuTERS

s the european Union prepares to ban iranian oil and the United states turns the screw on payments, oil executives and policymakers say China and russia stand to gain the most and Western oil firms and consumers may emerge the biggest losers. iran will continue to sell much the same volume of oil - 2.6 million barrels per day or around 3 percent of world supply - but almost all of it will flow to China, they reason. And being pretty much iran’s only remaining customer, Beijing will be able to negotiate a much reduced price. the eU will ban iranian oil from July. the United states plans sanctions on iran’s central bank and possibly its shipping firm. european headquartered oil firms such as France’s total and royal Dutch shell have already abandoned iranian oil purchases or are in the process of doing so. Japan and south Korea have signaled they may reduce purchases of iranian oil to comply with Us sanctions designed to put

pressure on tehran over its nuclear program. that leaves a growing number of buyers competing for alternative supplies. inevitably attention has turned to saudi Arabia, the world’s biggest exporter and the only country that can quickly increase oil output and help the West avoid a price spike that would deal a severe economic blow. the iMF said this week that crude oil prices could rise 20 to 30 percent if iran were to retaliate by halting its oil exports altogether. Oil industry executives meeting in Davos said energy markets can afford to lose half of iran’s 2.6 million barrels per day. that would be roughly equivalent to supplies lost during libya’s civil war in 2011. they are confident saudi Arabia will fill the gap. “What we say is that oil is fungible. iranian oil will still find its way into the market, to Asian markets, China and possibly at a lower price,” a top saudi source told reuters, speaking on condition of anonymity because of the sensitivity of the matter. “But if let’s say 50 percent of iranian oil is lost, we have spare capacity, we have the capacity to replace it as libya has shown,” he added. the chief of saudi state oil monopoly saudi Aramco, Khalid al-Falih, moved from one

bilateral meeting to the next during the World economic Forum this week. Over the past month or so the kingdom has received requests for additional oil from the european Union, Japan and south Korea. the european Union and turkey buy almost a third of iranian oil exports with the rest going to China, Japan, south Korea, india and south Africa. “As a regular conversation we talked about increased supplies. saudi Aramco is always positive,” Jun Arai, the head of Japan’s showa shell, told reuters. russia too stands to gain from Western sanctions on iran. the world’s biggest oil producer is well positioned to raise its market share in europe, despite misgivings among some europeans about relying too heavily on russia for oil and gas. Payment disputes between russia and neighboring Ukraine have in the past threatened transit gas supplies to europe. “i’m sure Moscow is watching the situation with big interest,” said José sergio Gabrielli, chief executive of Brazil’s Petrobras. Arkady Dvorkovich, the Kremlin’s top economic aide, concurred that russia stood to benefit from sanctions that were guaranteed to keep oil prices

at least at current levels around $100 a barrel by his reckoning. showa shell buys 100,000 barrels per day from iran under a deal that expires in March and like other firms would be exposed to U.s. sanctions if not given a waiver under the latest ban on dealing with iran’s central bank. “We are waiting for guidance from the government,” said Arai. For total the guidance has been clearer. French President Nicolas sarkozy has been one of the main advocates of tough sanctions. “We have already stopped (buying from iran),” said total’s chief Christopher de Margerie. the firm was previously lifting 80,000-100,000 barrels per day (bpd) from iran. Peter Voser, chief executive at royal Dutch shell, said his company might take some time before suspending purchases, which market sources estimate at 100,000 barrels per day. “We are a european company and therefore we are affected by the sanctions and we will obviously oblige and implement the sanctions. i need to study all the details in order to see how it goes forward,” he said. Apart from total and shell, europe’s biggest buyers of iranian oil are italian, spanish and Greek companies.

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Sunday, 29 January, 2012

news

KCCI hopeful of fruitful trade after visit of Indian delegation

KARACHI STAFF REPORT

ArACHi Chamber of Commerce & industry (KCCi) will host a luncheon reception in the honour of Anand sharma, indian minister of commerce, industry and textiles, during his visit toKarachi next month. speaking at the interactive session held with indian delegation headed by Goutam Ghosh, director and head of south Asia, Federation of indian Chamber of Commerce & industry (FiCCi) and Manish

Mohan, director, Confederation of indian industries (Cii) Mian Abrar President KCCi said, “We at KCCi, firmly believe that both countries will have to demonstrate greater political will to foster relations and accord priority to trade for cementing bilateral ties. it is the need of the hour that both governments, besides opening new land routes, should positively consider to connect Mumbai with Karachi through land, air and sea links as our businessmen are serious about maintaining two-way trade with india owing to lower cost and minimum logistics charges.” He said it is the

time to converge interest to regional trade because Pakistani exporters are keen to diversify exports from the saturated Western markets. President KCCi asserted upon the need to accelerate the pace of confidence building measures. He was of the view that it is high time we bring policy shift while giving priority to trade rather than political conflicts. He said during last 64 years both sides have had mutual animosity; however, it’s a healthy sign that the mindset and policy is changing on fast track and in a positive sense. He stressed upon the dire need of build-

ing stakes at public level and urged to enhance public-to-public and business-to-business contacts. He said business and industrial community of Pakistan must not fear that india has an edge on balance of trade because Pakistanis maintain a similar situation in Pak-China trade where China has edge over trade balance. He articulated that Karachi chamber had already provided its proposal to ministry of commerce with regards to the three agreements that include customs cooperation agreement, mutual recognition/ certification agreement and redressal of grievances agreement which will are likely to be signed during the visit of indian minister in the next month. He voiced for visa liberalisation for the business community and proposed that businesspersons should be issued multiple visas without restriction of destination and with exemption of police reporting. He concluded that the luncheon meeting with indian commerce, industry and textile minister and the 150 persons in the business delegation will be organised according to the programme chalked out and confirmed by the trade development authority of Pakistan. leaders of indian delegation Goutam Ghosh, director and head of south Asia, Federation of indian Chamber of Commerce and industry (FiCCi) and Manish Mohan, director, Confederation of indian industries (Cii) apprised the President KCCi about details of upcoming visit of Anand sharma, minister of commerce, industry and textiles, government of india and briefed that various agreements will be signed on that juncture between the two government. And likewise, top indian businesspersons will meet their Pakistani counterparts to explore existing business prospects.

CORPORATE CORNER Private sector role commendable for training workforce: DG karachi: Private sector role is essential and commendable for training and education of the manpower because skilled and qualified human resource could drive the country’s economy on the growth track as strong engines of industries and businesses. this was stated by Asif shuja Khan, Director General environment Protection Agency, Government of Pakistan, at the launch of 2 nd Career Day being organized by toyota-indus Motor Company under its toyota technical education Program at Construction technology & training institute in islamabad on Friday. the institute offers 3-year Diploma to students and provided an opportunity in the Career Day for the Jobs at iMC’s Dealership Network. students will be selected after going through formal tests & interview at the relevant dealerships management. PRESS RELEASE

German NGO 'human aid' representative donates ambulances to Edhi karachi: this is to inform about the upcoming visit of Dieter Denschlag, head of the German NGO 'human aid', a registered organization formed to help and support the needy in Pakistan, particularly victims of disastrous floods. Denschlag will visit Karachi on 29th and 30th Jan and during his stay, he will meet the Archbishop Karachi, evarist Pinto, to hand over cash donation. On Monday, 30th Jan 2012, at 12:30noon, Mr. Denschlag will meet the Founder President of the edhi Foundation, Dr. Abdul sattar edhi at the Bilquis edhi Female Child Home Clifton Karachi to formally hand over a donation in form of four ambulances. On this occasion, the German Consul General of the Federal republic of Germany in Karachi, Dr. tilo Klinner will be present. PRESS RELEASE

PTCL brings Mobile Bucket-2 for customers islaMabad: encouraged by the massive customer response to its last year’s ‘bucket packages’, Pakistan telecommunication Company limited (PtCl) has launched an exciting countrywide “mobile bucket-2” offer specially designed for existing and potential PstN subscribers. the “mobile bucket-2” now offers two packages allowing customers to call from fixed to mobile operators in Pakistan on discounted rates. in the first mobile bucket package, customers can talk 200 minutes for only rs.250 per month; whereas, the second mobile bucket package allows customers to talk 400 minutes on all mobile networks for only rs.500 per month. PRESS RELEASE

New Remittance Service to Pakistan

LDFA 2012 provides value addition increase platform KARACHI STAFF REPORT

DFA 2012 provided the platform to livestock, Dairy, Fisheries, Poultry and Agriculture (lDFPA) sectors to show their potential; this was stated by Nisar Ahmed Khuhro, speaker sindh assembly while addressing the seminar of lDFA 2012, at expo Center Karachi here on saturday. Nisar Khuhro said, provincial government endowed immense importance and set ambitious targets to pursue in-

vestment opportunities which are available in lDFPA sectors by focusing on value addition and export. He added that, Pakistan has come in wheat exporter countries; that is big achievement for us, two years ago we were importing wheat but, now we are exporting it. Zahid Ahmed Burghari, provincial minister for fisheries stated that livestock, Agriculture and Fisheries (lAF) are the backbone of any agrarian economy and government of sindh is talking all sorts of measures to bring in technology to increase efficiency of this sector. secretary investment, Younus Dagha said the objective of lDFA 2012 is to promote unconventional and unexploited but highly potential sectors of economy such as lDFPA whereby overwhelming response is expected from public as well as private sector during this event. According to Younus Dagha livestock, Dairy and Agriculture (lDA) sectors have been the foundation of some of the progressive economies of the world. Pakistan in general, sindh in particular has vast potential for modern and technology driven practices. Younus Dagha, said the 2nd edition of lDFA exhibition was organised by sindh Board of investment (sBi) in collaboration with Provincial livestock and Agriculture Department (PlAD) on 28th and 29th January 2012 at expo Center Karachi. He stated that, the event was a continuation of lDF

karachi: the National Bank of Pakistan (NBP), which has tied up with major players in the remittance business like tahweel Al-rajhi, samba, enjaz and Arab National Bank, has made the task of transferring funds back to Pakistan very simple by launching two top class remittance services. the NBP has launched an innovative service called “NBP Foree Cash” (instant cash delivery) and another service known as “NBP Foree transfer” (instant transfer to bank accounts in Pakistan). PRESS RELEASE

The objective of LDFA 2012 is to promote unconventional and unexploited but highly potential sectors of economy LAhORE: h.E Emilion lon Ambassador of Romania inaugurated the winter collection of ‘NABEEL & AQEEL’ at WARDROBE. PRESS RELEASE exhibition 2011 which was a great success. strengthened by the success of lDF 2011 this year’s edition includes agriculture along with livestock, dairy, fisheries, poultry (lDFA 2012) to widen the scope of activities and benefits of the success of the event to potential participants. Younus Dagha added, “Over 350 exhibitors participated in lDFA 2012, the general public is very enthusiastic, excited and happy to witness horse and cattle show, bird show, ornamental fish exhibition, dog and cat show, ostrich’s exhibition and flower show which were arranged on the sidelines of the exhibition.

LAhORE: On behalf of TOTAL OIL PAKISTAN (Pvt) Ltd. And TOTAL PARCO PAKISTAN (Pvt) Ltd., “Flood Relief Assistance” was presented by Qasim Zaheer CEO & MD of Total Pakistan (Pvt) Ltd. To Meer Mohammad Parihar, representative of The Rural uplift & Welfare Association (TRuWA) for flood affected people in Badin District. PRESS RELEASE