Thursday, 4 October, 2012

PARCO acquires LPGgiant SHV Energy

KARACHI

STAFF REPORT

Pak-Arab Refinery Limited (PARCO) has acquired SHVEnergy Pakistan (Private) Limited, one of the country’slargest LPG marketing and distribution firms, Theacquisition would take effect from the first of thismonth. The SHV Energy Pakistan was previously a 100percent owned subsidiary of SHV Calor Asia B.V.(Netherlands) and is one of the largest LPG marketingand distribution companies in Pakistan. The companyhas been issued a license for storage, processing, fillingand distribution of LPG by the Oil and Gas RegulatoryAuthority (“OGRA”). It has a nationwide network ofdistributors and customers and also has expertise inindustrial applications of LPG. The PARCO is a jointventure between the Government of Pakistan and theEmirate of Abu Dhabi. PARCO, A fully integrated energycompany is a key player in Pakistan’s oil supply andlogistics and has become the strategic fuel supplier to thecountry with a broad portfolio of operational ventures inrefining, transportation, storage and marketing ofpetroleum products. -

One step forward, twoback for Greece on debt

BRUSSELS

AGENCIES

Every step Greece takes to shore up its finances seems tomake it harder for Athens to make the numbers add up inthe long-term, especially when it comes to its spirallingdebt. Monday’s 2013 budget plan contained somepositive news – for example, the expectation that Greecewill have a primary budget surplus, before debt financingcosts, for the first time since 2002 - as well as some morealarming forecasts. Chief among those was anacknowledgement that the economy will shrink againnext year, by 3.8 percent, the sixth annual contraction insuccession, and that the debt-to-GDP ratio will rise to179.3 percent in 2013, a dauntingly high figure. Thebottom line is that Greece is in a worse state now thaneven the most pessimistic forecast just six months ago.The relationship between growth and debt is the focus ofthe European Commission, the European Central Bankand the International Monetary Fund — the troika ofinspectors currently in Athens poring over thegovernment’s projections. In the coming 4-6 weeks, thetroika will publish its latest report assessing whetherGreece’s debt is sustainable in the longer-term,something many private sector economists have alreadyconcluded is not the case. In its last analysis published inMarch, the troika said Greece needed to get its debtsdown to 120 percent of GDP by 2020 for the situation tobe manageable and concluded the goal was achievableunder certain optimistic assumptions.

KARACHI

ISMAIL DILAWAR

THE Karachi stock market closedWednesday at what the Exchangesaid was its “highest” level withbenchmark 100-share index peakingto a historic 15,712.21 points.

According to official data, this jump by theindex happens to be the 54-month high as onApril 18, 2008 the benchmark had climbed to itshighest level, 15,676.34. Wednesday’s upwardmovement by the index marks an increase of35.87 points compared to that ofApril 2008.

The KSE said the maximum in-crease in KSE-100 index was960.50 points on June 24,2008 against a maximum de-crease of 696.25 points the mar-ket had witnessed on December31, 2007. On July 14, 1998 the indexhad nosedived to its lowest level of 765.74points with market capitalization for theday standing at Rs 234.145 billion only.The highest trading turnover at KSE wasrecorded at 1.122 million on April 16, 2004with the index standing at 5,582.28 points.

“KSE 100 index breaks the previous record,”said the regulators at Karachi Stocks Exchange(KSE) in a statement.

The investors’ hope for a further rate-cut, ofat least 50 basis points, by the central bank oncoming Friday, Oct 5, is said to be the major stim-ulus for the index hitting the historic high. “High-est ever closing by KSE index today amid hopethat the interest rate will further decline,” viewedMohammad Sohail, a senior stock analyst andchief executive officer of Topline Securities.

Ashen Mehanti, another senior equity market

observer and director at Arif Habib Securities,believes that the decrease of previously double-digit Consumer Price Index inflation to 8.79 per-cent during September had raised thespeculations for a 50 to 100 basis point cut by theState Bank in its next monetary policy decisiondue tomorrow on Friday.

“Pakistan stocks closed bullish… after Sep ‘12CPI Inflation stood at 8.79pc YoY raising specu-lations ahead of SBP policy rate announcementdue on Oct 5,” the analyst said on Tuesday.

Farhan Mahmood of InvestCap Research saidthe local market had already priced in the impact

of 50 to 100 basis points decrease in the discountrate as the banking stocks plunged by 8 percentin last two months while the KSE 100 index wasup 6 percent.

Another InvestCap analyst Abdul Azeemviewed that the benchmark touched the highestlevel of its current rally on Wednesday.

The day saw the KSE 100 index gaining 64points or 0.41 percent compared to Tuesday’s15,648.29 points. The index hit the intraday highof 15,747.64 points and then slid to the intradaylow of 15,607.10 points.

The trading turnover at the ready counter wasrecorded, however, lower at 107.651 million sharesas against 140.793 million of the previous session.The trading value for the day accumulated to Rs4.2 billion against Tuesday’s Rs 5.9 billion. Whilethe market capital stood almost flat at Rs 3.964trillion compared to Rs 3.947 trillion of the previ-ous day. “Turnover was not as healthy as it should

have been at this level,” viewed AbdulAzeem of InvestCap Researchadding that the index neededhealthy volumes to take it furtherup towards 15,850 points level.

The analyst foresees theindex moving towards newhighs. “The index still has thepotential to go further up to-wards 15,850 points. Closing

above 15,570 points is expectedto be a confirmable zone,” he said.The day’s volume leader was Ja-hangir Siddiqui Company whichsaw its 13.354 million sharestraded each at Rs 13.43 in openingand Rs 13.99 in the closing. Thetrading volumes on the future mar-ket dip to 7.877 million shares

against 12.543 million of Tuesday.

KARACHI

STAFF REPORT

With expectations of yet another policyrate cut in upcoming monetary policy, oneof the major concerns for investors is theearnings outlook of Pakistan banks.

The local banks are already facingmargin compression due to 350 bps cut indiscount rate and 100bps rise in minimumdeposit rate in less than 1.5 years. “We be-lieve that contrary to common perceptionif discount rate is cut by 50-100bps, banksannualized earnings will be negatively af-fected by 3-7 percent,” said Topline analystFarhan Mahmood.

The analyst said if the central bank cutthe discount rate by 50bps, the 2013 esti-mated profits of his sample banks wouldincrease by 3 percent now compared toearlier projection of 6 percent.

He said his side had downgraded earn-ings growth to 6 percent from 14 percenton August 13, 2012 after the SBP surprisedthe market by slashing rate by 150bps. Lasttime in 2011 when SBP reduced discount

rate by 200bps, banks lending rate re-duced by approx 40-50bpps only becausebanks increased floor rate.

Assuming the same trend to continue,we might see lending rate falling by ap-prox.10-12bps. Moreover, banks on theother hand will opt to shun expensive de-posits to mitigate the impact of cut in dis-count rate and will increase theiradvances.

In case of higher discount rate cut i.e.100bps, banks 2013 earnings to dilute by6- percent7. Thus, in that case, 2013 earn-ings will remain flat as we have also as-sumed fall in deposit rate and increase inlending. In fact few banks have aggres-sively started marketing consumer financ-ing.

On the flip side, 50-100 bps reductionin discount rate may lead to 2-3 percentimprovement in earnings in short run. Ac-cording to accounting rules in Pakistan anygain and losses on re-measurement forheld for trading (HFT) is included in profitand loss account while the impact of reval-

uation in all other categories of investmentis taken in profit and loss account when ac-tually realized upon disposal.

Thus, there is only a small portion ofthose gains will be reflected in IncomeStatement and major portion of that reval-uation gain will go into the equity therebyincreasing the book value of the banks andthus reducing PBV marginally. In arrivingthe revaluation gain, we have also assumedthat banks will realize 20-25 percent of theinvestment portfolio in available for sale(AFS) and Held to Maturity (HTM) inshort-term.

Incorporating a 100bps cut, Pakistanbanking sector is trading at one year for-ward PE of 5.9x and P/BV of 1.1x with av-erage ROE of 17 percent. This is 35 percentand 38 percent discount than last 5 yearsaverage PE and PBV of 10.7x, 1.8x, respec-tively. “We believe that market has alreadypriced in the impact of 50-100bps cut asbanking stocks plunged by 8 percent in last2 months while KSE 100 index is up 6 per-cent,” said Farhan.

ISLAMABAD

APP

The Asian Development Bank (ADB) has en-hanced Pakistan’s growth forecast for the year2012 to 3.7 from 3.6 percent projected earlier.

For Asia, the bank has scaled back 2012 and2013 growth forecasts, saying that after years ofrapid growth, the region must brace for a prolongedperiod of moderate expansion amidst an ongoingslump in global demand. In its Asian DevelopmentOutlook 2012 Update, the bank predicted Pakistan’sgrowth at 3.7 percent, which was early predicted at3.6 percent by the Asian Development Outlook re-

leased in April this year. It is pertinent to mentionhere that the Asian Development Outlook and theAsian Development Outlook Update are ADB’s flag-ship economic reports, which analyze economicconditions and prospects in Asia and the Pacific, andare issued in April and October, respectively.

The report has projected the same growth rateof 3.7 percent for the next year (2013) against theprediction of 4 percent. The report has scaledback 2012 and 2013 growth forecasts for India,which will slow to 5.6% in 2012, down from 6.5%in 2011. Chinese ecnomy is forecast to grow by7.7% this year and 8.1% in 2013, a drop from the9.3% posted in 2011. For overall South Asia, the

growth has been predicted at 5.5 percent as com-pared to 6.2 percent in 2011. The report projectsthe region’s gross domestic product (GDP) growthdropping to 6.1% in 2012, and 6.7% in 2013, downsignificantly from 7.2% in 2011.

The report notes that the ongoing sovereigndebt crisis in the Euro area and looming fiscalcliff in the US could have disastrous spillovers tothe rest of the world, particularly developingAsia. The projected slowdown is likely to easeprice pressures, however, with inflation fallingfrom 5.9% in 2011 to 4.2% for both 2012 and2013, assuming there are no spikes in interna-tional food and fuel prices.

Bulls catapult indexto 54-month high

A late cut too many?

ADB enhances Pakistan’s growthprojection to 3.7 per cent

Another rate-cut to slash banks profit by half in 2013

KSE index hits historic high of 15,712.21 points

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02

Thursday, 4 October, 2012

Major Gainers

CoMPAny oPEn HIgH LoW CLoSE CHAngE TUrnovErUniLever Pak 10000.00 10500.00 10000.00 10500.00 500.00 100Nestle Pakistan Ltd. 4425.01 4646.26 4425.01 4646.26 221.25 440Siemens Pakistan 722.05 756.00 722.05 756.00 33.95 250Bata (Pak) Limited 1035.00 1077.77 1001.00 1055.55 20.55 1,500Shezan Inter. 315.00 330.75 329.00 330.75 15.75 1,100

Major LosersRafhan Maize Prod. 3899.00 3800.00 3705.00 3800.00 -99.00 280Atlas Battery Ltd. 243.95 237.00 237.00 237.00 -6.95 500Abbott Lab. 206.89 206.89 198.00 200.02 -6.87 41,000Attock PetroleSPOT 525.65 525.06 516.00 519.46 -6.19 15,200Atlas Honda Ltd 135.00 132.54 131.00 131.00 -4.00 2,500

Volume Leaders

Jah.Sidd. Co. 13.43 14.24 13.54 13.99 0.56 13,354,000Nishat Mills Limited 57.50 59.02 57.15 58.85 1.35 4,571,500Askari Bank 15.41 15.70 15.20 15.47 0.06 4,323,500P.T.C.L.A 19.56 19.82 19.41 19.76 0.20 4,229,000Azgard Nine 6.06 6.34 6.05 6.19 0.13 3,771,500

Interbank RatesUS Dollar 95.1357UK Pound 153.3683Japanese Yen 1.2161Euro 122.9820

Dollar EastBUy SELL

US Dollar 94.50 95.00Euro 121.51 122.51Great Britain Pound 151.48 152.70Japanese Yen 1.1949 1.2043Canadian Dollar 95.20 96.46Hong Kong Dollar 12.04 12.20UAE Dirham 25.70 25.88Saudi Riyal 25.19 25.33Australian Dollar 95.90 98.12

Business

NEW YORK

AGENCIES

THE euro rose against the dollar onTuesday on expectations that a re-quest by Spain for a bailout is im-minent, but U.S. stocks endedlittle changed on uncertainty of

when Madrid will make its request and growinguneasiness over third-quarter earnings.

European officials said on Monday thatSpain is ready to make the request for a eurozone bailout as early as next weekend. On Tues-day, however, Spanish Prime Minister MarianoRajoy said that a request for European aid wasnot imminent.

A request for a bailout is viewed as positivefor financial markets because it would triggerSpanish bond buying by the European CentralBank, which would lower the country’s borrow-ing costs. It would also remove another layer ofuncertainty in the region’s three-year old debtcrisis. “Spain being rescued would be good forrisk assets and ultimately global growth, butwhile the benefits are largely priced in, we’restill getting conflicting signals that understand-ably have investors apprehensive,” said BrianBarish, president of Cambiar Investors LLC inDenver, who helps oversee $7 billion.

“Until we get some kind of clarity, weshould expect a lot of volatility and difficultyholding onto gains,” Barish said. The MSCIglobal stock index was little changed at 333.35.

Wall Street stocks gave up early gains to fin-

ish largely unchanged in a volatile session as arally that took the S&P 500 to its highest innearly five years stalled.

The Dow Jones industrial average endeddown 32.75 points, or 0.24 percent, to13,482.36. The Standard & Poor’s 500 Indexclosed up 1.26 points, or 0.09 percent, to1,445.75. The Nasdaq Composite Index gained6.51 points, or 0.21 percent, to 3,120.04.

The Dow was pressured by stocks closelytied to the pace of growth, including heavy ma-chinery maker Caterpillar Inc and plane makerBoeing Co. A major headwind for the globaleconomy has been falling demand from Europe,which has been drifting toward recession.

September marks recordmonth and quarter for PMEXtrading volumesKARACHI: October 03, 2012 - Pakistan MercantileExchange ended the first quarter of FY 2012-13 witha record trading volume of Rupees 385.58 Billion interms of value. This represents an increase of 40.71% on previous quarter. Over Rupees 150 Billion oftraded volume was seen in September which is amonthly record, beating previous monthly high of

129 Billion Rupees set in August 2012Correspondingnumber of contracts traded in the quarter was1,051,032 which is also a record. Number of activebrokers reached a high of 67 and investor accountswere at record level of close to 8,000. Discussing theachievement, Mr. Amjad Khan, Acting Managing Di-rector PMEX, added that “This record volume sets ahigh benchmark for the Exchange to continue per-forming in the coming months. It also gives us theassurance that an increasing number of Pakistani in-vestors are placing their trust in PMEX as the onlylegal platform for Commodities Investing whilstadding commodities as an alternative asset class fortheir wealth portfolio diversification.”

Japan – Pakistan to showcase their products at7th Expo PakistanKARACHI: 3rd October, 2012 – Many majorJapanese brands and companies will be furtherexploring business opportunities through partici-pation and promotion at the 7th Expo PakistanExhibition, being held from 4th till 7th October,2012 at the Expo Center in Karachi. An exclusivepavilion is being set-up at the Expo Center inKarachi, inspired by the “Japan External TradeOrganization” (JETRO), which enjoys the cooper-ation of numerous prominent Japanese companiesoperating across various industrial and commer-cial sectors of Pakistan. Prominent sectors thathave attracted Japanese investments and entre-preneurs include; Automobiles, Engineering, Con-sumer Items, etc. The key participants from Japanthis year will be Hino, Honda, Suzuki and Toyota,displaying the latest models of their most popularcars, coasters and trucks in Pakistan.

Lake City adds another jewel to crownKARACHI: The Lake City Holdings which is one ofthe largest real estate projects of Pakistan and a pre-mier secured gated community is proud to announcethat they have added a jewel to their crown by finaliz-ing a deal with Technogym for their Lake City Golfand Country Club’s Health Club. A contract signingceremony was held between the management of LakeCity Holdings and Technogym at the Lake City Golf &

Country Club on Monday, 1st October, 2012.

WISE Awards honor world’s bestinitiatives in innovative educationDoHA: The World Innovation Summit for Educa-tion (WISE) announces six groundbreaking proj-ects from around the world as Winners of the 2012WISE Awards under the theme “Transforming Ed-ucation”. Now in their fourth year, the WISEAwards identify, showcase and promote innovativeeducational projects from all sectors and regions ofthe world in order to inspire change in education.Winning projects, which are selected for their con-crete, positive impact upon society, receive globalvisibility and a prize of $20,000 (U.S.).

Bata organizes anti-dengue walk

KARACHI: Bata Pakistan Ltd. organized a doorto door campaign and dengue awareness walkunder the umbrella of Bata Children’s Program atBatapur. The children went door to door and ex-plained the precautionary measures to preventdengue. They also distributed brochures contain-ing written instructions amongst the residents.

CORPORATE CORNER

US stocks flat, euro upas Spain bailout in focus

LAHORE: Mr.Imtiaz Faruque, HR Head at Pakistan Tobacco Company with the MBA students and faculty at The Lahore School of Economics.

KARACHI

STAFF REPORT

Keeping up its weekly borrowing spreefrom the banking system, the cash-strapped government Wednesday bor-rowed over Rs 180 billion from thebanks to cater its ever-burgeoning budg-etary needs.

Last week on Wednesday too hadseen the government raising over Rs 37billion from the risk-averse banksthrough selling Pakistan InvestmentBonds (PIBs) of 3 to 20-year tenors.

Wednesday saw the federal financeministry raising over Rs 180.227 billionfrom the primary dealers through auc-

tioning the Market Treasury Bill of 3-,6- and 12-month maturities.

The central bank auctioned the T-bills setting the cut-off yield at 9.7291,9.7583 and 937601 percent, respec-tively, for 3-, 6 and 12 months maturi-ties. The primary dealers, consistingmostly the otherwise cash-strappedbanks, responded well and offered asurplus amount of over Rs 562.697 bil-lion to the government their primefocus being in the mid-term, 6-month,government papers against which bidsof over Rs 230.376.040 billion worthwere offered.

The central bank, however, ac-cepted bids of Rs 180.227 face value.

KSE shows the doorto brokerage housefor repeated defaults

KARACHI

STAFF REPORT

The front regulators at Karachi StockExchange on Wednesday declared thePearl Capital Management as defaulterwhich would be deemed as expelledfrom the Exchange with immediateeffect. The disgraced firm is a corporatebrokerage house and the holder ofTrading Rights Entitlement Certificate(TREC), said the KSE on Wednesday.The firm has been declared as defaulterfor its “repeated failure” to comply withthe instructions of the Exchange toresolve the pending investors’complaints and claims. “Accordingly,M/s Pearl Capital Management (Pvt)Ltd has ceased to be a TREC holder ofthis Exchange,” said the KSE. It saidthe broker’s declaration as a defaulterby the Exchange shall not affect theright of their creditors in any mannerand the said corporate entity remainsresponsible for discharging all itsfinancial obligations.

LSE gains 12.21 pointsLAHORE

APP

Lahore Stock Exchange on Wednesdaywitnessed bullish trend by gaining12.21 points as the LSE-25 Indexopened with 4083.00 and closed at4095.21 points.The market’s overall situation,however, did not correspond to anupward trend as it remained at 2.090million shares to close against previousturnover of 3.348 million shares,showing a downward slide of 1.258million shares. While, out of the total96 active scrips, 28 moved up, 45remained equal and 23 shed values.Attock Refinery Limited, TreetCorporation Limited, PakistanPetroleum Limited were Major Gainerof the day byrecording increase in theirper share value by Rs 7.04, Rs 3.70 andRs 2.15 respectively. Engro FoodsLimited, Dawood HerculesCorporation, and Muslim CommercialBank Limited lost their per share valueby Re 0.95, Re 0.80 and Re 0.68respectively. The Volume Leader of theday included Silk Bank Limited(Saudi)with 395,000 shares, Bank AlfalahLimited with 209,000 shares andDewan Cement Limited 173,500 shares.

Govt sells T-bills to borrowover Rs180bn from banks

ISLAMABAD: The Economic Coordi-nation Committee of the Cabinet ap-proved import of LNG along with givenframework as proposed by Ministry ofPetroleum and Natural Resources.

The ECC also discussed the sum-mary for export of sugar presented byMinistry of Commerce. The ministry in-formed ECC that the country was in a po-sition to export sugar as there was asurplus. After due deliberations, ECC al-lowed to export 200,000 MT of sugaragainst the proposal of 400,000 MT witha quota of 10,000 MT sugar for eachsugar mill. ECC also constituted a com-mittee comprising PM Adviser on Agri-culture and Water Resources, Secretaries

of Commerce and Industries to work outthe reasons for non-utilization of earlierapproved export quota amounting166,000 MT of sugar by sugar mills.

The ECC also discussed a summarythat proposed an import of 0.5 milliontones of urea. After evaluating differentaspects, ECC constituted a committeecomprising deputy prime minister andSenior Minister for Industries, ministerfor Petroleum and Natural Resources,Planning Commission deputy chairmanand secretary industries to work out fur-ther on subsidy mechanism, price fixationformula for fertilizer and gas availabilityto fertilizer plants, after consultation withfertilizer industries. STAFF REPORT

ECC approves import of LNG,

200,000 MT of sugar export

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