profit 30th December, 2011

PDF Profit_Layout 1 12/31/2011 12:21 AM Page 1

Gas crisis generating unemployment Page 2 Providing more than marginal impetus Page 3 Govt fails to find solution for expensive fuel mix Page 7 Pages: 7

profit.com.pk

Saturday, 31 December, 2011

China Three Gorges plans $15b investment in Pakistan Ground breaking of CTG’s first wind power project held ISLAMABAD

C

AMER SIAL

hinese hydel power giant, China Three Gorges Project Corporation (CTG) has said that Pakistan is on the top of its priority for foreign investments, as the state owned firm plans to invest up to $15 billion for generating 10,000 MW power in the country.

This was stated by the Chief executive Officer of China Three Gorges First Wind Farm Pakistan, Wang shenliang at the ground breaking ceremony of $130 million 50MW wind power plant in Jhimpir Thatta sindh. The ground breaking of the project was performed by the Minister for Water and Power syed naveed Qamar and Chinese Ambassador Liu Jian. Chinese company is self financing the wind power project and the 1100 MW Kohala hydro power project in the country. Wang said, “As the CTG expands its overseas investment, our first priority remains Pakistan, and we are interested to generate 10,000 MW hydel and wind energy in Pakistan”. he said the first project of 50 MW will be completed by late summer 2012. The firm is seeking additional land for a 450 MW project and has given its commitment to set up 1000 MW in sindh in the next 3-4 years. it will be making all the investment through its own resources.

CTG has shown interest to invest in four mega hydropower power projects of Bhasha, Bunji, Kohala and Karot, provided the government removes legal bottlenecks in the award of contracts. Pakistan had already signed MoU CTG for the construction of 7100 MW Bunji hydropower, while the contract for 1100 MW Kohala hydropower project was awarded to it this year. speaking on the occasion, Chinese Ambassador Liu Jian said the project will further deepen the strategic and

economic relationships between the two countries. he said China values its friendship with Pakistan and wants to further strengthen it by enhancing its investment in the country.

Minister for Water and Power syed naveed Qamar said President’s look east policy was paying dividends, as CTG was working on wind and hydel power projects in the country through their own financial resources. he said the country has an estimated wind power potential of 50,000 MW and many more wind power projects will be coming during the next year. in October, the national electric Power Regulatory Authority (nePRA) approved Rs12.61 per kWh feed-in tariff for the foreign financed wind power projects while locally financed projects were offered Rs17.28 per kWh tariff which complete their financial close before December 2012.

Pakistan has set a target of generating 1500 MW from wind power, with in the next three years. The minister said the government was also working on a policy to provide feed-in tariff for coal based projects that will help overcoming the power shortages in the country. The power generation of coal is half the price of expense furnace oil or diesel. Pakistan has huge coal reserves but has failed to tap them for power generation.

Chief executive Officer of Alternate energy Development Board (AeDB) Arif Alauddin said the CTG was the third wind power project in the country. Turkish company Zorlu and Fauji Foundation are also setting up 50 MW each wind power plants. he said looking at the pace of Chinese firm he would not be surprised if they beat

their competitors by completing the project before their competitors. he said wind energy sector has started attracting the highest private sector investment as compared to other sectors of the economy. he said the year 2012 will be remembered as a year of renewable energy (Re) in Pakistan as they plan to inaugurate a project every month during the next year. he said the implementation agreement with Zorlu energy is expected to be signed on January 03, 2012. he was of

the view that they were successful in creating for the first time an investment protection, a financial instrument for repayment risk in the form of the counter guarantee from the Asian Development Bank, which was a key concern of the investors.

The counter guarantee removed the last of the bottle necks and the banks were now ready to invest in the sector.

Commenting on the criticism on AeDB performance, he said critics ignore the fact that in China it is public sector investments that have increased the pace of renewable energy deployment, while india started implementing renewable energy projects in 1982 and now have a full fledged ministry with an annual budget of Rs1200 crore. Pakistan on the other hand had decided not to invest any public sector funds in the sector and all the investment was to come from the private sector. he said despite difficulties they have managed to attract Zorlu, LiMAK, LiMA and Kenisis from Turkey, nordix and Azur from Germany, Lumen energy from Dubai, hartfort energy and ssiD from UsA, nBT from norway, and Aei from UK which have teamed up with Pakistani companies to set up wind and solar power generation facilities.

Chinese companies sUneC, CWe, sUnTeCh, ChinT, Goldwind and Datang Renewable energy are now serious players in the Pakistan market. in 2008 there was not a single approved ePC contractor or turnkey supplier available in the country, now more than 7 top wind turbines manufacturers including Vestas (Denmark), nordex (Germany), seimens (Germany), General electric (UsA), hyundai (Korea), Goldwind (China), sunec (China) are offering turbines, fully backed by ePC contract and operation and maintenance for extended period.

Government fails to reform PSEs in 2011 ISLAMABAD

G

JALALUDDIN RUMI

OVeRnMenT failed to reform the Public sector enterprises (Pse) during the last year even though the Cabinet Committee on Restructuring (CCOR) kept claiming that the incumbent management would be replaced with professionals to make the entities profitable. Prime Minister Yousuf Raza Gilani on December 25, after presiding the 100th federal cabinet meeting announced to form a task force headed by Finance Minister Dr Abdul hafeez sheikh, to address the issue of energy crisis in the country and for transformation of public sector entities, including Pakistan international Airline (PiA), Pakistan Railways and Pakistan steel Mills (PsM). According to Mr hafeez

shaikh, government spends an estimated Rs250 billion as Pse bailout cost each year. A total of Rs30 billion has already been doled out to PsM to cover its financial losses.

Much of the reduction in expenditures from 20.5 per cent of the GDP in 2010 to 18.9 in 2011, came at the expense of development expenditures, which will “dampen fixed investment” and lower future growth prospects. Federal subsidies were three times higher than envisaged in the budget leading to resource misallocation. Pakistan Railways, PiA and PsM are classical examples of the heavy cost of poor governance to the economy. Pakistan Railways, national passenger carrier is into ruin, ending all goods haulage, and leaving millions of passengers stranded. in last four years since current government took power, Pakistan Railways has retired 64 of its

104 trains, leaving just 40 left for a country larger than Britain and Germany combined. With expected losses of 35 billion rupees $390 million in fiscal year July 2011 to June 2012 the company relies on government handouts of 2.5 billion rupees $2.8 million a month to pay salaries and pensions.

During first six months of current fiscal year; Pakistan international Airline (PiA) suffered a loss of Rs10.7 billion. Cabinet Committee on Restructuring (CCOR) has said that it might use 20 billion rupees on the condition of restructuring the airline.

One of the main reasons why the debt is increasing every year for the national flag bearer is its Rs15 billion long term debt, on which it has had to pay billions of dollars of interest every year. Along with the long term debt, the short term liabilities for PiA are also increasing at an alarming rate

and if not dealt with soon, will lead to more liquidity problems. in 2008, the airline’s accumulated losses stood as high as Rs73 billion and have risen to over Rs107 billion at present. Financially, it is this long term debt, and the losses that are not dealt with which is causing most other problems for the airline. There are a number of varied opinions regarding why this does exist; politics, global economy and inefficiency are cited as a few, and they all hold true.

PsM with its prevailing inefficiencies is due to the centralised, bureaucratic structure with considerable government intervention. however, with elections just around the corner, privatisation doesn’t top the list of solutions for saving PsM. Pses like Pakistan Railways and PiA have social service provision responsibility and therefore privatisation may not

FBR faces Rs1 billion difference between provisional and reconciled figures ISLAMABAD JALALUDDIN RUMI

F

eDeRAL Board of Revenue (FBR) is facing a difference of Rs1 billion in the provisional and reconciled figures of the tax revenue reporting system during the first five months (July- november) of the current fiscal year. Chairman FBR salman siddique while talking to the journalists said the difference was creating a misperception about the authenticity of the reported figures. he said efforts were underway to minimise the margin of error in provisional and reconciled figures and will be completely abolished during the current fiscal year. he while briefing about FBR’s tax revenue reporting mechanism said there are three phases in tax reporting system under which, at the end of every month, provisional tax numbers are shared on net basis that include banking sector transactions and domestic taxes. in the second phase, under FBR’s tax revenue reporting system, provisionally reconciled numbers would involve the process of reconciling from FBR accounting system, Directorate of Research and statistics (DRs), Auditor General of Pakistan Revenue (AGPR), state Bank of Pakistan (sBP), national Bank of Pakistan (nBP) and adjustments lagging one month. Chairman FBR while clarifying the process of reconciliation of tax figures said routine data of monthly civil accounts by AGPR comes during the date of 15 to 18 of next month. All DAOs, treasuries of FBR, and AGPR offices are involved in the reconciliation process.

The reconciliation process of FBR and AGPR begins on 20th; takes ten working days after which AGPR reports to finance division. The third and final process of FBR’s reporting system include, final annual revenues and cutoff date that is June 30th for cash- no further spillovers and cutoff dates for accounts. Chairman FBR further said in Pakistan, under the universal tax based system, tax was taken on income bases not on assets. he said 60 per cent of 7.5 per cent of the pending refund claims account for 90 per cent of the total amount that FBR has paid off. FBR Chairman has made commitment to the senate standing committee on finance that it would resolve the issue in the next 45 days.

be a plausible solution for them.

PsM, on the other hand, is free from such restrictions but political hegemony comes in the way to make it a profit-making entity. The solution to these problems is clearly missing in the announced plan, without which any action will fail to achieve the desired results. even if the government opposes privatisation, independent boards comprising of private sector experts who are credible and dedicated to work in the interest of the company are much needed.

With no government influence in the running of the entity, bureaucratic inefficiencies will cease to exist. such plans, however, have seldom seen the light of the day. Action and implementation, the key to ensuring the success of such plans, is something that the government lacks.

Whether this development will prove the general mindset wrong or will it strengthen our belief about the fate of the Pses as a tool for political patronage remains to be seen.

PDF Profit_Layout 1 12/31/2011 12:21 AM Page 2

02

Saturday, 31 December, 2011

debate

Gas crisis

generating

unemployment

FArAkh ShAhzAD exTiLe sector of Faisalabad, ‘The industrial capital of Pakistan”, which was finding it hard to cope with four-days weekly gas cut, had another deadly blow this week when the snGPL authorities were unable to restore the gas supply to the industrial sector on the fifth day. As the industry has been gripped in an unspecified gas load shedding schedule, the analysts say that the closure of more than 600 industrial units in the textile capital of Pakistan might lead to an immediate large-scale unemployment in the region, where 4 million people are directly or indirectly attached to the textile manufacturing trade. earlier, the textile exporters, industrialists and labour rights campaigners have taken up a strong united stance to urge the government to immediately stop discrimination in gas supply to upcountry industries, as 4 days a week suspension of gas supply has forced closure of industrial units, rendering thousands of workers unemployed.

The city has recently been turned into a hotbed for the protestors of all kinds. For instance, the workers who lose their daily wage due to a gas holiday usually take the protest route to ventilate their anger against the state. But it is a serious dilemma for the authorities that if they restore the gas to the industry, resulting in low pressure to the domestic consumers, the same lot of workers will return to the streets to fight for another cause. it is pertinent to note that in the priority list of gas supplies, industrial sector stands next to the domestic consumers which are the top priority. in order of priority, the government’s distribution of natural gas ranges from domestic consumers, industries, independent Power Producers (iPPs) and fertiliser factories. it is significant to note that local industrialists had announced to defy a ban this month and tried to run their industry forcibly, but sui northern Gas Pipelines Limited (snGPL) stopped the total supply to the domestic and commercial sector in the industrial city, causing severe problems for citizen as well as restaurants, tandoors and other commercial consumers. At the joint call of Pakistan hosiery Manufacturers and exporters

T

Association (PhMA) north Zone, Faisalabad Chamber of Commerce and industry, Pakistan Textile exporters Association, All Pakistan Bed sheet and Upholstery Manufacturers Association, Khurrianwala industrial estate, Millat industrial estate, All Pakistan Textile Processing Mills Association, industrialists, textile exporters and industrial workers staged demonstration at all entry points of the city and raised slogans against the federal government. The speakers alleged that the wide scale mismanagement is yielding negative impact on the national economy and hurting industrial investment of billion dollars, which was being sinking. They raised slogans demanding immediate action by the government to stop discrimination in gas supply. in the broader spectrum, the gap between supply and demand of natural gas has reached nearly one billion cubic feet per day mark (bcfd) resultantly the management is forced to cut gas supply for industrial sector of Punjab and CnG sector of sindh. however, the situation is likely to deteriorate in the coming months due to increase in the intensity of cold. According to the petroleum ministry estimates, natural gas shortfall against committed supplies remained around 911 million cubic feet per day (mmcfd) in December and will increase up to 1.1 MMCFD in January 2012 and 1.4mmcfd in February, before easing down to 726mmcfd in March. it is unfortunate to forecast that the problem is likely to worsen in the coming years. According to official estimates, gas shortfalls are estimated to reach 2.5 BCFD in 2014-15, 3 bcfd in 2015-16 and 3.5 bcfd in 2016-17. The gap is estimated to peak at 5 bcfd by 2020-21, unless major discoveries and field developments are made in the coming years.

The consumption of gas has increased from the year 2,000 onwards on a massive scale. initially, domestic users were consuming 32 per cent of the total gas supply, general industries 24.9 per cent, power sector 22 per cent, commercial users 5 per cent, and the CnG sector 4 per cent. however, the ratio has now changed with domestic consumers consuming 26.07 per cent, power sector 15.9 per cent, CnG sector 11.85 per cent, fertilisers 7.82 per cent, and the commercial sector 4.75 per cent.

According to petroleum ministry estimates,

Pakistan’s domestic gas production is expected to fall from the current 4 billion cubic feet per day (cfd) to 2 billion cfd by 2020. Demand, on the other hand, is expected to soar to 8 billion cfd by that time, creating a 6 billion cfd shortfall.

Pakistan is losing 300 mmcfd of gas due to theft and leakages, causing Rs20 billion loss to the gas companies in unearned revenues alone, admitted Rashid Lone, managing director of sui northern Gas Pipelines- the second of the two governmentowned gas distribution companies.

Textile leaders indicate time and again that government was intentionally creating hurdles in smooth running of the textile industry by minimising the gas pressure. They argue that the situation in textile industry has become horrible due to poor gas supply by snGPL and the government should immediately settle this chronic issue of gas supply after taking all stakeholders into confidence. They also demand that the government should honour its commitment to avoid devastating impact of gas curtailment for textile industry and should review its priorities on gas supply immediately, to save the value added export oriented and labour intensive textile industry. The government seems to stay calm, composed and totally un-phased of all the hue and cry from the stakeholders. it is an objective fact that in the current global scenario and stiff international competition, exporters are struggling hard day and night, despite heavy odds against them battling to toe the line and meet their export commitments with stringent demands from their foreign buyers. But unfortunately, it seems that the government does not care as to how important it is for the exporters to earn the much needed foreign exchange for the nation.

Rehan naseem Bharara, Vice Chairman FCCi, said that government still could not develop long term strategy and planning to tackle gas crisis, which is putting an adverse effect on the production. especially, exporters of textile would face a lot of problems, because they would not be able to produce and export textile products in the given time frame. Renowned businessman, Mian Aftab Ahmad, warned the government to reschedule the gas load management plan otherwise, large number of indus-

trial units would be shutdown and thousands of labour and their families would be deprived of their bread and butter. Leaders of textile industry also appealed the government to immediately intervene in this high time and save the textile industry by immediately stopping gas shedding and discrimination. it is abundantly clear that due to gas load shedding and low pressure, people including labourers, and daily wagers have faced huge problems and remained jobless because productions of factories and power loom units had halted. Power looms owners were not getting the sized yarn beam from textile sizing factories for starting production of cloth, while huge stocks of cloth were piled up in the premises of the textile processing and printing mills, where gas is not available. Power loom units were not using gas directly, but thousand of looms remained closed due to breaking of the textile chain because of the freezing of textile sizing sector. Consequently, due to prolonged gas shedding, hundreds of labourers, most of them daily wages, suffered from gas load shedding which has left them penniless as they are struggling to generate income from other ways. Almost all manufacturing activities have already been frozen because of mismanagement and unfriendly course of action of the present regime, while the worst gas shortage threw more fuel to the fire. Lately, the labour unions have also expressed grave concerns over the prevailing situation, which is generating unemployment and poverty in the province. Almost all the textile manufacturing and export organisations have strongly criticised the snGPL for its mismanaged gas supply to the textile industry, causing a colossal loss of over Rs50 billion, so far besides affecting direct employment of about 350,000 labourers across the Punjab. in this whole episode, the government has not demonstrated a will and vision to address the issue that has pushed the textile sector to the brink of collapse. instead of announcing a relief or showing a figment of sympathy towards the industry, the authorities have stated time and again that industrial consumers should realise that they had agreements for 9-month gas supplies and were required to use alternative fuel like, furnace oil during winter. The ruling elites think that the industrialist should stay away from blackmailing the government through their shutdown or lay-off threats.

China’s factories falter, pro-growth policies eyed

C

hinA’s factory activity shrank again December as demand at home and abroad slackened, a purchasing managers’ survey showed on Friday, reinforcing the case for pro-growth policies to underpin the world’s second-largest economy.

The People’s Bank of China is widely expected to lower its requirement for the amount of cash banks must hold as reserves to let lenders inject more credit into the economy to fight headwinds from europe’s debt crisis and sluggish U.s. demand. The hsBC Purchasing Manager’s index, designed to preview the state of Chinese industry before official output data are published, inched up to 48.7 in Decem-

ber from a 32-month low of 47.7 in november, but fell short of the flash reading of 49. The hsBC PMi has been mostly under 50, which demarcates expansion from contraction, since July.

“While the pace of slowdown is stabilizing somewhat, weakening external demand is starting to bite,” said Qu hongbin, China economist at hsBC. “This, plus ongoing property market corrections, adds to calls for more aggressive action on fiscal and monetary fronts to stabilize growth and jobs, especially with prices easing rapidly.” he said China would avoid a hard economic landing so long as policy easing measures filtered through in coming months. hsBC believes a PMi reading of as low

as 48 in China still points to annual growth of 12-13 percent in industrial output.

China’s once turbo-charged economy is on track to slow for a fourth successive quarter, easing further from the first quarter’s 9.7 percent annual growth rate with economists expecting the final three months of the year to have slipped below 9 percent. The official PMi, due to be published on sunday, is expected to paint a similar picture, suggesting the world’s second-largest economy is finishing 2011 on a weak note, in tandem with the global economic outlook. Both the official and hsBC PMis are stuck near their weakest levels since early 2009, when China took a blow from the global financial crisis.

economists polled by Reuters earlier this month forecast the PBOC will deliver 200 bps of required reserve ratio (RRR) cuts by the end of 2012 but refrain from an outright cut in interest rates unless quarterly GDP growth dips below 8 percent. economists typically view growth of 7 to 8 percent as the bare minimum needed to generate enough jobs to help China absorb the urban influx of rural migrants and maintain social harmony. “i think the government will ratchet up pro-growth policies if (quarterly) growth falls below 8 percent, otherwise the economy could face big risks,” said Guotai Junan securities economist Wang hu in shanghai. “Another RRR cut could happen any time.”

ROOM FOR RRR CUTS: China’s central bank cut reserve requirements for commercial lenders late in november for the first time in three years. The RRR remains at 21 percent for big banks, giving the central bank plenty of room to cut and free up funds that could be used for lending. Persistent capital outflows from China are putting more pressure on the central bank to release cash to keep credit conditions supportive for growth.

Underlying indexes of the hsBC PMi showed softening demand at home and abroad, which helped cool inflation — a boon for Chinese policymakers, according to the data collated by UK-based information firm, Markit.

PDF Profit_Layout 1 12/31/2011 12:22 AM Page 3

Saturday, 31 December, 2011

EDITORIAL

Providing more than marginal impetu

Rise of the yuan T was only natural for Beijing to partner with time-tested allies to float the yuan as a possible international reserve currency. But it’s not the smartest idea to posture towards pricing international trade away from the dollar, especially if your country is on Washington’s list of perspective importers of democracy. Yet few, especially among emerging economies, will find fault with a medium to long term work plan of moving away from the greenback. The reserve currency has been under immense pressure of late, especially after Bernanke and Co flooded the market with quantitative easing dollars to sooth choked credit markets. The dollar is at its weakest, its only bouts of strength of late owing to safe haven trading because europe seems bent upon being the more-inferior economy.

Pakistan’s currency swap agreement with China will bring benefits – not the least being favourable investment opportunities from Beijing – but it will also test islamabad’s resolve. Already, the equation

I

with Washington is not at its best. in addition to Afghanistan/nato specific problems, there is pressure to abandon the iran-Pakistan gas pipeline project in favour of the non-starter TAPi (TurkmenistanAfghanistan-Pakistan-india) project. Fortunately, though, the chance of the Pakistani government caving into American pressure this time around is negligible. interestingly, the Chinese move is sure to rekindle the bitter argument within opec with regard to the ultimate dollar denominated trade – oil. Proposals to price oil out of the dollar are not new, though Washington’s reaction to proponents of such change (saddam, Gaddafi) is not very reassuring.

While such developments are far in the future, the Chinese novelty is sure to find suitable imitation elsewhere, in similar trading blocs. Pakistan, having already signed a similar deal with Turkey, seems at the centre of a profound market shift. These alliances should be worked at with the specific aim of attracting as much friendly investment as possible for partaking in such ventures.

An optimistic stance This is with regards to the article, ‘iKnomics – walking the PTi talk’, published on 29th December. First, we need to make sure of the credible promises for improvements and increases in public goods and services: infrastructure, public transportation, education, health and social security. if people see improvements in their standard of living by paying taxes, they’ll be more inclined to pay.

Governments should show people that if they pay more through taxation, then their expenses will be reduced by the state through cheaper education or healthcare, for example. secondly, governments should be more transparent about how much tax is collected, from whom it is collected (geography, profession-wise), and where it is eventually spent. A major problem of the government and the public will be solved this way. On a more purely political front, this initiative can be linked to ensuring that Pakistan is sovereign, that it can pursue its own interests domestically and internationally without fear. These measures, if carefully, clearly and systematically implemented should most certainly ensure that Pakistan collects more tax and governments are truly able to serve the people. it is simply a matter of will. One simply requires optimism of the will.

Aahyan Mumtaz eT’s not be scathing, let’s not criticise for kicks; putting it simply, the seCP has got it right this time round. The recent amendments made to the securities (Leveraged Markets and Pledging) Rules, 2011, are welcomed respite for capital market participants at a time where all-round dullness seems to dominate. The actions of the regulator insofar as providing an investor friendly platform to boost capital market activity needs to lauded in this case. The key word here is ‘investor friendly’ and the changes in regulations surely fit the adage well. This was the primary intention behind the introduction of Margin Trading products when reintroduced into the market in 2009. however, for one reason or another, the product failed to spur activity and lacked attractiveness.

The changes supplement the affordability of the product and provide it with better appeal for investors now.

Let’s take stock of what the key amendments encompass: (i) At present, borrowers who wish to take up leveraged positions through availing margin financing facilities are required to deposit and maintain a minimum of 25 per cent ‘cash only’ margin. This was posing to be a dampener for stock market activity as the requirement is surely pocket heavy. seCP has offered relaxation by likely reducing the cash requirement (amount though still not disclosed) and also has indicated that a part of the margin can be furnished by certain selected shares as a pledge too. in simple terms, it now costs less money upfront to take up a leveraged position in stocks. (ii) individuals have also been allowed to act as financiers for Margin Trading as opposed to the current situation of only institutions providing financing for the purchase of shares.

L

Borrowing magnifies the quantum of gain or loss given a particular movement in the underlying price of a stock

zAIN ChAUDhrY

it is exactly the purchase of shares, in turn daily turnover, which facilities like Margin Financing encourage. Designed on a ‘borrow and buy’ principle, leverage stimulates market activity and should help investors engage more in transactions boosting average daily volumes. The last few years have seen participants struggle with a bout of illiquidity that has hurt business prospects for brokers, in addition to compromising on price discovery for investors. it should also assist in building market depth and attracting more people to the local bourse – both local and foreign alike. But is margin financing the magic wand which waves the troubles goodbye or do other factors also come into play? insofar as providing the favourable conditions for trading activity are concerned, the seCP has been spot on in the aforementioned amendments. however, another issue that the regulator needs to address is that of Capital Gains Tax (CGT). The tax has delivered benefit to neither the government, nor the payer – well it shouldn’t for the latter anyway. Most of the concern over this topic hinges around the information heavy needs of filling and dubious collection mechanism. Reforming it in another way and automating collections would serve purpose here. Then the general sense of risk aversion in a weak economic environment is another hindrance. While not much can be done about that from the regulatory front, raising public awareness of the attractive valuations available at the local bourse (5.7x for 2012e earnings) should aide in attracting investment. nevertheless, let’s not get greedy and focus on one step at a time.

Coming back to Margin Financing, it is pertinent to mention one key point that should not be left untouched here. Recalling that excessive leverage was a key factor behind the 2008 stock market crisis, one must be aware of the dark side attached. Like all borrowing principles, borrowing magnifies the quantum of gain or loss given a particular movement in the underlying price of a stock. Lower initial margin requirements can also aide in speculation, precisely the problem that surfaced three years ago. however, this recklessness can be tackled through robust risk management frameworks and formation of a ‘fit and proper’ criterion. A balanced stance needs to be achieved between relaxations and tightening; where tilting towards either extreme undermines the regulator’s standing. The move explained above is a move towards such a balanced position and is certainly a good grounding for revival.

The writer is a financial analyst and freelance journalist

LAHORE

Brazilian coup

Haya Hamid n a sudden shift of fate, the Centre for economics and Business Research (CeBR) noted, that Brazil has now officially overtaken the UK as the worlds sixth largest economy.

With the way things are going, especially taking toll of the european debt crisis, by 2020 Britain’s economy will officially be overtaken by Russia and india. They have also predicted that by 2028 Brazil will officially enjoy a per capita income that will almost be

I

equivalent to that of Britain. in other and more simpler words, by 2028 the standard of living of the average Brazilian will be better than that of the average Britisher. This historic paradigm shift has been a result of a clear dichotomy in policy making, where on the one hand, credit and debt creation was fueled and encouraged while on the other prudent economic policies were pursued, essentially aimed at self sustenance.

More interestingly, with the ailing economies of europe and the Us, China is yet to show their strength and flex their muscles. What Brazil has successfully done and the other western powers have failed at is the creation of just human centric policies that are aimed at poverty alleviation.

The fifth most populous country of the world launched an anti poverty campaign under the slogan “opportunity not favours”, that supports millions of

families and covers health and education programmes. The programme that was first initiated under Luiz inacio, and now is operating under Dilma Rousseff pledges to take 16 million Brazilians “out of destitution”.

While countries were focusing on wealth creation even if it wasn’t backed by real money, Brazil focused more on wealth diversification and redistribution. The wall street rioting reinforce the fact that without focusing on human centric policies, the entire spectrum of what is being ‘dubbed’ development will instead of lending credibility to the governments, snatch it away from them. expansion of the middle class has also been phenomenal which has risen owing to Brazil’s diversification in the manufacturing and sevices sector. even though growth is expected to sharply decline this year, to 3.5 per cent, it is now anticipated that it will

shahaB JaFRy Business Editor

KunwaR Khuldune shahid Sub-Editor

BaBuR saGhiR Creative Head

ali RiZvi News Editor

maheen syed Sub-Editor

hammad RaZa Layout Designer

Brazil has now officially overtaken the UK as the worlds sixth largest economy

rise sharply by 7 to 8 per cent in 2012.

With growth comes responsibilities and while the west was wasting its energies on scorning at south America and the Middle east, Brazil used that opportunity to make some valuable and unlikely friends – Venezuela’s hugo Chavez and iran’s Mahmoud Ahmadinejad among them.

These changing paradigms imply that even if the West wants to, they can no longer treat Brazil and other Latin American states as subservient nations, built and constructed to serve their interests. The Monroe Doctrine no longer exists and such mentality would have to change sooner rather than later. The rise in power of states like China, Brazil, india, indonesia, nigeria and south Africa means that

the underdogs are now winning the race. The eurozone will eventually have to learn lessons from the likes of countries like Brazil and China.

Despite the recent recession it seems as if policy makers have not learnt the lesson and militarily UK remains to be one of the biggest spender as a proportion of its GDP despite the latest tranche of cuts. With this paradigm shift the western countries must now prepare not only for the skilled not being able to find jobs, but also for the highly skilled to look for greener pastures elsewhere around the globe. With these glaring realities, Britains demotion to a middle ranking power is now discretely accepted across the globe.

The writer is a freelance contributor

For comments, queries and contributions, write to: muneeB eJaZ Layout Designer

email: profit@pakistantoday.com.pk Ph: 042-36298305-10 Fax: 042-36298302 website: www.pakistantoday.com.pk

PDF Profit_Layout 1 12/31/2011 12:22 AM Page 4

Saturday, 31 December, 2011

04

I feel, affiliations do not and will not have a significant impact in driving the local advertising industry forward

news

Pirana Group CeO, imran irshad

FPCCI withholds election results on High Court order kArAChI

F

GHULAM ABBAS

OLLOWinG a directive of sindh high Court, Federation of Pakistan Chambers of Commerce and industry (FPCCi) has withheld the result of annual election. however, according to unofficial results, haji Fazal Kadir Khan sherani, has received majority votes on Thursday. sherani, backed by a strong group of FPCCi, has obtained almost 95 percent votes in the body’s presidential election held on Thursday while his competitor senator haji Lashkari Raisani could obtain only few votes. however, as Balochistan’s all chambers including Quetta, Lasbela, Gawadar, Makran, Chaman and Pasheen have rejected the nominee of sherani for the presidential slot which as per the FPCCi’s rules should be filled from the province this year, the sindh high court through a directive has stopped the body from announcing

changed in the country. The fresh election process at FPCCi also proved that the interest group was not ready to give the due rights to the already deprived province. he said his panel would wholeheartedly accept whatever decision is taken by the court.

Though, Raisani, was earlier claimed of having a strong position in the presidential election of FPCCi as he enjoyed the unanimous support of all six chambers of commerce of Balochistan, nomination of sherani for the slot by the influential group in the body, some Baloch representatives claim, was a conspiracy to hold the group’s monopoly on FPCCi’s affairs. The influential group, they alleged, was trying to deprive the province of the leadership of FPCCi even after 12 years in traditional rotation of president of the body. The president was to be elected from Balochistan province this year. According to a statement of the Federation, the Businessmen panel had already swept all four

result of the election. The situation at FPCCi become critical when Raisani group insisted to keep the ballet box sealed honouring the court’s decision of withholding the results of the election while the other group, including sherani and the businessman Panel tried to open the box and make a counting of votes. To avoid any unfavourable situation, law enforcement personnel including police were also invited inside the Federation house where the police personnel led by an shO controlled the situation.

Later a committee formed by the two groups decided to keep the ballet boxes sealed until any decision from the court. however, according to sources, sherani led group has obtained almost 95 per cent of the vote from business representatives of Punjab, Khayber Pakhtoonkhwa and sindh while Raisani could only get some votes from Balochistan.

Talking to media persons, senator Raisani said that the status regarding the rights of Balochistan was yet to be

aPTma to launch countrywide strike

SECP amends securities rules 2011 LAhOrE STAFF REPORT

s

eCURiTies and exchange Commission of Pakistan (seCP) has amended securities (Leverage Markets and Pledging) Rules, 2011 as a result of a long debate in a series of sessions with stakeholders to resolve the long standing issue of stringent Margin Trading Regulations introduced in the capital market in recent years. it has been learnt in a press release issued by seCP. Market participants appreciated such amendments in securities (Leverage Markets and Pledging) Rules 2011 promulgated by federal government in February, 2011. since failure of CFs Mk-ii in 2008, there exists no leverage product available to the investors. The general investors disappeared from the market at large resulting in a slow

down of market performance in terms of returns and turnover.

There was need to introduce leverage product in line with the international best practice which commensurate to the prevailing environment in the stock market since 2008 crisis. The securities (Leverage Markets and Pledging) Rules, 2011 introduced MTs as an alternate product of obsolete CFs Mk-ii but stringent rule of MTs could not rescue the sinking ship of capital market. in view of the recent step initiated by the regulator to revitalise the stock market activities would attract new investors and gain confidence of market participants. it is aspired that the amendments in MTs will boost up the market activity, improve the deteriorating trading turnover and stimulate the small and medium size enterprises to inject their capital

FPCCi's Vice President’s seats of Punjab and Khyber-Pakhtunkhwa unopposed in the election of FPCCi for the next two-year term starting from January 01, 2012. The contest was held among the three presidential candidates from Baluchistan namely Fazal Qadir sherani, Masood ismail and Mir haji Lakhni Lashkri. however the group of ismail was already in favour of Raisani. A total of 130 voters drawn from Management Committee and General Body of federation were to elect the President and other office bearers.

The Business panel led by Tariq saeed had already claimed that all remaining seats in the election would be swept by the panel already enjoying more than 95 percent majority in the federation. According to sources, the existing president of FPCCi senator Ghulam Ali would be the beneficiary of the situation developed in the body’s election this year. interestingly the senator was also a favourite of the existing Business Panel, sources claimed.

PEShAWAr Staff Reporter

into investment stream through participating in MTs. Mr Aftab Ahmed Ch., the CeO and managing director of Lahore stock exchange Limited while commenting on the relief package said that investors seeking to avail leverage position in the stock market has been given relief through modification of Financing Participation Ratio (FPR) whereas previously the Financees were required to deposit 25 per cent cash to carry his long Ready Market position through MTs beyond the T+2 Rolling settlement system. now the recent amendments in securities Rules, 2011 have empowered the seCP to reduce the FPR ration in terms of mandatory cash requirement while the remaining portion would be allowed to deposit in approved securities with the applicable cut in order to manage the risk posed in leverage positions.

A

LL Pakistan Textile Mills Association (APTMA) has warned that it will launch a countrywide strike, if the gas supply was not restored to the industry forthwith. industrial sector is crippling owing to absence of smooth supply of gas in the country, said APTMA Chief, Mohsin Aziz, while talking to media on Friday. he expressed a grave concern over disconnection of gas supply to the industry; in particular in Punjab, where industry was hitting hard by gas load shedding.

Owing to this productivity and export ratio has immensely declined, he reiterated.

Mr Aziz said industry had already been devastated by gas curtailment for long periods and crippling bank interest rates. Due to unprecedented gas disconnection, electricity stoppage and high interest rates, he said that sector was plunging into collapse.

Karachi Stock Exchange 100 ends on sour note, with 88pts drop karachi Staff report

i

T was time to do some year end portfolio cleaning at the local bourse today as investors looked to primp their numbers on the last trading session of CY11. While Kse-100 index took a symbolic pounding – an all too familiar phenomenon this year – market volumes gained momentum in the second half of the day as they ended up at 62.5 million shares. niB continued its streak on top of the volume leader board with fellow penny stock TRG coming in at second place. Despite the volumetric surge, broad spectrum of equities was en-

veloped in a sea of red as investor outlook for the year ahead remains dismal. With Kse-100 index losing 88 points to end the day at 11,347 points, CY11 ended on a sour note as expected.

While it is customary to wish a

“happy new Year” at this time of the year, from a local investor’s perspective it appears there isn’t a whole lot to be happy about in the upcoming year, said Ali hussain at hMFs. Kse 100 index closed at 11347.66 levels with the loss of 88.01

points, while Kse 30 index lost 139.13 points to close at 10179.03 levels. All share index closed at 7856.82 levels after losing 56.14 points. Total 98 scrips advanced 113 declined and 88 remain unchanged out of total 299 scrips traded.

sialkot chamber threatens to lock up factories SIALKOT: sialkot Chamber of Commerce and industry (sCCi) and the other main trade bodies have announced to lock up their factories from January 7, 2012 as a protest against 20 hours daily forced load shedding of electricity and closure of gas supply to the exportoriented industries of sialkot. Acting President of sCCi Zafar iqbal Jaffary stated this while addressing a largely attended press conference at sCCi. he said sialkot business community has strongly protested against the said forced load shedding, saying that this critical situation was now unbearable. Due to this exportoriented industries of sialkot are on the verge of collapse, he added. he said the daily 18 to 20 hours forced load shedding of electricity had badly affected as many as 85 per cent industrial production in sialkot factories, due to which industrial wheel has been jammed in sialkot. ARIF MEHMOOD SHEIkH

speakers at lCCi apprehensive about mFn to india LAHORE: Government must not make any agreement with india at the cost of local industry which is currently making all out efforts to survive in the presence of acute energy crisis, rising inflation and widespread corruption.

This was the upshot of the speeches delivered at a seminar on ‘Most Favoured nation’ status to india organised by LCCi standing committee on pharmaceuticals here at Lahore Chamber of Commerce and industry. LCCi President irfan Qaiser sheikh was the chief guest while vice chairman Pakistan Pharmaceutical Manufacturers Association Tariq ikram, Mujeeb Ahmad Khan, head of WTO Cell TDAP and Convener LCCi standing Committee Amjad Ali Jawa also spoke on the occasion. LCCi President was of the view that Pharmaceutical industry requires some special safeguards before the notification of MFn status to india as indian pharma sector is almost 10 times bigger than that of Pakistan’s. irfan Qaiser sheikh said Pakistan’s pharma industry can not compete with indian pharma industry which comes at 3rd place in the world in terms of volume. STAFF REPORT

lTus, RTOs, TFCs to remain open till 10 pm today ISLAMABAD: Federal Board of Revenue (FBR) said all Large Tax Units (LTUs), Regional Tax Offices (RTOs) and Tax Facilitation Centres (TFCs) will remain open today as final day for income Tax Returns filing by Corporate sector till 10 pm. FBR has taken the decision in order to facilitate the income Tax Returns filing by corporate sector. For receiving of Returns and Payment of Taxes from the corporate sector, which are due today. All authorised branches of state Bank of Pakistan and national Bank of Pakistan will also remain open beyond their normal working hours to collect tax revenue. STAFF REPORT

Clarification Apropos upon a news report regarding a year of gloom for agriculture sector published in “Profit”, Lahore on 28th December, 2011, the spokesman of Agriculture Department has clarified that supply of agricultural inputs and imposition of RGsT on fertiliser are responsibility of the federal government. Clarifying some aspects of the news, the spokesman said production of all major crops in Punjab has remarkably increased since 2007-08. The spokesman further said wheat production of 18.42, 18.24 and 19.04 million tonnes during 2008-09, 2009-10 and 2010-11, was achieved as compared to 15.60 million tonnes in 2007-08. This marked an increase of 18.02 per cent, 16.87 per cent, and 18 per cent, respectively. similarly, record rice production of 3.643 and 3.713 million tonnes was achieved during 2008-09 and 200910, as compared to 3.28 million tonnes in 2007-08, which marked an increase of 10.86 per cent and 12.99 per cent, respectively. sugarcane production of 37.5 and 42.8 million tonnes was achieved during 2010-11 and 2011-12 which marked an increase of 19.7per cent and 36.74 per cent against 31.3 million tonnes production of 2009-10.

The spokesman added that now Punjab government has entered into certification regime to produce fully traceable agricultural and livestock products to reach high end markets of the developed world and to enhance exports for which Rs2.024 billion has been allocated to improve supply chain of selected agricultural and livestock products for improving quality and introducing traceability as per international standards and requirements. in the history of Pakistan, 15-20 fully traceable fruits, vegetables, rice and meat products will be showcased at forthcoming international Green Week, Berlin, Germany during January 2012 for which capacity of about 25 exhibitors has been built for compliance of Global GAP and iFs standards. PRESS RELEASE

PDF Profit_Layout 1 12/31/2011 12:22 AM Page 5

Saturday, 31 December, 2011

Some of the regional governments, clinging to the hope that cooperation with the US and its allies, and the implementation of their plans will help them stay in power, have been ensnared in a trap

news

iran President, mahmoud ahmadinejad

Commodities poised for first annual decline since 2008 on European crisis OMMODiTies (sPGsCiTR) headed for the first annual drop since 2008, paced by declines in cotton, copper and cocoa, on concern that the sovereign-debt crisis in europe and a cooling Chinese economy will sap demand for raw materials.

The standard & Poor’s GsCi Total Return index (sPGsCiTR) of commodities was little changed at 4,895.4 at 10:37 a.m. in new York, down 1 per cent for 2011. Cocoa plunged 31 per cent in 2011 on signs of expanding supplies from ivory Coast, the world’s biggest grower. Cotton fell 37 per cent this year amid rising output and dwindling demand. Copper, often seen as an indicator of economic activity it is used in building construction and automobiles, is set for the first loss since 2008. economic growth in China, the world’s biggest copper user, will slow to 8.5 per cent next year, after growing 10.4 per cent in 2010, the Organisation for economic Cooperation and Development projected on nov 28. Manufacturing in December contracted for a second month as global growth faltered and Premier Wen Jiabao prolonged a crackdown on speculation in the housing market. Global equity markets have lost $6.3 trillion in

C

value this year as europe’s debt crisis and slowing economic expansion weighed on investor demand for riskier assets.

“The two biggest drivers have been the global economic environment and the Chinese economy,” said Dan Denbow, a cofund manager of the $2.1 billion UsAA Precious Metals and Minerals Fund in san Antonio. “What happens next year really depends on what happens with global growth. investors may not be as quick to come back to commodities unless they get a very good feeling about global growth.”

GOLD, OIL Advances in gold, oil and cattle helped limit commodity losses.

Gold, 11 per cent higher in 2011, is on track for an 11th year of gains as investors seek protection against financial markets turmoil. Oil climbed 8.8 per cent this year, set for a third annual gain, on speculation that escalating tension in the Middle east will disrupt supplies as a recovery in the Us economy bolsters demand. Cattle futures in Chicago are up 13 per cent as the Us herd shrank. The dollar’s rally, up 1.5 per cent this year against six

foreign-exchange peers, has curbed demand for commodities priced in the Us currency. Treasuries gained 9.6 per cent, Bank of America Merrill Lynch index data show. still, raw materials outperformed equities as the MsCi (MxWD) All Country World index of stocks dropped 9.5 per cent.

EUROPEAN CRISIS Commodities plunged 46.5 per cent in 2008 as the collapse of Lehman Brothers holdings inc. triggered the worst recession since the Great Depression and sent global equity markets tumbling. Raw-material prices rebounded 13.5 per cent in 2009 and rallied 9 per cent last year as governments around the world ramped up stimulus spending to boost their economies.

The s&P GsCi index touched an 11-month low in October, extending its decline from an April peak to more than the 20 per cent threshold of a bear market, as investors cut holdings of commodities amid slower economic expansion. There is a 50 per cent chance of recessions in the Us, the U.K. and euro- zone economies in the next 12 months, nouriel Roubini, the economist who predicted the Us housing bubble that started the last

slump, said in October.

Goldman sachs said in a Dec 1 report that the world probably will avoid a recession and maintained its “overweight” allocation to commodities, predicting a 15 per cent return in the next 12 months. A close balance between supply and demand across raw materials “could drive a strong price rebound in early 2012,” Barclays Capital said this month.

METALS’ PERFORMANCE The LMex (LMex) index of six industrial metals retreated 23 per cent this year, led by declines in tin, nickel and zinc. spot silver is 8.8 per cent lower in 2011, set for its first annual decline since 2009. Palladium is poised to fall 19 per cent, and platinum has lost 21 per cent.

“Problems in the Us, europe and China have all contributed to the weaker performance this year,” said nick Trevethan, a senior commodities strategist at Australia & new Zealand Banking Group Ltd. “The risk in moving into 2012 is what’s going to happen in europe particular. some kind of major events there could put more pressure on the market from a sentiment perspective.” BLOOMBERG

US stock little changed on Spain concerns s stocks fell, as the standard & Poor’s 500 index pared its third straight annual gain, as concern over spain’s budget deficit overshadowed optimism that the American economy will expand in 2012.

Bank of America Corp. (BAC), which had the biggest decline in the Dow Jones industrial Average for the year, sank 0.4 per cent as financial companies slumped. sears holdings Corp (shLD) retreated 0.9 per cent after Fitch Ratings downgraded its long-term default ratings. FreeportMcMoRan Copper & Gold inc. (FCx) and hecla Mining Co. (hL) rose 0.9 per cent as commodity producers posted the biggest gains out of 10 groups in the s&P 500.

The s&P 500 fell 0.1 per cent to 1,261.80 at 10:32 a.m. new York time.

The benchmark gauge for American equities is heading for a 0.3 per cent gain this year. The Dow Jones industrial Average slipped 22.86 points, or 0.2 per cent, to 12,264.18.

“The Us economic data has been experiencing some bounce in the last quarter,” Kevin shacknofsky, who helps manage about $5 billion for Alpine Mutual Funds in new York, said in a telephone interview. “The negative is still europe. spain numbers show that it’s very difficult to have strong economic performance while you’re trying to deleverage.” equity futures erased earlier gains after spain said its budget deficit will reach 8 per cent of gross domestic product this year, more than the previous forecast of 6 per cent. Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers, said economic growth in the euro region “isn’t good” and the world economy is growing only in some Asian and

ident Barack Obama struggled over Us deficit cuts, and sank further amid concern that the euro-area’s debt crisis was threatening the global economic recovery. The s&P 500 fell as much as 19 per cent from April to its low for the year on Oct. 3. Data signaling that the world’s largest economy was weathering europe’s crisis helped the market rebound during the fourth quarter. The Us unemployment rate fell to 8.6 per cent in november, the lowest since March 2009, after lingering at 9 per cent or above for seven straight months.

U

BANK OF AMERICA

African countries.

‘DOWNSIDE PRESSURE’ China’s official xinhua news Agency reported the world’s secondlargest economy may face “downside pressure” next year, even though growth will be more than 9 per cent in 2011. The s&P 500 rose 1.1 per cent yesterday as data signaled the world’s largest economy is weathering the euro-area debt crisis. The measure has rallied 12 per cent in the fourth quarter.

Both the s&P 500 and the Dow Jones industrial Average are among the 10 best performers this year among 91 national indexes tracked by Bloomberg.

“The story of this year is really interesting outperformance of the Us equity market versus everything else,” Michael shaoul, chairman of Marketfield Asset Management in new York, which oversees $1 billion, said in a tele-

phone interview. “if you strip financials and materials out of the Us, you had a pretty good year.”

FINANCIAL STOCKS Financial shares have fallen the most (sPxL1) among the 10 main industries in the s&P 500 (sPx) this year, losing 18 per cent as a group through yesterday, followed by losses of 12 per cent in raw-material producers. Utilities, consumer-staples providers and health-care companies, among stocks considered the least sensitive to economic prospects, rose at least 10 per cent for the top gains.

The s&P 500 started the year with a rally, rising as much as 8.4 per cent to a three-year high by the end of April and extending its rebound from a March 2009 bear-market low to 102 per cent. The index tumbled throughout the summer as Congress and Pres-

Bank of America slid 0.4 per cent to $5.44. The bank is on track to be this year’s worst performer in the Dow as concern about mounting mortgage losses and a global economic slowdown weighed on the second-biggest Us lender. The 59 per cent decline through yesterday erased almost $80 billion of shareholder value at Charlotte, north Carolinabased Bank of America. JPMorgan Chase & Co erased 0.8 per cent to $33.17. Regions Financial Corp. (RF) dropped 1.2 per cent to $4.31, leading losses among financial stocks, which declined 0.4 per cent as a group. sears retreated 0.9 per cent to $32.61. Fitch downgraded the longterm default ratings of the retailer to CCC from B, after the company said this week it will close as many as 120 Kmart and sears full-line stores.

Freeport-McMoRan climbed 1.4 per cent to $37.06, pacing gains among raw material producers, which rose 0.2 per cent as a group. hecla advanced 0.9 per cent to $5.28, as prices of precious metals rose. Gold added 2 per cent to $1,571.40 an ounce, extending an 11th annual gain. BLOOMBERG

05

CORPORATE CORNER PTCl makes hajj dream of 40 employees come true

ISLAMABAD: Pakistan Telecommunications Company Limited (PTCL) has made a dream come true for 40 of its employees by sponsoring their hajj this year as part of its organisational commitment to provide incentives and encouragement to the good performing employees. “PTCL is proud to have played a central role in realising a lifelong spiritual and religious aspiration of our dedicated employees for performing hajj,” said senior executive Vice President, human Resource, syed Mazhar hussain, while addressing a reception to honour PTCL employees who have returned from hajj. PRESS RELEASE

usaid commits $90 million to strengthen agriculture sector ISLAMABAD: The United states Agency for international Development (UsAiD) has signed a cooperative agreement with Agribusiness support Fund (AsF) for implementation of a five year 90 million dollar Agribusiness Project. AsF, a locally registered development organisation with rich experience in the Pakistan agriculture sector, will implement the project in collaboration with international and domestic partners.

The overall goal of the UsAiD Agribusiness Project is to support improved conditions for broad-based economic growth, create employment opportunities and contribute to poverty alleviation through increase in competitiveness of horticulture and livestock value chains in partnership with all stakeholders. PRESS RELEASE

TradeKey ranks among 25 fastest growing entities in Pakistan KARACHI: TradeKey, a leading online business-tobusiness entity, has been included in the top 50 companies of All World’s Arabia Fast Growth 500 list and it is also ranked as one of the top 25 fastest growing companies of Pakistan. The announcement was made by the All World network in istanbul at the 2nd Global summit on entrepreneurship which was attended by over 2,000 successful entrepreneurs from across the world. Mr Junaid Mansoor, CeO of TradeKey, congratulated the team, partners and customers on this achievement and said that the achievement shows trust of our customers, employees and partners on the company. PRESS RELEASE

Pia fares to increase from Jan 1 KARACHI: Pakistan international Airlines in wake of the new taxes levied by the Civil Aviation Authority Pakistan (CAA) has increased the existing airport charges on airline ticket per passenger, effective from January 1, 2012. PiA spokesman said that these additional charges on tickets purchased before January 1, 2012 shall be collected in cash at the briefing counters before issuing the boarding cards; at all airports in Pakistan from sunday onwards. Passengers taking international flights traveling First/Business class will have to pay an additional amount of Rs1,720 while the economy class passengers traveling abroad will be charged Rs1,220/. similarly domestic travelers of all classes will pay an additional sum of Rs200 for traveling within Pakistan.

These new charges levied by CAA include embarkation fee, government airport tax, infrastructure development and security charges, etc. PRESS RELEASE

etihad airways offers reduced fares in 2012 LAHORE: etihad Airways, the national airline of the United Arab emirates, is offering reduced fares to its destinations all around the globe valid from 22 January till 30 June, 2012. Destinations offered include, Dubai/Abu Dhabi (Rs30,650), Manchester (Rs66,290), London (Rs65,100) and new York (Rs92,750), for all return tickets on Coral economy Class. For Pearl Business Class return tickets, the destinations include Dubai/Abu Dhabi (Rs65,650), Manchester (Rs224,470), London (Rs207,100) and new York (Rs281,740). These reduced rates will only be offered on bookings made from 29 December to 9 January 2012 and only limited number of seats will be made available. PRESS RELEASE

PDF Profit_Layout 1 12/31/2011 12:23 AM Page 6

Saturday, 31 December, 2011

06 Markets top 10 sectors

49% 09% 10% 04% 04%

Chemicals

01% 03% 01% 02% 17%

Real Estate Investment

Construction & Materials Electricity Banks

Fixed Line Telecommunication

Oil & Gas

Financial Services

Personal Goods

Equity Investment Instruments

STOCK MARKET HIGHLIGHTS Index 11347.66 2793.8 2537.44

KSE-100 LSE-25 ISE-10

Change -88.01 -39.57 -16.28

Volume 47,317,093 1,236,155 8,700

Market Value 1,606,196,053 24,796,239 285,659

top 5 perForMers sector wise

Major Gainers Company Nestle PakistanXD Siemens PakSPOT Wyeth Pak Limited Bata (Pak) Ltd. Fazal Textile

Open 3437.88 1007.35 800.72 804.22 234.86

High 3608.00 1057.71 820.00 820.00 246.60

Low 3379.00 1000.00 810.00 765.00 246.60

Close 3597.11 1056.75 819.95 818.40 246.60

Change 159.23 49.40 19.23 14.18 11.74

Turnover 2,303 924 1,005 814 130

5729.85 418.35 97.27 350.95 138.12

5725.00 419.89 97.45 351.97 139.45

5460.00 411.50 92.41 345.00 134.00

5565.80 412.50 92.70 346.45 134.60

-164.05 -5.85 -4.57 -4.50 -3.52

8 46,627 2,234,705 306,304 617,242

Volume Leaders NIB Bank Ltd 1.72 TRG Pakistan Ltd. 1.14 Habib Sugar Mills 23.06 Azgard Nine 3.08 P.T.C.L.A 9.98

1.88 1.45 22.75 3.19 10.74

1.65 1.12 21.91 2.75 9.92

1.73 1.22 21.91 2.85 10.39

0.01 0.08 -1.15 -0.23 0.41

8,139,894 7,730,767 4,732,621 3,195,788 2,825,732

Bullion Market Gold 24K Gold 22K Silver (Tezabi) Silver (Thobi)

Per Tola (PKR) 52,887.00 51,608.00 949.00 1025.00

Per 10 Gm (PKR) 45,390.00 44,245.00 814.00 880.00

Per Ounce US$ 1,569.00 – 35.05 –

hiGh

lOw CuRRenT

420.50 109.55 22.80 6.78 84.74

416.00 108.00 22.52 6.65 82.62

ChanGe

vOlume

Oil and Gas Attock Petroleum Attock Refinery Burshane LPG Byco Petroleum Mari Gas Co.

420.02 109.17 22.52 6.72 83.42

Agritech Limited Agritech(PREF)(R) Arif Habib Co SD Clariant Pakistan Dawood Hercules

15.55 1.01 26.97 151.00 37.70

-0.27 -0.61 0.00 0.03 -0.68

16,299 152,085 101 60,252 4,422

18.50 1.13 8.24 32.91 10.49

16.50 0.85 27.00 151.50 39.58

16.40 0.40 25.95 149.00 38.00

16.44 0.64 26.70 149.30 39.58

0.89 -0.37 -0.27 -1.70 1.88

1,800 16,880 1,559,547 1,265 411,564

2.54 50.99 6.75 18.82 1.41

18.75 1.12 8.43 34.55 10.50

18.15 1.10 8.00 31.70 10.03

18.74 1.10 8.09 34.46 10.47

0.24 -0.03 -0.15 1.55 -0.02

10,566 8,000 4,334 173,937 5,502

27.23 3.75 42.06 6.99 79.81

Ados Pakistan AL-Ghazi TractorsXD Bolan Casting K.S.B.Pumps Millat Tractors Ltd.

89.9951 138.8174 1.1565 116.2646

5.28 176.55 28.50 24.51 365.22

2.60 51.00 6.80 18.95 1.59

2.12 50.99 6.45 18.70 1.41

2.32 50.99 6.75 18.83 1.41

-0.22 0.00 0.00 0.01 0.00

820,325 26 1,502 419,090 1

US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar

International Oil Price WTI Crude Oil

Sell 90.30 117.09 139.45 1.1609 89.62 11.65 24.62 24.09 93.07

Brent Crude Oil

Atlas Battery Ltd. Atlas Honda Ltd. Bal.Wheels Dewan Motors Exide (PAK)

162.00 125.98 23.70 1.69 159.60

27.85 3.70 43.00 6.99 81.00

27.10 3.60 41.30 6.90 80.00

27.23 3.70 42.85 6.99 80.74

0.00 -0.05 0.79 0.00 0.93

326 7,012 5,515 47 2,100

5.80 184.75 29.92 25.73 369.00

4.70 176.00 28.50 24.51 364.00

165.00 125.98 24.88 1.68 161.30

163.45 125.00 23.70 1.62 159.60

110.49 111.43 150.02 150.00

5.31 180.75 28.50 24.51 366.04

$108.01

164.45 125.98 23.70 1.62 159.60

109.00 111.18 145.05 145.58

17.90 92.48 55.99 39.83 11.00

18.90 92.49 55.99 39.00 11.80

AL-Abid Silk Mills Hala Enterprise Hussain Industries Pak Elektron Ltd. Tariq Glass Ind.

23.34 7.00 3.00 3.55 8.30

24.50 7.00 3.00 3.65 8.49

Amtex Limited Azam Textile Azgard Nine Babri Cotton Bannu Woollen

1.20 1.11 3.21 8.41 14.85

1.25 1.60 3.26 8.50 14.37

AHCL-DEC AHCL-JAN ANL-DEC ATRL-DEC ATRL-JAN

27.00 27.47 3.25 109.50 110.62

26.92 27.10 3.20 109.25 110.50

Abbott Laboratories Ferozsons (Lab) Ltd. GlaxoSmithKline Pak. Highnoon (Lab) IBL HealthCare

99.95 75.44 66.08 30.23 13.76

100.00 78.00 67.00 30.23 14.00

0.03 4.20 0.00 0.00 0.82

3,131 707 8,600 99 4,390

2.45 0.00 0.00 -0.07 0.00

1,460 5 300 27,809 1

0.69 -4.44

1,170 203

P.T.C.L.A Pak Datacom Ltd Telecard Limited Wateen Telecom Ltd WorldCall Telecom

10.00 34.50 0.80 1.75 0.85

18.90 92.49 55.99 39.00 11.00

1.00 0.01 0.00 -0.83 0.00

10,491 7 26 2,000 10

24.50 6.90 3.00 3.40 8.00

24.50 7.00 3.00 3.59 8.12

1.16 0.00 0.00 0.04 -0.18

500 111 100 38,312 4,396

1.19 1.11 3.08 8.41 14.26

1.24 1.11 3.11 8.41 14.26

0.04 0.00 -0.10 0.00 -0.59

103,150 1 314,901 1 1,510

26.05 26.40 3.11 108.30 109.31

26.73 26.93 3.17 108.91 109.94

-0.27 -0.54 -0.08 -0.59 -0.68

88,500 94,000 1,500 60,000 61,000

100.00 75.44 66.68 30.23 14.00

0.05 0.00 0.60 0.00 0.24

1,361 1 1,508 20 5,275

99.50 75.44 66.00 29.25 13.70

10.10 34.50 0.83 1.85 0.89

9.96 34.00 0.75 1.75 0.83

10.00 34.50 0.80 1.75 0.84

0.00 0.00 0.00 0.00 -0.01

140,195 101 42,806 26,613 214,669

0.31 34.17 0.64 1.59 15.51

0.34 34.33 0.68 1.59 15.51

0.22 34.06 0.61 1.53 14.62

0.27 34.11 0.63 1.59 15.51

-0.04 -0.06 -0.01 0.00 0.00

30,012 417,944 47,381 41,119 100

56.41 10.01 4.86 11.20 28.10

56.50 10.20 4.96 11.34 28.20

54.99 9.85 4.83 11.18 27.80

55.34 9.92 4.93 11.20 27.88

-1.07 -0.09 0.07 0.00 -0.22

16,622 80,549 331,096 102,692 60,345

Banks Allied Bank Ltd Askari Bank B.O.Punjab Bank Al-Falah Bank AL-Habib

OPen

hiGh

lOw CuRRenT

ChanGe

vOlume

Non Life Insurance 18.40 88.00 53.20 39.00 11.00

Electricity Genertech Hub Power Co. Japan Power K.E.S.C. Kohinoor Energy

symBOl

Adamjee Ins Central Ins Co. EFU General Ins Habib Insurance IGI Insurance Ltd.

44.42 50.02 36.21 9.85 43.38

45.70 52.50 36.05 10.29 43.50

43.30 50.02 36.00 9.85 42.74

45.29 50.02 36.00 9.85 43.46

0.87 0.00 -0.21 0.00 0.08

102,889 50 1,804 100 2,200

13.50 1.40 65.53

14.50 1.40 65.53

0.00 0.00 0.00

2 1 157

0.34 15.17 13.59 0.70 2.54

-0.01 0.27 -0.08 0.05 -0.01

1,523 6,608 12,450 500 4,006

Life Insurance American Life East West Life Assur EFU Life Assur

14.50 1.40 65.53

14.50 2.34 68.80

Financial Services AMZ Ventures A Arif Habib Investmen Arif Habib Ltd. Dawood Equities F. Nat.Equities

0.35 14.90 13.67 0.65 2.55

0.35 15.60 13.60 0.70 2.75

0.30 13.90 13.28 0.70 2.37

Equity Investment Instruments 1st.Fid.Leasing Mod AL-Noor Modar B.F.Modaraba B.R.R.Guardian Cres. Stand.Mod

1.58 4.50 4.25 2.06 0.49

1.60 4.30 4.00 2.15 0.50

1.58 4.10 4.00 2.06 0.42

1.58 4.30 4.00 2.06 0.50

0.00 -0.20 -0.25 0.00 0.01

7,490 10,239 1,398 100 4,815

13.00 30.75 35.40 12.53 64.66 1.12 63.50 24.50 3.41 14.94 8.02 23.00 26.00 13.20 0.01 1.85 9.92 0.76 1.76 0.94 15.67 19.25 70.75 62.00 1.20

13.00 30.76 35.40 12.71 65.99 1.22 63.52 24.50 3.49 15.94 8.20 23.00 26.20 13.40 0.01 1.97 10.39 0.80 1.79 1.00 15.71 19.29 74.80 62.39 1.30

0.23 -0.24 0.00 -0.04 -0.91 0.08 -0.79 0.00 -0.06 0.00 0.19 0.00 0.00 0.99 0.00 -0.03 0.41 -0.03 -0.01 0.03 -0.28 -0.26 0.52 2.39 -0.01

2,191 1,010 101 5,502 1,703 7,730,767 1,133 57 18,608 271 11,602 500 200 3,107 115 66,078 2,825,732 28,642 61,650 834,474 56,276 4,195 13,748 3,500 137,989

Miscellaneous Century Paper Pak Paper Prod.

Security Paper P.N.S.C. Pak.Int.Con. SD TRG Pakistan Ltd. Murree Brewery AL-Abid Silk Mills Pak Elektron Ltd. Singer Pakistan Tariq Glass Ind. Grays of Cambridge Shifa Int.Hospitals Media Times Ltd Media Times Ltd(R) P.I.A.C.(A) P.T.C.L.A Telecard Limited Wateen Telecom Ltd WorldCall Telecom Sui North Gas Sui South Gas EFU Life Assur Jubilee Life In Pace (Pak) Ltd.

12.77 31.00 35.40 12.75 66.90 1.14 64.31 24.50 3.55 15.94 8.01 23.00 26.20 12.41 0.01 2.00 9.98 0.83 1.80 0.97 15.99 19.55 74.28 60.00 1.31

13.00 31.85 36.20 13.00 68.85 1.45 64.00 25.48 3.50 15.94 8.60 23.00 27.25 13.41 0.99 2.10 10.74 0.80 1.85 1.07 15.86 19.88 76.00 62.75 1.39

Mutual Funds Fund

$99.96

Adam Sugar AL-Abbas Sugur AL-Noor Suger Mills Baba Farid Bawany Sugar

Fixed Line Telecommunication

Beverages Murree Brewery Co. Shezan Int’l

vOlume

Pharma and Bio Tech

Automobile and Parts Buy 89.30 114.72 136.96 1.1437 86.80 11.35 24.28 23.79 89.91

ChanGe

Future Contracts

General Industrials Cherat Packaging ECOPACK Ltd Ghani Glass Ltd MACPAC Films Packages Limited

lOw CuRRenT

Personal Goods

Construction and Materials Al-Abbas Cement Attock Cement Cherat Cement D.G.K.Cement Dadabhoy Cement

hiGh

Household Goods

Industrial metals and Mining Crescent Steel Dost Steels Ltd. Huffaz Seamless Pipe Int. Ind.Ltd. Inter.Steel Ltd.

OPen

symBOl

Food Producers 419.75 108.56 22.52 6.75 82.74

Industrial Engineering

Interbank Rates US Dollar UK Pound Japanese Yen Euro

OPen

Chemicals

Major Losers UniLever Pak Ltd. Attock Petroleum Engro Corporation Pak Oilfields Ltd. MCB Bank Ltd

symBOl

Alfalah GHP Cash Fund Askari Islamic Asset Allocation Fund Askari Islamic Income Fund Askari Sovereign Cash Fund Atlas Income Fund Atlas Islamic Income Fund Atlas Money Market Fund Atlas Stock Market Fund Crosby Dragon Fund

Offer 501.2900 114.7196 103.6501 100.6900 519.3500 519.0900 516.9700 453.1500 82.9800

Repurchase 501.2900 111.8516 102.6136 100.6900 514.2100 513.9500 516.9700 444.2600 81.3500

nav 501.2900 111.8516 102.6136 100.6900 514.2100 513.9500 516.9700 444.2600 81.3500

Fund

Offer

Repurchase

HBL Money Market Fund HBL Multi Asset Fund HBL Stock Fund IGI Income Fund IGI Stock Fund JS Principal Secure Fund I JS Principal Secure Fund II KASB Cash Fund

100.2768 87.0103 97.6745 101.8987 112.3545 121.5000 104.1200 0.0000

100.2768 85.3042 95.2922 100.8898 109.6141 111.5200 96.5000 0.0000

nav 100.2768 85.3042 95.2922 100.8898 109.6141 117.3900 101.5800 100.1087

PDF Profit_Layout 1 12/31/2011 12:23 AM Page 7

It is unfortunate that the Pakistani advertising business which, around 2007, was growing at 30 to 35 per cent, is today growing only at 10 to 1 per cent

Friday, 30 December, 2011

08

news

Orient-mcCann erickson CeO, syed masood hashmi

Govt fails to find solution for expensive fuel mix ISLAMABAD

e

AMER SIAL

Ven after showing some forward movement on the power sector reforms, the government still remains at loss on how to address the sphinx like riddle of changing the expensive fuel mix that not only holds the economy hostage but also grips the financial sector, halting possibility of new investment in the energy sector. A complex maze of bureaucracy, including ministries of finance, water and power and petroleum and their numerous allied departments, though facing a similar problem, have failed to adopt a joint strategy to be implemented on war footing to come out of the quagmire. Despite a 75 per cent increase in power tariff during last two fiscal years, the woes of consumers are far from over as they are persistently faced with long black outs.

During the last three decades the energy mix has changed from 70 per cent hydel in 1980s to 30 per cent in

2000s, with enhancement of share of thermal generation to 70 per cent.

The expensive thermal generation, resulting from an increase in furnace oil prices from Rs34,000 tonnes two years back to Rs74,000 per tonne at present have caused numerous woes for consumers. Whatever steps government takes to address power outages in the short term will lead to abnormal increase in power tariff for consumers due to high fuel costs.

Pakistan has not managed to undertake any mega hydel power project after the completion of Tarbela hydropower project. Failure to evolve political consensus and no decision on public sector investment in new mega hydel power projects have resulted in the present crisis. even though friendly countries and international financial institutions (iFis) have shown commitment to finance the most feasible hydropower project of Kalabagh dam, the government has evaded taking a decision. its priority remains Diamer Bhasha dam, which the donor community is reluctant to finance.

Coal and wind power could be tapped in the short term but the lengthy bureaucratic procedures have delayed new investment. Government has notified a feed-in tariff for the wind projects but still matters for expediting land allocation in coastal areas need to be settled. Thar coal potential remains untapped in the presence of circular debt as foreign investors and banks are reluctant to invest in the projects without addressing the root cause. every month a massive Rs25 billion piles up in government’s account due to the power differential subsidy and massive line losses. The matters are made worse by the litigation which has withheld passing on the fuel price adjustment to consumers and increasing the 14 per cent increase in power tariff. in this situation, even the interested investors for LnG imports were having second thought as it would be primarily used for power generation. Government has ended the administrative control of Pakistan electric Power Company (PePCO)

over the power sector but the Central Power Purchasing Agency (CPPA) will take months for it to function. same is the case with bringing professional management at the power distribution companies (DisCOs), as despite efforts CeOs for DisCOs were not finalised during the current year.

The most worrying aspect is the professional boards brought in for DisCOs with the claims to enhance their efficiency were unable to perform their policy making task on being unaware of their powers.

All these failures have at least created awareness in the government of having professionals in the ministries for policy making and implementation. Creation of specialised technical wings in the ministry of water and power and ministry of petroleum have been approved and if competent professionals were appointed there are chances that the government may start to move in the right direction even though the ultimate aim of energy security would still require years if not decades in future.

CPI inflation likely to rise by10.6pc kArAChI

C

STAFF REPORT

OnsUMeR Price index (CPi) inflation for the month of Dec-11 is likely to post a 10.6 per cent YoY rise. That translates into a 0.08 per cent MoM rise compared to 0.29 per cent MoM in nov-11. ‘We earlier had projected that ongoing price pressure will rest upon non-food prices, while food price may slide going forward,’ said saad Khan at AhL, adding that the decelerating sensitive Price index (sPi) inflation depicts the easing food price pressure. Whereas the rising trend witnessed in non-food and rigid growth in core (nFne) prices averaging 0.8 per cent and 0.94 per cent MoM during 5MFY12 validates our contention, he added. he further said we also tended to note that December happens to be a peculiar month, in a sense, as compared to the rest of the months it experienced monthly deflation. Based on a 10 year average, the monthly inflation declined by -0.11 per cent, with July being the highest month registering on average 1.2 per cent MoM inflation.

in the recent Treasury Bill auction held on 28th of Dec-11, the cut-off yields of 3M and 12M tenure bills rose by 18bps (+11.83per cent) and 10bps (+11.90per cent) respectively. The rising yields in our view do not come as a surprise, given market anticipation of yields crossing the 12 per cent mark in the last auction. sBP duly rejected all the bids on all three tenures while in the follow-up of that auction result, we have seen secondary market yields trading above the 12 per cent benchmark rate.

The CPi inflation came in milder than expectations during the 5MFY12, registering an11.12per cent YoY rise on average, keeping the real interest rates in the positive territory. however despite this, the treasury yields have been pacing up. historically we were of the view that treasury yields lag behind inflation, which when taken in the current context seems to be completely the opposite case. so far the current pattern seems that the treasuries are implicating a higher inflation going forward.

‘We do not think the treasuries are pricing in higher inflation expectation, at least in the given current mild inflationary environment. We think the cur-

rent rising pattern in treasury yields are in fact based on the higher public sector borrowing requirement,’ he added. As long as public borrowing remains on the higher side there is always a tendency for yields to trend upwards, on account of liquidity constraints. so far the net domestic assets (nDA) have posted a growth of 7.1 per cent (16th Dec-11) FY12TD with schedule banks being the largest financier of this borrowing requirements.

Although sBP kept the discount rate at pause in the last monetary policy statement announced back in nov-11, but excessive government borrowing requirements combined with further upside to inflation foreseen in months ahead, interest rate is likely to remain under pressure and treasuries are likely to sell at a record. having said that we think policy rate is likely to stay on a hold throughout FY12, but considering the last monetary policy stance we sense that any adjustments in rate would come in line with the outlook on external accounts, he said, adding that we suspect deteriorating external accounts may warrant the rate re-tightening, sooner than initially envisaged.

Govt reduces fee for CnG stations and Petroleum storage licenses CnG stations directed to fully cooperate with aPCnGa g

ISLAMABAD STAFF REPORT

G

OVeRnMenT has reduced the safety checking fee for CnG stations and petrol pumps for strengthening the mechanism of checking installation of substandard CnG kits and cylinders in vehicles. it has also appointed third party inspectors for implementing the safety mechanism, while extending the date for depositing the fee by one month to January 31, 2012.

A statement issued by the ministry of industry said that in view of demand of ACnGA and petroleum companies and other stakeholders regard reduction in various fees charged by the Department of explosives (DOe) has revised the fee structure.

Under the revised fees, Rs500 application scrutiny fee and Rs5,000 tyre puncture shop has been reduced to nil, kit conversion shop fee of Rs10,000 has been reduced to Rs3,000, CnG storage license reduced from Rs20,000 to Rs10,000. While the revised fee to be charged by third party inspectors for CnG filling station testing reduced from Rs40,000 to Rs25,000 and re-inspection from Rs20,000 to Rs5,000. A spokesman of OGRA said a meeting was chaired by Chairman OGRA and attended by Chairman APCnGA, officers of hDiP, OGRA and DOe was held to discuss various preventive measures to avoid occurrence of fire incidents in CnG fitted public transport. it was informed that Chairman APCnGA had submitted plan

for certification of vehicles at authorised workshops and CnG stations for immediate implementation to eliminate refueling of unauthorised and substandard CnG converted public transport vehicles buses, mini-buses, vans, mini-vans. OGRA directed APCnGA to immediately nominate their diploma holders for one week training at hDiP as already conveyed to them by hDiP. APCnGA was also directed to immediately stop refueling of vehicles buses, cars, wagons, vans where cylinders are installed beneath the passenger seats or on roof top as such installation is in violation of the safety code of practice. it was informed that the licence of CnG stations will be cancelled where station was found violating the refueling procedure and standard code of practice appended with CnG Rules, 1992. APCnGA, hDiP and DOe will continue to conduct surprise inspections of CnG stations for strict compliance of the conditions of the licence to ensure public safety. in case of noncompliance, defaulter stations shall be disconnected and punitive action shall be taken against violators under the law. CnG licensees were directed to fully cooperate with APCnGA for strict compliance to ensure public safety failing which, the marketing licence granted to them by OGRA will be revoked. OGRA has disconnected 13 CnG stations which were found violating the refueling procedure and standard code of practice as a part of ensuring public safety at large.

Fiscal indiscipline, energy crises mar economy in 2011 SBP pumps Rs175b kArAChI

T

STAFF REPORT

he country’s 2011 economic story swung in tandem with the changing dynamics of international commodity prices and its subsequent impact on the external accounts, viewed the analysts.

The first half, ranging between January and June, was marked with optimism as favourable cotton prices with able support of work remittances reflected positively on the country’s dollar reserves, while the second half, July to December, was about adverse commodity prices shock (firm oil prices and declining cotton prices) coupled with subdued support from the financial account.

Resultantly, the country’s foreign exchange reserves rose to all-time high of $18.3 billion by mid-July while easing in the later half to around $16.8 billion (midDec 2011). “Fiscal indiscipline and energy shortage also continued to mar country’s economic health,” said nauman Khan of Topline securities. These factors, the analyst said, were subsequently reflected in the central bank’s monetary policy stance that instigated the monetary easing

process (slashing policy rate by 200bps in 2-stages), but have recently halted the process as weakness on the external account has emerged. similarly, he said, the rupee remained stable against Us dollar in the early part of 2011 while it came under considerable strain in the later part. Khan said with FY12 average inflation to fall below government expected target of 12 per cent with comfortable external account position during first half on account of favourable commodity prices and rising remittances, central bank initiated the process of monetary easing to give the much-needed impetus to economic growth. staggered in two stages, the sBP slashed the policy rate by 200bps during JulyOctober 2011. however, the regulator halted the process of monetary easing in the last Monetary Policy Decision as weakness in the external account emerged coupled with higher than expected fiscal deficit. in 5MFY12, the country’s current account deficit stood at $2.1 billion, already crossing the full year target set by government initially, while financial account has not provided much support. subsequently, the country’s dollar reserves have fallen from all-time high of $

18.3 billion in mid-July to $16.8 billion (mid-December 2011). On the fiscal side, the deficit is expected to stand above 6.5 per cent of Gross Domestic Product (GDP) as against the initially envisioned target of 4.0 per cent of GDP. in 2011, the 6-months treasury bills declined by 146 basis points (bps) to close the year around the level of 11.9 per cent, but went down to trade around the levels of 11.6 per cent in late november. The yields on 10-year Pakistan investment Bonds (PiBs) reduced by 114bps to stand at 12.99 per cent, during the period under review with low of 12.0 per cent registered during the month of november. similarly, Khan said, rupee remained stable during the initial half of the year on account of strong external account position. “however, emergence of weakness in the external account along with sBP restoring the forward cover facility and impact of iMF’s loan repayment of $1.2 billion on forex reserves exerted pressure on the PKR towards the later half of the year,” he viewed.

Overall, the analyst said, the local currency depreciated by 4.9 per cent against the greenback in 2011 with 4.5 per cent devaluation coming in 2h2011 alone.

in money market kArAChI

C

ISMAIL DILAWAR

enTRAL bank Friday pumped around 175 billion into the banking system to avoid what the market players believe a potential liquidity crunch. Banking system is said to have been under immense pressure due to ever increasing budgetary borrowings of the cash-strapped central and provincial governments which, according to state Bank data, have broken all the previous borrowing records.

Central bank figures show that during July-Dec 16 (FY2012) the fundsstarved government raised over Rs846 billion from the banks leaving little or no liquidity for the growthoriented private sector. Of the total Rs846.459 billion, government borrowed Rs222.360 billion from state Bank and a huge sum of Rs624.098 billion from the scheduled banks that, in view of the prevailing

recessionary climate and the resultant upsurge in their bad debts, are prioritising the risk-free government securities for investment. This pressing demand from public sector borrowers, however, is sucking much of the liquidity available in the banking system, a problem that is dealt with by state Bank in the face of weekly money injections. Friday saw the regulator injecting Rs174.950 billion into the rupee-scarce banking system through reverse repo open market operations in the Market Treasury Bills (MTBs) and Pakistan investment Bonds (PiBs) of 7-day maturity at 11.62 per cent annual rate of return. Quotation range for the current injection was also increased to 11.81 and 11.50 per cent. Total amount offered by the banks was Rs223.200 billion, but sBP accepted bids valuing Rs174.950 billion. “Total Amount offered at 11.62 per cent was Rs33,500.00 million, out of which sBP accepted Rs24,650.00 million on pro-rata basis,” state Bank reported.