BULLS RULE KSE - Weekly Report

Volumes improved as 756 million shares exchanged hands in the overall market during the week
KARACHI: Karachi stock market went through a bullish week as its main index ended near 2 per cent up mainly on decline in PIB yields, SC decision on Sharif brothers and rising international oil prices however deteriorating law and order situation remained a concern for the market participants.
The benchmark KSE 100-Index rose by 130 points or 1.82 per cent to end at a level of 7,276 points.
"Buying activity witnessed as PIB yields fall by 61 basis points in 10 years, tenor indicating falling interest rate trend. Bullish activity remained in oil sector as international oil prices cross 63 USD" said Ahsan Mehanti, CEO Shehzad Chamdia Securities.
Ahsan added that expectations of record PSDP allocation of over Rs 600 billion in Federal Budget 2009-10 invited investment in cement sector.
Sharif brothers eligibility for elections, gains in international equity markets & rise in oil prices played a catalyst role for positive activity in the market.
Moreover, investors remained positive on oil marketing companies due to limited fall of local petroleum prices. Gas line deals with Iran taken positive for gas marketing companies.
Week started with a minor gain of 27 points on Monday as investors took position at attractive levels but the participation of investors was limited due to strike call in the city, index moved in a limited range where at a moment during intra-day trading it touched its lowest level of the week of 7,125 points. Mixed activities stayed during the next two days also, where index closed 3 and 12 points up respectively on Tuesday and Wednesday.
On Tuesday there was uncertainty on the Supreme Court's decision regarding Sharif brother's eligibility but on the next day market saw some positive activities during intra-day trading on SC decision but market witnessed pressure due to Lahore incident.
Decline in PIB yields played a catalyst role for the bullish activity in the market on Thursday where the index gained 99 points, hopes of early end of the military action was also a factor for the bullish move.
Market continued to show positive activities on Friday where during intra-day trading it touched its highest level of the week of 7,368 points but as it was the last trading day of the week investors preferred to book profits at higher levels and market ended with a minor loss of 11 points below 7,300 levels.
Despite some positive activities in the market, there was net selling by the foreign investors as according to the figures released by NCCPL there was net foreign selling of around $4.15 million during the week.
Volumes too were improved as 756 million shares exchanged hands in the overall market during the week which is 177 million shares more as compared to a turnover of 579 million shares a week earlier.
Out of total 383 active issues, 215 ended positive and 145 negative while 23 issues remained unchanged.

Business Updates

KSE directed to establish unified trading platform.

ISLAMABAD (June 01, 2009): The Competition Commission of Pakistan (CCP) has directed Karachi Stock Exchange (KSE) to establish a Singular Unified Trading Platform for the central execution of the trading orders of all the stock exchanges within six months period.

Big investment potential in banking sector: Governor SBP

Governor of State Bank of Pakistan (SBP), Syed Salim Raza, has said that Pakistan’s banking system has great potential for further investment. He was speaking at a ceremony held here for the launching of Silkbank Limited, formerly Saudi Pak Commercial Bank Limited, says a SBP statement. Raza said the performance of country’s financial sector, which is largely dominated by banks, has been outstanding throughout the current economic situation. He stated that the banking sector has over the years nurtured itself in a way that it is able to withstand some of the shocks it has faced in the last 18 months or so. “The banking system is on strong footing and has long term potential, a feature which has served to attract a substantial amount of Foreign Direct Investment (FDI) in the sector, with established global financial institutions now active participants in the domestic financial sector,” the Governor SBP said.

Small investors should stick to mutual funds: NIT

This was stated by the National Investment Trust chairman, Tariq Iqbal Khan, while briefing reporters on the capital market and the role of mutual funds in its development.

He said that the fundamentals of economy had improved, but the capital market was overly-depressed due to political and law and order situation.

He pointed out that mutual funds and bonds market were more favoured instruments of investment in developed economies.

For example, he said, against bank deposits of $66.9 billion in Pakistan, the net assets managed by mutual funds were equivalent to $2.75 billion, which was only 4.4 per cent of the bank deposits.

India had bank deposits of $751.8 billion and the net assets under the management of mutual funds were to the tune of $77.5 billion or 10.3 per cent of the bank deposits.

The US had bank deposits of $7363.7 billion while net assets managed by the mutual funds were $9248.9 per cent or equivalent to 125.6 per cent of its bank deposits.

He said out of 107 mutual funds operating in Pakistan 86 were open-end mutual funds and 21 were closed-end mutual funds. Seven pension funds were among the open-end mutual funds.

Currently, he said, the capital market of Pakistan had capitalisation of $25.7 billion against $602.4 billion in India and $13,886 billion in the US. Net assets of mutual funds in Pakistan’s capital market were to the tune of $2.75 billion equivalent to 10.7 per cent of the market capitalisation, he added.

Against this, the net asset value of Indian capital market was $77.5 billion equivalent to $12.9 billion of the market capitalisation.

The net assets of the US capital market were $9248.9 billion which was 66.6 per cent of market capitalisation.

He dispelled the general perception that some institutions, including the NIT, intervened in the in the falling capital market on the instructions of the government to give it a boost. He said the institutions act independently and take investment or selling decisions in the larger interest of investors.

He said this was the reason that the NIT had constantly been outperforming average growth at the Karachi Stock Market.

He said in depressed times the NIT losses were always lower than the general decline in the capital market.

He said institutions did intervene in the capital market to stabilise it in the larger interest of investors.

He said almost all mutual funds operating in Pakistan were being run by highly qualified professionals.

He said that the NIT had about 38 per cent share of the total open-end funds of Pakistan and 80 per cent of the open-end equity funds. The trust, he said, had investment in around 450, out of total 651 companies listed on KSE.

Value of NIT’s fund invested in the market at current price levels was around Rs72 billion. He said that the NIT was the single largest institutional investor in the KSE. Presently, he said that the NIT had over 55,000 unit holders, who collectively hold 1.9 billion NIT units.

Only the cash-rich may play stocks!

The total number of investor account in the Central Depository Company (CDC) currently stands at 0.05 million while those in the sub-accounts aggregate 0.25 million. In a population of 170 million, it would be one in a thousand that dabble in stocks. Fruitless to compare that with one in four persons that visit the Dalal Street in Mumbai or every second American who invests his money and future in stocks.

Markets all through the world were in melting pot in the year 2008, but there are indications of recovery. The KSE, which plunged by a historic 60 per cent during the year, the 100-share index tumbling from 15,760 to 4,800, pushed hundreds of middle class households to the brink of poverty. The injured were spared the agony of waiting for Probe reports as most people agreed that the greatest sufferers were those who bought stocks on borrowed money.

That brought on to surface the simmering revolt against the ‘badla,’ named as CFS and further glamourised into CFS Mk-II by the previous SECP chairman. Haji Ghani Haji Usman, who was one of the two major brokers who spearheaded the successful movement by more than 100 brokers to the end to ‘badla’ is aghast at the regulators’ dilly dallying on replacing the outgoing leverage product with another one with better features.

He says that a consultative committee was set up to review and release a new derivative product in the market, but after four meetings and a passage of two weeks, the public is at a loss to know, how far the progress has been made.

‘The Securities and Exchange Commission of Pakistan must ask the committee to come up with the alternative leverage product within 10 days,’ he says.

The consultative committee of 10 members has received much flak for what most believe to be its slow progress. But Aftab Diwan, who heads the committee, says that its consultations with the SECP on a new leverage product was only a part of the job. ‘The consultative group has been assigned the task of looking at all aspects of the capital market, including risk management and to discuss them with the SECP,’ says Mr Diwan. ‘Discovering a new leverage product is primarily the job of the stock exchanges,’ he says in defence.

SECP chairman Salman A Shaikh could not be reached, but spokesman for the apex regulator shifted the responsibility on the committee.

‘We are waiting for recommendations of the committee,’ said Imran Ghaznavi and added that the SECP would look into the features of the new product when one is placed on the table.

No one at the stock exchange, among the committee members or at the SECP would commit on a firm date for the launch of a new product.

Mr Diwan explained that all stakeholders were being consulted, including the Mutual Fund Association of Pakistan; the Association of Insurance Companies; Modarabas; financial institutions and the bourses. He said that reaching consensus would obviously take a little while.

The market pundits call the matter of new leverage product a ‘grey area.’ There was, however, a general agreement on finding a derivative product that stands up to ‘International best practices.’ But why was a quick introduction of the new leverage product of such paramount importance?

A small investor who had lost all of cash, house and a shop in the stock debacle of 2008, expressed his grievance.

‘During the bloodbath, CFS or ‘badla’ was believed to have caused the greatest amount of hurt,’ he said. That leverage product was scrapped, but small investors who would still like to trade with the hope of recovering of some of their losses, had been deprived of a new derivative product.

‘From the depth of 4,800, the KSE-100 index has clawed up 15 per cent or by around 2,400 points,’ he says. But because of the absence of leverage, only the deep pocket investors, who can take delivery on cash, are able to reap the riches. There is lot of heart burning among leverage players, who stand aside, cast out as the ugly ducklings. But some believe that as volume of trade keeps evaporating to 100 million shares a day from an average of 250 million in the first quarter of last year, the impact might be more widely felt.

Some prophets of doom even suggest cornering of scrips by ‘broker cartels,’ followed by lower locks and the fall of the market into another crisis.

Top Business News

SAEP demands salary raise before June 30th.

President Society of Aircraft Engineers Pakistan (SAEP), Shoukat Jamshed, in a letter to MD PIA has demanded that Executive Committee of the SAEP has decided that prior to the settlement of the working agreement, the core issue of salary ratio between pilots and engineers i.e. 100:55 between average salary of a pilot and average salary of an air craft engineer may be settled down before June 1, 2009 and the remaining parts of the agreement be finalised before June 30, 2009.
As per letter, their demands for salary and better working conditions were long lasting but management was paying no heed towards the issue.
The letter further speaks that minutes-1 of the meeting held on 4th of July, 2008 vide Minutes-I refer HO: HRA & C/102/P&P, in which promise was made to carry out a quality study of the regional airlines regarding the salary ratio of pilots to aircraft engineers and the same was to be completed within 60 days. So far no further progress has been made on this issue. Management in the past also agreed and promised to settle down the issue before March 2008, vide Minutes-I refer HO-HR & A / 111 / HRM, Dated 23 Nov, 2007 and Admin Order No. 15/2007 dated 19th Dec 2007. Moreover, similar understandings were made vide MoUs signed between SAEP and the then management. First MoU was signed between SAEP and management on 24th May 1989; second on 17th October 1996; third on 30th Nov, 2000 and fourth Admin Order No. 05/2001. Referring to Admin Order No. 05/2001, adhoc ratio payment to serving aircraft engineers towards partial maintenance of ratio of 100:55 between the emoluments of pilots and aircraft engineers was made as an acceptance for the subsistence of this ratio. Furthermore, due to the increase in guaranteed flying hours payment (from 50 to 70) of pilots, heavy rise in salary will further widen the gap between existing salary ratio causing momentous strife among the SAEP members.

IMF projects GDP at 3.5pc, single digit inflation in '10.

The International Monetary Fund (IMF) Thursday projected Pakistan’s Gross Domestic Product (GDP) growth at 3.5 percent in financial year 2009-10, saying that the inflation would come down to single digit.
The IMF report on “Regional Economic Outlook: Middle East and Central Asia,” released on Thursday, said that the inflation would come down to 11.9 percent during 2008-09 and further slide to single digit at 7.5 percent in Fiscal year 2009-2010.
The report projected GDP growth at 2.5 percent during 2008-09 which was about 6 percent in 2007-08.
Speaking at the launching ceremony of the report here, IMF Resident Representative Pakistan, Middle East and Central Asia Department, Paul Rose observed that the budget deficit during 2009-10 would remain 4.6 percent.
He said that Pakistan’s Large Scale Manufacturing sector had to face shortfall in exports due to decreasing demand owing to global recession.
He was of the view that if the global recession continues Pakistan economy would be exposed to some risks including further decline in exports and private capital flows and decline in workers’ remittances.
He said that consolidating macroeconomic stability and ensuring protection of vulnerable groups should be policy priorities of the government adding that it needs to take care of the deprived sections of the society.
He said that the vulnerable groups could be protected through strengthening the social safety net by improved targeting of the poor under the Benazir Income Support Programme.
He maintained that the unemployment rate is likely to increase in Pakistan, as the direct investment in the country and foreign remittances have gone down.
He said that the third installment of IMF loan will be issued to Pakistan in July this year.
Briefing about the world economic outlook, he said that financial markets would remain highly stressed where as the world economy will contract in 2009 by around 1.25 percent before recovering gradually in 2010.
He said that emerging economies face dramatic drops in capital inflows, demand for their exports and commodity prices adding that a third wave of the global financial crisis is hitting the world’s poorest and most vulnerable countries.
The IMF representative said that turning around global growth depends critically on concerted policy actions to stabilize financial conditions, as well sustained strong policy support to bolster demand.

APFMA cuts flour price by Rs10 per 20-kg .

ISLAMABAD: The All Pakistan Flour Mills Association (APFMA) has decided to reduce the prices of 20-kg flour bag up to Rs10 to provide flour at affordable prices.

Chairman APFMA Asim Raza said here on Thursday that the prices of flour were different region-wise because of the transportation cost of wheat.

He said that the ex-mill rate for Rawalpindi and Islamabad had been fixed at Rs510 instead Rs520 per 20-kg bag for a period of one month.

The decision in this effect was taken after observing slight decrease in the wheat prices in open market during current month as the price of wheat was reduced by about Rs30-35 per 40 kg, he said.

The millers were buying wheat from the open market at the rate of Rs960-970 per 40kg, which was now available at Rs925-930 per 40kg, the chairman said.

TCP to import sugar, urea to stabilise prices.

KARACHI: The Trading Corporation of Pakistan (TCP) has finalised arrangements to import fertiliser and sugar to meet the expected shortfall of both the commodities during coming months.

It has already issued tenders for import of 100,000 tons sugar and 260,000 tons fertiliser and both the commodities are expected to arrive in second half of next month.

This was stated by Saeed Ahmad Khan, chairman TCP while talking to Dawn in his office on Thursday.

He said that TCP was ready to eliminate shortage of fertiliser for kharif crops as well sugar by importing that much quantity of both the commodities, which could help stabilise prices by increasing their availability in the local market.

The TCP chief said that 260,000 tons urea will start arriving from third week of June because there is a gap of 800,000 tons with production at 4.8 million tons and requirement at 5.6 million tons.

Every year there is fertiliser shortage and the government has to import to stabilise prices so that growers do not suffer, he said. Actually speculators and hoarders take advantage of demand and supply gap to make quick money but in the process country’s major crops suffer adversely due to such tactics.

Consequently, Mr Khan said that the kharif crops of rice, cotton and sugarcane would not face urea shortage as the government was fully alive of the situation and will not allow hoarders and profiteers to surge fertiliser prices to their advantage.

This season the TCP was asked by the government to procure 0.5 million cotton bales but the corporation after procuring 192,698 bales has to stop because cotton prices in the domestic market stabilised.

Responding to a question, he said the TCP procured cotton at an average price of Rs3,202 per maund and presently price in the open market has gone beyond Rs3,600.

The imported 0.1 million tons of sugar is expected to reach Karachi by end- June and hopefully it will help to stabilise prices, which are expected to rise owing to lower production of sugar during the coming season.

According to estimates the TCP chairman said the present stocks of sugar with TCP and sugar mills were at around 2.2 million tons, including 25,000 tons of TCP’s earlier stocks. These stocks would be sufficient for up to November or the start of next crushing season.

Undoubtedly, Mr Khan said the TCP is paying higher price for 0.1 million tons as the world sugar prices have gone up to $474-$494 in May against $451 per ton quoted in February this year.

This would mean that the landed cost to TCP on new imports would come to around Rs50 per kg and the government will sell it at a subsidised rate of Rs38 per kg.

However, he said there was a rare possibility that the corporation would suffer losses on sugar imports because it would be making profits on earlier stocks (imports) when prices in the world market were lower by around $40 per ton and would cost the TCP at Rs20 per kg in local market.

He said that the TCP tendering was transparent as it adheres to PEPRA rules, which under clause 40 do not allow negotiations and the lowest has to be awarded if all tender conditions are met.

Our Staff Reporter adds from Lahore: The problem of issuance of letters of credit (LCs) for the import of urea was resolved on Thursday after the Trading Corporation of Pakistan convinced the banks to provide guarantees for 255,000 tons import.

According to Shahid Hussain Raja, additional secretary (fertiliser) of ministry of food and agriculture, the liquidity crunch mainly caused by wheat procurement had hit the banks and imports alike. The government agencies, especially the Punjab Food Department launched a huge procurement drive, which emptied coffers of most of the banks.

But the TCP convinced the banks on the basis of its improved financial health having received money from provinces against imported wheat supply, he said.

Business & Economy

Global crisis poses risk to Pakistan''s economy: Fund.

ISLAMABAD (May 29, 2009): The global financial crisis and recession pose risk to Pakistan''s economy with it growth, exports, remittances and capital inflow could decline further in the next fiscal year, according to the International Monetary Fund "Regional Economic Outlook: Middle East and Central Asia," released here on Thursday.

Tunisian envoy calls for stronger trade ties.

KAACHI (May 29, 2009): Ambassador of Tunisia, Mourad Bourehla has said that Tunisia is interested to further reinforce its bilateral trade and encourage establishment of industrial units through joint ventures with Pakistan. Speaking at a meeting of Karachi Chamber of Commerce and Industry (KCCI), he said that Tunisia is a part of the most advanced Free Trade Agreement (FTA) with European Union (EU) and a pivot part in others FTA with Arab, and Sub-Saharan countries.

'Businessmen can strengthen trade ties with Indonesia'.

ISLAMABAD (May 29, 2009): Business community has a big role to strengthen the economic and trade ties between Pakistan and Indonesia and to help the two countries in economic stability, said Ishak Latu Consina, Ambassador of Indonesia to Pakistan here on Thursday.

Pak-EU summit: market access, trade facilitation on top of agenda. FAISALABAD (May 29, 2009): Market access and trade facilitation to Pakistani exports in European markets would be on top of agenda in the first ever Pak-EU Summit to be held in Brussels on June 17, 2009. Counsellor Economic Affairs Embassy of Germany, Dr Gregor Schotten disclosed this while addressing the members of Pakistan Textile Exporters Association (PTEA) here on Thursday.

Businessmen apprise Qaim of SITE problems. KARACHI (May 29, 2009): Syed Qaim Ali Shah, Chief Minister of Sindh was appraised about the problems being faced by industries in SITE industrial estate, the biggest shareholder in the GDP and revenue contribution by a delegation of SITE Association of Industry (SAI) here on Tuesday.

Traders' leader to observe hunger strike till death. ISLAMABAD (May 29, 2009): A traders' leader Jahangir Akhtar on Thursday said he would observe hunger strike till death in front of ministries of commerce and industry if his demands were not met. Akhtar, who has started hunger strike till death at Abpara Market against unnecessary delay in approval of Chamber of Small Traders and Cottage Industry, said there is no question of backtracking from a just stance.

Vast scope to export food products to Libya. ISLAMABAD (May 29, 2009): Pakistan has vast scope to enhance export of food products to Libya which imports about 75 percent food products to fulfil its domestic requirements. This was stated by Ambassador of Pakistan in Libya, Jamil Ahmed Khan while giving a presentation to the business community at the Islamabad Chamber of Commerce and Industry.

Steps being taken for promotion of women entrepreneurship. SIALKOT (May 29, 2009): Chairperson Departmental Committee on Women Entrepreneurs of Sialkot Chamber of Commerce and Industry (SCCI), Shabnam Asif has said that all necessary steps are being taken for the development of women entrepreneurship and to address their problems.

Zardari orders return of illegally occupied land to Sindh government. KARACHI (May 29, 2009): Finally, President Asif Ali Zardari has issued instructions to the land owning departments of the federal government to transfer land occupied by katchi abadis to Sindh government for regularisation.

Zardari forms committee to curb land grabbing in Sindh.

KARACHI (May 29, 2009): A high-level meeting with President Asif Ali Zardari in the chair, decided on Thursday to form a provincial-level committee to curb land grabbing in Sindh.

Stocks & Bonds

Healthy gains on KSE.

KARACHI (May 29, 2009): Fresh buying mainly in cement, banking, fertiliser and power sector stocks supported the KSE-100 index to close with healthy gains of 99.29 points at 7,288.13 points level on Thursday. The market opened on a positive note and the index breached the 7,300 psychological level to hit 7,302.93 points intra-day high level. Trading activities also improved as the volumes at ready counter increased to 154.782 million shares as compared to 141.252 million shares traded a day earlier.

LSE index gains 26.95 points.

LAHORE (May 29, 2009): Equities extended gains across the board on the Lahore Stock Exchange (LSE) on Thursday on account of fresh entries made by the private and public sector institutions that also pushed the trading volume considerably up. The LSE-28 index further increased by 26.95 points to close at 2177.86 against 2150.91 of Wednesday while transaction volume slide up by 2.907 million shares to 16.489 million shares as compared to day earlier volume of 13.581 million shares.

ISE equities improve.

ISLAMABAD (May 29, 2009): Equities showed healthy signs at Islamabad Stock Exchange (ISE) where bulls dominated the proceedings under the lead of hot favourite amid increase in the index. ISE Ten Index showed an improvement of 38.19 points, as the Index moved from 1,694.11 to 1,732.30 points. The volume of trade amounted to 1,259,078 shares as compared to previous turnover of 989,245 shares.

BRIndex30 soars 84.39 points. KARACHI (May 29, 2009): On Thursday, BRIndex30 opened in the positive zone at 6,822.58 and remained there for whole of the trading time. It closed at 6,867.53 with a net positive change of 84.39 points and percentage change of 1.24. It experienced intra-day high of 6,880.42 and intra-day low of 6,822.58.

KSE launches investor facilitation service. KARACHI (May 29, 2009): Karachi Stock Exchange (KSE) has officially launched mKATS, in collaboration with VectraCom (Pvt) Limited on Thursday. The mKATS is an investor facilitation service provided on any hand held mobile set (all mobile operators), by dialling KSE(573) short code or sending an SMS, to receive live KSE Index position, information about any scrip, traded volume etc. The information is sent directly from KSE.

Rental income: SECP proposes rationalisation of taxation.

ISLAMABAD (May 29, 2009): Securities and Exchange Commission of Pakistan (SECP) has proposed rationalisation of taxation on rental income in the upcoming budget (2009-2010) to apply uniform tax rate on income from property. Sources told Business Recorder on Thursday that the SECP has proposed amendment in the Income Tax Ordinance 2001 to rationalise tax rate on rental income.

Stocks & Bonds

Investors adopt cautious approach on KSE

KARACHI (May 25, 2009): The investors at Karachi stock market adopted cautious approach during the week ended on May 23, 2009 due to news regarding possible imposition of additional taxes at the share business in the next budget and the prevailing law and order situation in the northern parts of the country.

LSE index registers marginal gains

LAHORE (May 25, 2009): Mixed sentiment persisted on Lahore Stock Exchange during the week ended on May 23, 2009 and the equities registered marginal gains amid range-bound activity due to investors' cautious behaviour who were reluctant to take long positions and indulged in intra-day trading. The LSE-25 index recorded insignificant gain of 6.51 points and finished at 2125.76 against 2119.25 of previous week.

Alico AIG Life American Life Insurance Company (Pakistan) Limited

ISLAMABAD (May 25, 2009): Alico AIG Life has issued Weekly Unit Prices.

HBFCL capital structure KARACHI (May 25, 2009): House Building Finance Corporation Limited (HBFCL) is incorporated under the Companies Ordinance -1984, with an authorised capital of Rs 6 billion divided into 600 million ordinary shares of Rs 10 each. The paid-up capital is Rs 3.001 billion divided into 300.1 million ordinary shares of Rs 10 each.

21.9 percent decline in CFS investment KARACHI (May 25, 2009): The investment under CFS at the Karachi share market declined by 21.9 percent to Rs 167 million. The CFS rates depicted a divergent trend, increasing by 10pps, to reach 50 percent, though lack of depth did not allow deriving a meaningful conclusion from this increase, analysts said.

Revised Rates of Debt Securities KARACHI (May 24, 2009): The following were the revised rates of debt securities on Saturday (May 23, 2009).

KSE index surges 176.42 points KARACHI (May 23, 2009): The clarification by the Advisor to Prime Minister on Finance, denying imposition of additional taxes on share business, invited healthy buying on Friday said and the KSE-100 index surged by 176.42 points to close at 7,146.24 points level.

Bullish sentiments dominate on LSE

LAHORE (May 23, 2009): Bullish sentiments dominated on the Lahore Stock Exchange (LSE) on Friday and the equities registered gains across the board amid increased trading turnover following fresh buying on account of some encouraging news on the economic front.

Stocks & Bonds

Another dull day on KSE

KARACHI (May 20, 2009): The benchmark KSE-100 index lost 105.00 points to close at 7,067.85 points level with thin volume due to investors' concerns over the continuous outflow by foreign investors and absence of leverage products, analysts said. The market opened on a positive note and the index hit 7,208.98 points intra-day high level.

33.12 points decline in LSE index

LAHORE (May 20, 2009): Equities registered losses across the board on Lahore Stock Exchange on Tuesday amid reduced trading turnover on account of negative news regarding GDP growth. The LSE-25 index declined 33.12 points from 2119.15 of Monday to 2086.03, while transaction volume reduced to 9.086 million shares as compared to Monday's 13.276 million shares.

Losers outnumber gainers at ISE

ISLAMABAD (May 20, 2009): Losers outnumber gainers at Islamabad Stock Exchange (ISE) where major players and small investors adopted cautious approach to avoid heavy losses amid increase in index. ISE Ten Index showed a decrease of 26.43 points, as the Index moved from 1,637.25 to 1,610.82 points.

BRIndex30 down 137.53 points KARACHI (May 20, 2009): On Tuesday, the BRIndex30 opened in the positive zone, at 6,834.94, but closed at 6,661.23 with a net negative change of -137.53 points and percentage change of -2.02. It experienced intra-day high of 6,844.22 and low of 6,659.32. The volume amounted to 57,776,000 shares, which was 76.96 percent of the total market and 90.98 percent of KSE-100 index.

Shares buy-back schedule KARACHI (May 20, 2009): Shares buy-back schedule of listed companies on Tuesday (May 19, 2009).

Placing price 'floor': CCP hearing in KSE, LSE appeals shortly ISLAMABAD (May 20, 2009): The Competition Commission of Pakistan (CCP) will soon hold another hearing on the appeal of KSE against its order over placing/fixing "price floor" on the securities traded on the stock exchange. Sources said that the CCP had raised a number of questions during the first hearing on Monday, and the KSE asked for time to submit response to the queries raised by the Appellate Bench, comprising CCP Chairman Khalid A Mirza and Ms Rahat Konain.

Revised Rates of Debt Securities KARACHI (May 20, 2009): The following were the revised rates of debt securities on Tuesday (May 19, 2009).

Odd Lot Market Rates KARACHI (May 20, 2009): Odd Lot Market Rates on Tuesday (May 19, 2009).

Mutual Funds Association of Pakistan KARACHI (May 20, 2009): Mutual Funds Association has issued open-end funds daily prices for Tuesday (19 May 2009)

BRIndex30 and BR Sectoral Indices

KARACHI (May 20, 2009): BRIndex30 and BR Sectoral Indices on Tuesday (May 19, 2009).

ADB Okays $5.3bn for development projects

KARACHI: The Asian Development Bank (ADB) has approved $5.3 billion for 60 on-going development projects for Pakistan as of July 2008, which included a financing of $2.166 billion for energy projects.

This was stated by the country director ADB Rune Stroem while speaking at the 5th POGEE conference at the Karachi Expo Centre here on Tuesday.

He said that the ADB provided $1.8 billion in 2007, $1.2 billion in 2008 and $1.5 billion for 2009 to Pakistan. It stands as the largest development partner of this country. He said that these projects were in key infrastructure sectors, including energy, transportation, water resources and reforms.

Rune said that ADB was also the largest development partner in energy sector and across the power supply chain.

The ongoing loans included $510 million for renewable energy, $800 million for power transmission, and $810 million for power distribution enhancement, he added.

Similarly, ADB will provide $350 million for sustainable energy efficiency, $800 million for power transmission enhancement and $500 million for energy infrastructure under its future loan programme.

Rune pointed out that the ongoing technical assistance programme included gas sector restructuring, establishment of a central power purchase agency, renewable energy policy formulation and capacity building, power distribution enhancement and energy efficiency.

He said that ADB had recently concluded technical assistance programme for the development of Thar coal fields and provision of technical support to the office of energy adviser to the prime minister.

Illegal flow of remittances continuing, says Tarin

ISLAMABAD: Pakistan’s federal budget for 2009-10 will be presented in the first half of June, the country’s economic manager said, although he has not been able to decide on a final date.

Advisor to the prime minister on Finance Shaukat Tarin has said here on Tuesday that the federal budget for 2009-10 will be presented either on June 6 or June 13.

‘Preparations for the budget have almost been completed but the final budget announcement date would be decided soon,’ he said talking to media at the launch of World Bank’s report on ‘Bringing finance to Pakistan’s poor’

The federal budget 2009-10 would be the first budget for Mr Tarin in capacity as the finance manager of the country.

Shaukat Tarin said that illegal channels still contribute to the major inflow of remittances into the country.

He acknowledged that the contents of the WB report that informal supply occurs through the organized hundi / hawala sector and through committees, shopkeepers, moneylenders and transfers through friends and family.

The WB report has called for easier access to finance for poor in Pakistan and added that un-official estimates of remittances to Pakistan are around $16 billion.

Mr Tarin said that though the remittances play a valuable role in supporting the economy by providing foreign exchange and improving financial strength to the individuals.

Responding to the WB report Mr Tarin said that the government has set the target to increase the outreach of the microfinance services to three million borrowers by 2010.

The report said that 14 per cent of Pakistanis were using a financial product or service of a formal financial institution including savings, credit, insurance, payments and remittance services.

While, it said that 40 per cent of adults in the country have no access to formal or informal financial systems, but the report said that if the informal financial access is taken into account around 50.5 per cent of Pakistanis have access to finance.

Shaukat Tarin said that there are 40 Microfinance providers which include seven Microfinance Bank with an overall operating base of 1,550 branches and services centers to serve a clientele of approximately two million.

‘The potential cliental base of microfinance sector is estimated to be around 25-30 million borrowers of whom a significant portion still remains unserved by both regulated and un-regulated sector,’ he added.

The advisor to the PM said that there are potentials for other products such as insurance, payments savings that could be launched through postal services network and mobile phones.

He said that increasing access to finance for the small and medium enterprises (SMEs) could also be facilitated by attracting institutional investors with a track record in SME lending and assisting other banks to go down market.

The Country Director for the World Bank in Pakistan, Yusupha Crookes presented the address of the welcome and highlight the main features of the report ‘Bringing Finance to Pakistan’s Poor.’

The report said that Pakistan microfinance market has much potential for a rapid outreach expansion and faces considerable unsatisfied demand, especially for saving products.

Tatiana Nenova, Senior Economists WB and lead author of the report, said that if appropriately supported, SMEs have the potential to be the growth engine of economy due to their ability to create jobs, foster entrepreneurship and to provide depth to the industrial base.

The SMEs sector get a small share of credit despite having a greater role to play in the economic development.

‘SME lending accounts to only 16 per cent of the total lending volumes.’ Ms Nenova said adding that an aggressive promotion of an enabling environment leading to higher financing for the SME sector was needed to reverse this trend.

The World Bank Country Director Yusupha B Crookes was of the view that despite significant banking sector reforms and efforts to expand financial market coverage over the past few years, outreach has lagged behind the country’s growth and development needs.

He said that this report demonstrates that there is an enormous growth potential for financial services in Pakistan, especially in the rural areas.

According to the report Policy efforts to increase access to finance in Pakistan have taken time to bear fruits, but now access is indeed expanding quickly in certain financial sectors especially the microfinance remittances, but at a very low base.

The WB report also speaks about the rapid growth of Islamic banking in the country but said that it lacked liquidity management instruments.

April trade deficit shrinks

ISLAMABAD: The country’s trade deficit narrowed to $1.43 billion in April, compared with $2.30 billion in April last year, Federal Bureau of Statistic said on Tuesday.

Exports stood at $1.36 billion in April this year, as against $1.79 billion in the same period last year. Imports were worth $2.79 billion compared with $4.09 billion last year.

The deficit in the first 10 months of the 2008/09 fiscal year to April, narrowed to $14.16 billion compared with $16.83 billion in the corresponding period last year, the data showed.

The change is put down to weaker fuel prices, and a lower demand for imports following the global recession.

Current account deficit shrinks in July-April

KARACHI: Pakistan’s current account deficit narrowed to $8.547 billion during the 10 months to April compared with $11.173 billion in the same period a year earlier, the State Bank of Pakistan said on Monday.

Analysts said the main reason for the narrowing in the shortfall was lower global commodity prices.

For the month of April, the current account recorded a deficit of $457 million compared with a revised deficit of $243 million in March.

‘The reason for a higher deficit in April as compared to March is due to slowdown in current transfers and also because of monthly fluctuations in imports,’ said Asif Qureshi, head of research at Invisor Securities Ltd.

Pakistan’s trade deficit narrowed to $1.43 billion in April, compared with $2.30 billion in April last year, data showed last week.

Pakistan entered an emergency International Monetary Fund programme for a 23-month emergency loan of $7.6 billion in November to avert a balance of payment crisis.

Pak-Iran gas pact next month

KARACHI (APP) - Advisor to Prime Minister on Petroleum Dr Asim Hussain has said that Pakistan and Iran will sign the agreement for the supply of gas under Iran-Pakistan Gas Pipeline by the end of this month or next month.
He was speaking at the inauguration of 7th Pakistan Oil, Gas and Energy Exhibition (POGEE) and conference, 5th Fire & Security Pakistan exhibition at Karachi Expo Centre Monday.
He said that Iran has nearly built the site for the supply of gas to at Pak-Iran border. Currently we are working on the details of the project. For example, in which country we will go for the arbitration in case of dispute, he added. Dr Asim said that the efforts to get natural gas under Turkmenistan-Afghanistan-Pakistan gas pipeline were also in progress. At the same time, the government was exploring possibilities for utilizing Thar coal reserves for gasification and power generation, he opined.
Responding to the demand from speakers at the exhibition about the power shortage, he said that government was exploring every possible way to raise power generation.
However, he urged the masses to remain patient because it will take some time to enhance power generation in the country. The gap between the demand and supply of power will be overcome in next two to three years, he noted.

Zero duty on maize, vaccines to help reduce poultry prices

ISLAMABAD (APP) - The federal government has allowed import of maize for utilization poultry feed and vaccines at zero duty aimed at reducing input costs in poultry production which will help in decreasing poultry prices in the country.
According to sources of the ministry of livestock, in order to reduce input costs in poultry production, poultry vaccines, feed items and other inputs used in poultry feed has been zero rated.
Responding to a question about steps taken by the government to reduce poultry prices in the country, the sources said that Sales Tax exemption had been granted for un-cooked poultry meat to encourage establishment of value chain industry.
In order to facilitate establishment of value chain industry, government has allowed import of poultry meat processing machinery/equipment, poultry equipment’s (Incubators, Brooders, Evaporation Cooling Pads, Cooling system, grain storage for poultry), at zero per cent custom duty.
This will increase the shelf life of poultry meat, limiting middle man exploitation of farmers and consumers and assist in stabilizing the chicken prices to some extent.
For providing protection to domestic poultry industry, 25 per cent custom duty has been imposed on import of poultry meat and their products.
In order to deal with bird flu, an umbrella project titled “National Programme for Control and Prevention of Avian Influenza” amounting to Rs.1180.148 million is already under implementation in the country.
Regarding steps to compensate poultry farmers, the sources said that to restore confidence of poultry farmer an amount of Rs.
324 million had been allocated under the project for compensation to farmers whose birds were culled on account of bird flu. Under this project, an amount of Rs. 20.5 million has been disbursed to affected farmers during 2007-08.
These measures would help to increase the poultry production and price stabilization in the country, the sources hoped.
When asked to comment on the hike of poultry prices, he said that the increase in per capita income and increased of urban population is a main cause of demand of chicken which ultimately led to increased price of poultry meat. Moreover, comparatively less prices of live chicken than mutton prompted more consumers preference and demand, the sources added.
The increased input costs like feed (Contribute 65-70 per cent in total cost of poultry production), led to an overall increase in cost of production of chicken attributing to increased prices.

Inflation surges by 1.41 per cent

ISLAMABAD: Latest figures show the Consumer Price Index (CPI) rose by 1.41 per cent during April 2009 over the month of March.

CPI inflation during the first 10 months of the current financial year increased by 22.35 per cent over the corresponding period of the last financial year.

According to Federal Bureau of Statistics, prices of non-perishable items surged by 16.22 per cent and perishable items by 22.71 per cent in April 2009 over April 2008.

Ten-month average Wholesale Price Index inflation stood at 21.44 per cent between July 2008 to April 09.

Last year during the same period, WPI stood at 13.7 per cent. Increase in WPI-based inflation indicates a further increase in retail prices of essential commodities.

CPI covers retail prices of 374 items in 35 major cities and reflects roughly the changes in the cost of living in urban areas.

In April 2009, fuel and lighting charges went up by 26.68 per cent, education 23.04 per cent, house rent 18.86 per cent, cleaning laundry and personnel appearances 16.03 per cent, recreation and entertainment 13.86 per cent, medical cover 13.36 per cent, household furniture and equipment 12.63 per cent, apparel textile and footwear 12.34 per cent and transport and communications charges increased by 8.65 per cent as compared to the same month of 2008.

A high inflationary trend in food has been noticed since the start of the last fiscal year (July 2007).

Food inflation stood at 8.47 per cent. In August, it was 8.62 per cent, September 12.97 per cent, October 14.67 per cent, November 12.47 per cent, December 12.21 per cent, January, 2008 18.25 per cent, February 16.05 per cent, March 20.61 per cent, April 25.5 per cent, May 28.48 per cent, June 32.05 per cent, July 33.81 per cent, August 34.09, September 29.91, October 31.67 per cent, November 30.44 per cent, December 27.92 per cent; January 2009 21.61 per cent, February 22.90 per cent, March 19.73 per cent and during April it stood at 17.04 per cent.

The Wholesale Price Index (WPI) stood at 8.30 per cent during the month under review as compared to 23.50 per cent in corresponding month of the last fiscal year.

In the basket of WPI, raw material prices went up by 18.44 per cent, food 17.18 per cent and manufactures by 5.15 per cent while fuel, lighting and lubricants expenses were down by 4.70 per cent in April over the corresponding month of the last fiscal year.

In raw material, wholesale cotton price went up by 7.34 per cent and cotton seed 3.23 per cent. Furnace oil prices were up by 14.70, cotton yarn 4.05 per cent, other electrical goods 3.35 per cent and blended yarn by 1.75 per cent over March 2009.

Wholesale prices of tomato went up by 56 per cent, vegetables 14.47 per cent, potato 9.54 per cent, gur 8.89 per cent, wheat flour 7.31per cent and fresh fruits by 7.10 per cent over March 2009.

IMF relaxes Pakistan’s budget deficit target

WASHINGTON: The International Monetary Fund announced on Monday a preliminary agreement to raise the budget deficit target Pakistan must meet to take advantage of international aid.

Following a meeting with Pakistani authorities in Dubai over the past week to discuss the IMF’s $7.6 billion standby agreement with the country, the IMF agreed to raise the deficit target for fiscal year 2009-2010 to 4.6 per cent of gross domestic product from 3.4 per cent.

‘The slowing economy, additional donor support and the need to protect priority expenditures call for a relaxation of the fiscal deficit target for 2009/10,’ the IMF said in a statement issued in Washington after its mission returned from the region.

Shaukat Tarin, the prime minister’s financial adviser, held two rounds of meetings with IMF and World Bank officials over the past two weeks.

President Asif Ali Zardari too met senior IMF and World Bank officials in Washington last week, discussing various measures to help stabilise economy.

President Zardari and his Afghan counterpart Hamid Karzai also held a joint meeting with the World Bank president and agreed to expedite efforts to promote electricity trade between South and Central Asian regions.

On Monday, the IMF noted that Pakistan remained on track to fulfil conditions under the IMF-sponsored programme.

‘While the external current account deficit has started to narrow and inflation has declined, the drop in the demand for exports and uncertainty regarding the prospects for workers’ remittances pose risks to the external outlook,’ it said, noting that the international assistance would enable the country to pursue counter-cyclical policies.

‘The authorities and the IMF team agreed the Tokyo package should be regarded as a bridge towards the stronger medium-term revenue effort,’ the fund said.

‘In this regard, it is crucial to reinforce efforts to increase the tax revenue-to-GDP ratio through tax policy and administration reforms.’

The IMF plans to complete discussions on the second review of Pakistan’s programme over the next few weeks.

Karachi bourse lags behind regional markets

KARACHI: The Pakistan stock market underperformed against the regional markets in about 40 days since the end of March. The index also lagged far behind both the MSCI Emerging Market as well as MSCI World Index that gained 25 per cent and 16.5 per cent during the second quarter of 2009, so far.

The KSE-100 index rose by just about 5 per cent, which was at the lower end of nine competitive regional markets. Indonesia took the lead with 38.8 per cent gain since March 31 and a cumulative growth of 43.8 per cent for the year to date.

‘The KSE has been bleeding due to battle in the North of the country, as well as law and order situation in some other cities’, says a stock broker.

On the other hand, the gains achieved by the MSCI emerging market and MSCI World Indices were attributed by Farhan Mahmood at JS Global to ‘easing concern of global recessionary woes, improved liquidity conditions and reduced risk-aversion of investors’.

In the first quarter of the year, the KSE had beat the best of the regional markets and its cumulative growth at 20.6 per cent was only slightly down the Mumbai index rise by 21.5 per cent.

China was another country that has not done well in 2Q so far with only 9.4 per cent rise, though its aggregate gains in 2009 at 42.5 per cent, was a close second to Indonesia’s cumulative growth of 43.8 per cent including the highest gain of 38.8 per cent in 2Q.

Other markets which fared well during the period included: Taiwan up 28.6pc, India 26.1pc, Korea 24.5pc, Thailand 23.1pc, Malaysia 21.2pc and Philippines rising by 12.5pc.

Traders and brokers at the KSE hoped that healthy corporate earnings announced by most companies in the last reporting season and stable macroeconomic environment in the country could still put the KSE back on the rails.

The question mark was not then on the fundamentals for many stocks at the KSE still offered dividend yields of over 13 per cent, but on the administration’s ability to quickly restore the law and order situation to a semblance of normalcy.

Frontier Index

Investors are watching out with interest the results of the MSCI Inc, Semi-Annual Index Review, scheduled for May 13. MSCI Inc, the internationally acclaimed index provider, headquartered in New York, calculates over 120,000 indices across 70 countries daily.

As the Pakistani stock index was displaced from the ‘Emerging market’ and shifted to ‘the Frontier market’, the results announced by MSCI would be closely watched by the local and foreign investors. Sajid Bhanji, senior analyst and investment manager at Arif Habib Limited, said that the significance of it all lies in the fact that following the Pakistani Index induction into the Frontier market, it would be for the first time that its weightage would be disclosed by MSCI.

In addition, the results would also reveal the Pakistani companies that have been selected to be a part of the Pakistani index in the Frontier market. ‘Those companies can benefit as they will appear on the radar screen of foreign investors who track the MSCI indices’, says Sajid.

Stagnant deposit growth threatens banks

KARACHI: The banking sector in Pakistan which has, so far, escaped liquidity crisis is facing stagnant deposit growth for the last two months, signifying the potential risk behind the scene.

What happened to the global banking system during last one year was almost irrelevant to banking industry in Pakistan as no bank failed.

However, latest State Bank reports about the deposit and credit growth were worrisome for the banking sector and economy.

According to State Bank’s latest report, for the last couple of months deposit growth of the scheduled banks remained stagnant. In fact, the deposit growth has been falling since the beginning of the new banking year.

The State Bank reported that the total deposits of banks were Rs3,874 billion in March 2009 which remained unchanged in April. The deposits fell from Rs3,897 billion in February.

The most significant part was that about 90 per cent deposits have been kept for less than one year despite several incentives being provided to banks by the State Bank.

Banking experts said the stagnant deposit growth with poor credit growth for private sector, reflected the depressing situation for banking in the country.

The first quarterly report of the banking sector showed that banks’ profits fell 24 per cent. Non-performing loans (NPLs) of the banks crossed over Rs100 billion setting a new record.

The tumbling economic growth added more troubles to banking industry as failure of business and companies are adding to the mounting NPLs.

Reports suggest that the government plans to help the sinking companies with the help of Securities and Exchange Commission of Pakistan. However, no official announcement has been made.

Banking experts said it was the shadow of economic slump in the country which engulfed the banking system.

The IMF predicted on Wednesday that the Asian countries would face longer recessionary periods than developed economies which is alarming for countries, like Pakistan.

The reasons cited for stagnant deposit growth are high inflation and poor returns to depositors which encourages potential depositors to spend money instead of allowing it to devalue by putting into banks.

Banks are generally offering in the range of 10-16 per cent for longer term deposits but it was still negative return in the presence of over 19 per cent main inflation.

It was also noted that for the last six months banks were not marketing their products aggressively while new banking products were rare during this period.

An analyst said banks were not advertising their products through media or have minimised their advertising campaigns in the wake of declining profits.

Islamic banking gains ground in Pakistan

LAHORE: Islamic banking is fast gaining ground in Pakistan because it is risk free as compared to conventional modes of banking.

This was stated by chief executive officer AlBaraka Islamic Bank Mohamed Isa Al Mutaweh while talking to Lahore Chamber of Commerce and Industry president Mian Muzaffar Ali here on Thursday.

He said that Islamic financing products such as Murabaha, Ijara, Musharaka and Islamic Export Refinance were catering to a diverse cross-section of the economy, including the corporate, SMEs and consumer sectors.

Speaking on the occasion the LCCI president said that more than two hundred and fifty Islamic financial institutions were operating worldwide from China to US. Western banks through their Islamic units in UK Germany, Switzerland, and Luxembourg were also practicing Islamic banking.

He said that Islamic finance was practiced mostly in the Muslim world throughout the middle ages facilitating trade and business activities. In Spain and Baltic States, Islamic merchants became indispensable middlemen for trading activities. Many concepts, techniques and instruments of Islamic finance were later adopted by European financers and businessmen.

He said that the Islamic financial system employed the concept of participation in the enterprise, utilising the funds at risk on a profit-and-loss-sharing basis.

Exports can be increased with better policies

LAHORE: Trade Development Authority of Pakistan (TDAP) Chief Executive Syed Mohibullah Shah has said Pakistan can enhance its exports by upgrading its export potential of products where it has competitive advantage and increasing market share in traditional as well as non-traditional markets.

At a workshop on ‘Global economy: meeting challenges by Pakistan’ organised for the Lahore Economic Journalists Association at the TDAP office here on Wednesday, Shah said Pakistan lagged behind because it had not worked in synergy with the forces of industrial revolution.

Billions of dollars coming to the country after 9/11 were squandered on unnecessary imports creating trade deficit instead of developing capacity for increasing exports.

Up to $8 billion had been spent on the import of cellular phones despite the fact that a cellular phone manufacturing factory could be established at a cost of $250 million here in Pakistan. The country had more than 100 million cell phones at present, he said.

He said historically over the last five decades, specifically in 1949-2000, Pakistan’s exports had grown by an average 10.4 per annum whereas imports had grown by an average 9.7 per cent. He said that fundamental reforms were needed to liberate the entrepreneurship from the colonial medieval structures. Pakistan could increase its agricultural production from its available land and water four times by adopting better management and production techniques. A stone being sold for $100 could fetch $10,000 if it was marketed after proper cutting and polishing, he said.

Telecom sector attracts huge foreign investments

KARACHI: The telecommunications sector attracted an investment of about $9 billion in the last three years.

This was stated by the Pakistan Telecommunication Authority chairman Dr Mohammad Yaseen while speaking at the inaugural session of 4th connect conference 2009 at Karachi Expo Centre here on Wednesday.

Long distance and international operators have made huge investment in optical fiber, system up-gradation and installation of other communications equipment, he said.

He said that the companies, like Multi-net, Wateen and Link Direct, have installed almost 15,000 km long optical fiber between Karachi and Peshawar.

If the optical fiber of PTCL is included, the total length of optical fiber will reach 30,000 to 40,000 kms, he noted.

Talking about measures to check quality of service, Dr Yaseen pointed out that the PTA has installed state-of-the-art equipment for this purpose.

‘We are carrying out a survey to assess the quality of Internet service providers on a daily basis, and on the basis of our findings, we are suggesting them about corrective measures,’ he said.

Dr Yaseen pointed out that billions of rupees have been collected by USF Company for laying network lines by the operators.

Under the agreement, all telecom operators are required to deposit 1 to 1.5 per cent of their revenue minus expenses with USF Company.

This company provides a subsidy from this amount to telecom service operators for laying a broad band network to unconnected areas in the country, he added.

So far, two districts, including Faisalabad, have been provided broad band facility while Multan would also be connected soon, he said. The PTA chairman said that the number of mobile phone subscribers has increased from five million in 2004 to 91 million in 2009 and fixed line users have grown from 3.7 million in 2004 to 4.5 million in 2009.

Speedy completion of privatisation deals ordered

ISLAMABAD: The Privatisation Commission Board on Wednesday directed speedy disinvestment of 23 public sector entities through the Public-Private Partnership (PPP) mode.

The board meeting, with Privatisation Minister Syed Naveed Qamar in the chair, also reviewed the implementation status and progress of the ongoing transactions.

The board was informed that preliminary process for a number of transactions would be finalised in few months. About the privatisation of the SME Bank it was decided to hold a meeting of the financial adviser and the privatisation committee of the bank to reassess the transaction structure.

The meeting was informed that the SME Bank disinvestment had been delayed due to various factors including objections from the officers association over the offers made in Voluntary Separations Scheme (VSS) before the sale of the bank.

The meeting was informed that the Terms of Reference (ToR) for the appointment of financial adviser for Pakistan Post privatisation had been finalised. The PC plans to expand the services of the post offices in remote areas as a small bank providing financial services to the villagers.

The board also decided to initiate the process for the appointment of new financial adviser for Jamshoro Power Company Limited for which the PC had already received seven expressions of interest (EoIs).

The government has amended its privatisation policy to take on board the workers of state-owned entities for their empowerment by giving them shares in their respective units when the units are privatised.

However an official of the Privatisation Commission said the meeting was informed that the government was not satisfied with the pace of privatisation, which is almost stagnant or moving very slowly.

The PC Board however observed that the deteriorating law and order situation had slowed down the privatisation process during the last one and half years.

Secretary Privatisation Ahmed Jawad, PC Board members and senior officials and consultants also attended the meeting.

Business

KARACHI: Benchmark 6-month Treasury bills rates were increased on Wednesday despite one per cent cut in the policy discount rate recently allowing the interest rate to remain high.

The 6-month cut-off yield rose by 20 basis points to 13.18 per cent supporting the rising trend of Karachi Inter-Bank Offered Rate (Kibor).

The higher interest rate is in inconformity with the International Monetary Fund (IMF) programme as the donor agency has advised Pakistan to keep the interest rate high unless the inflation falls to a single digit. The main inflation (Consumer Price Index - CPI) is still over 19 per cent despite hopes of improvement being expressed by the government as well as the State Bank.

The Kibor, which is a barometer of interest rate, was at 13.26 per cent for 6 months on April 21 before the last Treasury bills auction. The Kibor kept on increasing as it reached 13.35 per cent on Wednesday.

The State Bank has been under immense pressure from the business and industrial sectors to reduce the policy interest rate as their cost of doing business went much higher than the regional countries.

The State Bank at the time of Monetary Policy announcement in the middle of last month reduced the policy rate by one per cent, which was treated as token reduction by the market.

Most of the market players saw no hope of improvement with the token reduction in policy interest rate, which proved correct as reflected from the poor credit growth for the private sector. It fell to just 13 per cent of what it was during the first ten months of the current fiscal year.

The State Bank picked up Rs71.772 billion and out of this the central bank picked up Rs64.266 billion for 12 months at the rate of 13.29 per cent, slightly increased by 2 basis points.

The SBP raised Rs4.981 billon for 6-month and Rs2.524 billion for three months.
Experts said the SBP was making efforts to keep the interest rate as high as required by the IMF.

Last month, the governor State Bank said the inflation would come down to a single-digit by next fiscal year. The next fiscal year will begin two months from now while the prevailing inflation rate is above 19 per cent.

‘The higher interest rate has impacted negatively on the economy as the performance of both the trade and industry could touch the lowest in the first decade of this new century,’ said a senior banker.

He said the banking industry was itself feeling the negative impact of higher interest rate despite the fact their net interest income has increased.

However, the high interest rate resulted in the collapse of series of businesses that mounted the non-performance loans (NPLs) setting new record during the current fiscal year.

‘The poor credit growth to the private sector is the outcome of higher interest rate that has threatened the overall economic growth despite strong agriculture growth during the current fiscal year,’ said the banker.

Banks and DFIs allowed to invest in commercial papers

KARACHI: Banks and Development Financial Institutions (DFIs) have been allowed to invest in commercial papers to help the corporate sector to get short-term financing to overcome the liquidity problem.

In order to develop and broaden the money market and also to provide an additional financial instrument to investors, it is considered desirable to allow highly rated companies to diversify their sources of short-term financing by issue of commercial paper (CP) as an instrument of redeemable capital.

The State Bank on Saturday issued a circular introducing amendment in the Guidelines of Commercial Papers.

‘The banks and DFIs may make investment in Commercial Paper (CP) as per policy approved by their board of directors and keeping in view the bank’s and DFI’s equity,’ said the SBP circular.

Earlier, banks and DFIs interested in investing in CP were required to obtain one time prior approval from SBP for commencing or undertaking such activity.

According to the guidelines the equity of a company issuing a commercial paper should not be less than Rs100 million.

The State Bank also wants to ensure that the issuer company has obtained the credit rating from a rating agency. The minimum credit rating of the issuer should be ‘A-’ (medium to long-term) and ‘A2’ (short-term).

The SBP said at the time of issue of commercial paper, the company will ensure that the rating is current and not more than two months old.

‘The bank or DFI would ensure that the risks associated with investment in CPs are in line with their risk taking capacity and appropriate measures have been taken to mitigate these risks,’ said the circular.

The commercial paper will be issued for maturities between 30 days and one year from the date of subscription. The minimum size of the issue of a commercial paper will not be less than Rs10 million.

Banking analysts said the free involvement of banks and DFIs for investing in the commercial papers would also help banks as they are facing falling credit growth.

Banks have been investing heavily in the Treasury bills since the beginning of the fiscal year that sharply hurt their lending trend resulting into sharp fall in credit growth.

Along with the Treasury bills, the government was the real borrower from the banks as it recenly borrowed to retire the circular debt of the oil companies. The government borrowed Rs80 billion through Term Finance Certificates to retire the circular debt.

However, the borrowing by the corporate sector has alarminlgy fallen during the first nine months of the current fiscal as was obvious from the State Bank report that private sector credit growth fell by 48 per cent.

Banks’ profits fall by 24pc in first quarter

KARACHI: Impact of global financial meltdown finally impacted the local banking industry, which witnessed a sharp 24 per cent decline in profits during the first quarter, Jan-March, 2009.

Pakistani banks have been showing resilience since the collapse of banking system largely in the developed economies and the impact was almost negligible.

However, the new banking year came under the garb of global economic recession, which is a direct outcome of the financial meltdown that ruined giant banks in United States and Europe.

‘During the first quarter of 2009, profits-after-tax of all banks stood at Rs16.1 billion as against Rs21.1 billion during the same period last year,’ said Kamran Rahmani, the banking analyst at First Capital Equities.

The banks’ trouble began with the slowdown of the economy, which severely slashed the credit growth for private sector. The liquidity flow for trade and industry has dried up and remained just 14 per cent during the last nine months compared to same period of last year.

On the other side, banks’ non-performing loans (NPLs) rose to record high level that has eaten up the profitability of the banking industry.

Banks have earned reasonably good net interest income due to high lending rates, an outcome of tight monetary policy and higher policy discount rate.

‘Notable rise in provisions against NPLs along with the impairment charges on equity portfolio were the prime reasons behind a double-digits decline in the underlying profits,’ said Rahmani.

The non-performing loans of banks and Development Financial Institutions (DFIs) set a new record of over Rs100 billion in just one year reflecting the gravity of the risks involved with financial system of the country.

The NPLs of all banks and DFIs reached Rs325.3 billion at the end of December 2008, which was Rs100.7 billion higher than NPLs at the same time last year.

The commercial banks were the real sufferers as they added Rs100.8 billion to their total NPLs.

Analysts said the NPLs were rising mainly because of deterioration in the economic system and the banks would be one of the biggest victims of the economic slowdown.

It is believed that the country would see just about 2 per cent economic growth during the current fiscal, which is much lower than the last year’s 5.8 per cent growth.

The rising NPLs and slowdown of economy forced small and medium-size banks to get a large shelter either by merger or by selling the entire entity.

Rahmani said the net interest income of the banks witnessed an increase of 24 per cent in first three month of the new calendar year compared to the same period of last year. However, the industry failed to retain the profitability because of massive NPLs and provisioning.

Few analysts were of the view that the inflows of loans from IMF, World Bank and monetary support of the United States would help to improve the economic growth and that would ultimately save many sectors from default and NPLs might drop in future.

Banking spread rises to 7.66 per cent

KARACHI: Banking spread continues to increase for the month of March mainly at the cost of depositors as the deposit rates were reduced by the banks.

Banking spread for March rose to 7.66 per cent, which was 57 basis points higher than the corresponding period of last year.

‘The average spread for the first three months of 2009 stood at 7.69 per cent, representing an increase of 62 basis points over the same period of last year,’ said Mohammad Imran, head of research at First Capital Equity.

Higher banking spread has been under serious criticism but the banks have continued with their strategy for higher profiteering at the cost of depositors who are already troubled by high inflation.

Bankers said one of the main reasons for the higher banking spread was the high inflation that made their earning devalued.

Analysts said the lending rates dropped by 20 basis points while the deposit rates dropped by 24 points in March.

It looks that the situation for depositors would not be changed and the rates might not be up for any significant decline in the banking spread.

The first quarterly report of the banks’ performance showed that the industry was gradually heading towards troubled waters and their earnings have started falling sharply. This dismal picture of the industry does not give any hope of relief to the depositors already under crunching impact of very high inflation rate of over 19 per cent.

Pakistan’s economy still not out of the woods

ISLAMABAD: Pakistan is geared up to keep trade deficit to 4.3 per cent of GDP and current account deficit within the range of 5.9 per cent, but it will continue to be threatened by the dangers of ‘domestic socio political upheavals’, intensity in the war-on-terror and global recession.

The Ministry of Finance on Monday released a report titled ‘Review of the Economic Situation (July-March 2008-09)’, which notes that after endorsement of the $7.6 billion economic stabilisation programme by the International Monitory Fund (IMF), the economy got confidence back.

Signs of improvement in economic variables such as inflation stabilisation, foreign exchange reserves build-up, import compression, and net zero government borrowings from the State Bank of Pakistan (SBP) by end of April is evident, the report says.

However, global financial crisis and extremely vulnerable security environment at home have added risks to the economy.

The trade data for February and March this year hints at imminent risks to the external sector. The report says external sector data for the last quarter (April-June) will be a real reflection of the impact of global financial crisis on the economy. The economic growth target at around 2.5-3 per cent is still gettable in the given circumstances.

The massive negative growth in the large-scale manufacturing (LSM) for January and February this year may not likely to persists in the remaining four months of the current fiscal year, but still LSM growth will remain hostage to acute energy shortages and demand shrinkage in the export based industries.

AGRICULTURE: Agriculture has been facing acute irrigation water shortages and the water-intensive kharif crops sugarcane and maize fell short of the target and depicted negative growth of 18.5 and 7.5 per cent, respectively.

However, cotton and rice have registered positive growth of 7.3 and 13.5 per cent, respectively. The combined weight of sugarcane and maize in overall agriculture is 6.2 per cent while that of cotton and rice is 13 per cent.

The report says that Rabi season started with estimated water shortages of 31.6 per cent, however, widespread rainfall between December and February had positive impact on the outlook for the Rabi crop.

Wheat with its 12.7 per cent weight in overall agriculture is estimated to post 7.8 per cent growth over the last year.

Disbursement of credit to agriculture sector by commercial and specialised banks has increased by Rs13.3 billion by 9.6 per cent year-on-year to Rs151.9 billion during the period under review from Rs138.6 billion in the corresponding period of last year.
The crop sector is projected to surpass the growth target. The livestock sector is buoyant because of enormous price incentive in the sector.

All livestock products witnessed increase in prices and thus the target of 3.2 per cent will be achieved. The demand for livestock products is growing at phenomenal pace. The agriculture sector is likely to achieve its growth target of 3.3 per cent.

SERVICES: The services sector exhibited resilience to fluctuations in the economic activities. The foreign direct investment (FDI) inflows in the telecommunications, financial businesses and personal services have reached a level of saturation in the first nine months.

PRICES: Food inflation is estimated at 28 per cent during July-March as against 13.8 per cent in the comparable period of last year. Although food inflation has eased during the course of the current fiscal year, the report says ‘it remains painfully high and remained a major cause of concern’.

‘This can be attributed to the stubbornness in prices of some key commodities such as edible oil, pulses, rice, milk, sugar, poultry, meat, wheat, wheat flour, and fresh vegetables,’ the report observes.

On the other hand, non-food inflation stood at 19.2 per cent, against 6.3 per cent in the corresponding period of last year. Non-food inflation has remained persistently around 18-20 per cent throughout this year as the transport group, fuel and lighting group and house rent index have remained high.

ASSETS: Net domestic assets (NDA) have increased by Rs307 billion as compared to increase of Rs627.5billion in last year. However, it is showing an increase of 7.6 per cent in stock during this period, whereas, last year the growth in stock was 20.4 per cent in the comparable period.

Net foreign assets (NFA) have recorded a contraction of Rs263.9 billion against the contraction of Rs356.4 billion in the comparable of last year.

Government borrowing for budgetary support has recorded an increase of Rs240.5 billion as compared to Rs336.0 billion in the comparable period of the last year. The government has over performed against freezing the net borrowing from SBP at Rs257 billion in 2008-09 and the SBP financing has shown a net increase of Rs103.3 billion and financing from scheduled banks witnessed a net increase of Rs137.2 billion during July 1, 2008-April 18, 2009.

DEBT: External Debt and Liabilities (EDL) stood at $49.7 billion or 30.7 per cent of projected GDP for this fiscal year. This is higher than end-June 2008 stock of $46.3 billion or 27.6 percent of GDP.

The EDL grew both in absolute and relative terms during July-December period but witnessed some correction in the third quarter. Almost all categories of EDL barring Paris Club, Eurobond and military, have witnessed increase.