18-Business Pages- 27 October_Layout 1 10/27/2012 12:32 AM Page 1
Saturday, 27 October, 2012
Let’s revamp the Greek debt to badly miss financial sector! ISLAMABAD ONLINE
Policymakers and bankers need to make a clear commitment to act now and lift the debilitating uncertainty plaguing the global financial system, International Monetary Fund (IMF) Managing Director (MD) Christine Lagarde has said. In a speech to the Canadian International Council in Toronto, Lagarde said the world’s financial system remains weak and policies in the major advanced economies have not been sufficient to rebuild confidence. Change in the global financial structure is not visible yet, in part because policymakers and bankers have delayed implementation of reforms in some places—intentionally or unintentionally—and because some reforms are meeting resistance. In setting out the challenges facing policymakers and bankers, Lagarde said banks are still weak in many countries. As a result, many borrowers still face very tight borrowing conditions. This creates a feedback loop of tight credit that stifles investment and growth. At its recent Annual Meetings in Tokyo, the IMF released its latest Global Financial Stability Report which said risks to financial stability have increased and financial markets remain volatile as the crisis in Europe continues. Lagarde urged action on the
financial reform agenda given the high price the crisis has taken on economic growth. “The financial sector?the source of this crisis?is holding down the recovery in key parts of the global economy,” said Lagarde. “Considering the staggering economic and human costs over the past six years, we must do whatever it takes to make sure this does not happen again.” The IMF recently assessed reform progress as part of the Financial Stability Report, and found that reforms are heading in the right direction, but they have not yet delivered a safer financial system. Also, IMF staff recently conducted a study on the costs of regulatory reform and found that the likely long-term increase in borrowing costs would be about one quarter of one percentage point in the United States, and lower elsewhere. Lagarde said Canada has one of the strongest financial sectors in the world. While it faces its own challenges, there are important lessons the country can teach the rest of the world about how to build a stronger, safer financial system. “You can speak with credibility based on your own financial sector success, but you are also regarded as a leading multilateralist,” said Lagarde. “Abroad, Canada is identified by its values of coordination and consensus building, which have given your country influence beyond its years.”
target: euro zone official
Greek debt will be above the target of 120 percent of GDP in 2020, a preliminary report by the IMF showed on Thursday, and Athens will need more reforms before emergency credit from international lenders can start flowing again BRUSSELS AGENCIES
Excerpts from the International Monetary Fund (IMF) report were presented to the Eurogroup Working Group (EWG) – junior finance ministers and treasury officials who prepare meetings of euro zone finance ministers. “It is clear that Greece is off track and there is no chance they will cut the debt to 120 percent of GDP in 2020 as envisaged. It will be rather 136 percent, and this would be under a positive scenario of a primary budget surplus, a return to economic growth, and privatization,” a euro zone official, who insisted on anonymity, said. “New prior actions will be needed, on top of the existing 89,” the official said, referring to a list of already agreed reforms that need to be in place before any new tranches of euro zone and IMF emergency loans to Greece can be paid. Apart from the debt projections, representatives of the IMF, the European Commission and the European Central Bank known as the troika - have been calculating how much more money Athens will need if it is given until 2016 rather than 2014
to reach a primary surplus of 4.5 percent, as agreed in February. A primary surplus or deficit is the budget balance before the government services its debt. In Greece’s case, it would mean government tax revenues exceeding spending, meaning Athens is beginning to get on top of its budgetdeficit problems. The two extra years would give the fast-contracting Greek economy some welcome respite, allowing it to return to growth sooner and therefore increasing the chances the country would eventually be able to make its debt sustainable. “Additional financing needs for Greece are now seen at around 30 billion euros ($39 billion),” the official said after the EWG meeting. Estimates from various officials since July varied from 13 billion to 30 billion and on Thursday another official estimated the financing needs at 16-20 billion euros. The critical question is where the additional money would come from. “The IMF is pushing for OSI (Official Sector Involvement) in Greece, Germany is strictly against. And they are not the only ones,” the euro zone official said. The IMF has long advocated
that the euro zone should restructure the loans that euro zone governments extended to Greece, in what is called OSI, to reduce the debt servicing costs for Athens. The restructuring could take the form of a further reduction of the interest rate on existing loans to Greece and an extension of their maturities, but while that would reduce financing costs, alone it would not fill the funding gap. Another option is to bring forward some payments from the IMF that would be granted to Greece at a later date, thereby bridging its immediate funding gap, but again that is not be fully sufficient. Also under consideration to reduce the Greek debt pile, and its servicing cost, is a debt buy back, taking advantage of the deep discount Greek debt is currently trading at. But more direct funding for Greece from euro zone member states looks inevitable. Any new money would have to come from the euro zone’s permanent bailout fund, the European Stability Mechanism, and is likely to face opposition from countries such as Finland, the Netherlands and Germany. ECB ASSISTANCE NEEDED:
The euro zone official said that further assistance from the ECB, in the form of new liquidity support to Greek banks, would be needed. Greece will be further discussed at the next EWG meeting on Monday. Apart from the funding issue, talks on granting Athens the twoyear extension on its primary surplus target are hindered by the opposition of some parties in the ruling Greek coalition on labor market reforms, seen as necessary by the Troika. Greek Finance Minister Yannis Stournaras told parliament on Wednesday that Greece had already been granted the two-year extension, but several top euro zone officials, including European Central Bank President Mario Draghi and German Finance minister Wolfgang Schaeuble, said they were not aware of that. If an agreement with Athens is reached in time, a decision on the extra money could be taken at the next meeting of euro zone finance ministers in Brussels on November 12. Despite disagreements over how it will be done, it has become clear in recent days that a twoyear extension will be granted and therefore some way will be found to finance it.
Iran’s coal shipping trade booms despite Western heat Using shadowy middle men, multiple bank accounts and a fleet of ghost ships, Iran’s coal trade is quietly booming as the Islamic Republic tries to sidestep Western sanctions and prevent its industrial economy from crashing LONDON AGENCIES
Tougher measures imposed by the European Union and the United States have tightened the screws on Tehran, which relies on its shipping trade for many imports including food, consumer and industrial goods. Many foreign companies, including shipping firms, have pulled out for fear of losing business in the U.S. and due to the complexities of arranging non-sanctioned deals. Despite the setbacks, industry sources say producers in Ukraine are providing Iran with coking coal, also known as metallurgical coal, and coke - key steel ingredients. “Iranians used to buy a lot of coking coal from Australia to make their own coke but that has stopped now as the big companies there don’t want to do it as they are too exposed,” a British-based coal trade source said. “So Iran went to buy coke from Ukraine,” he added, referring to the concentrated coal used in blast furnaces. While coal is not directly targeted as a commodity, the European Union imposed a ban on steel sales to Iran last week, making the Islamic Republic’s coal needs more pressing because it now must produce more steel itself. “Iran is one of the fastest-growing countries in terms of steel production so they need more steel raw materials,” a European based trade source said. “They need to import more (metallurgical) coal and coke,” he said. Lured by a trade worth nearly $25 million a month, suppliers in Ukraine are aiming to take advantage. “The US and EU sanctions programs currently in place against Iran are complex
and include sanctions against the indispensable marine insurances,” said Jakob Larsen with BIMCO, the world’s largest private ship owners’ association. “As is often the case, for those who are willing and able to take the risk, the rewards are more likely to be high. In such a market the risk-taker segment will try to find a way out.” Sources say the trade is complex involving often multiple brokers and diverse payment arrangements including a mix of currencies such as Russian roubles. “We have been approached to sell some (metallurgical) coal to Iran and they have been buying more lately,” one Ukrainian metallurgical coal producer said. “We have done some business but not directly, through another country — Syria and Lebanon,” he said, without providing further details. Even those looking to do deals with Iran from Ukraine are having to find creative ways to trade, other sources said. “One of the ways around it being looked at is barter. We’ve been approached several times but haven’t done any deals yet to do barter of coal for steel of equivalent value, that way no money needs to change hands,” a raw materials trader said. IRAN’S FLEET: A Black Sea based trade source also reported receiving multiple enquiries in recent weeks from Iran. “It isn’t easy, it’s very complicated to deal with Iran,” the source said. “To do some business there you must use a bank with specialist knowledge, not the usual banks or Russian banks. I would use a Lebanese bank instead, which has representative offices in Tehran and acts as an agent between the mills and suppliers.”
Trade sources said it was unclear who the ultimate Iranian end-users of imported material were because of the involvement of agents and middle men and the desire to conceal purchases. “Anybody who is doing this kind of business is not going to say who the buyers are,” another Ukrainian coal source said. Another Black Sea based industry source familiar with the shipments said cargoes were being routed from the cargo port of Nikolayev, not far from Ukraine’s larger terminal of Odessa. “Exports have been going on a constant basis already for two years, and there are around two to three cargoes a month,” the source said. “Iranian vessels come into the port, pick up the coal and then head for home.” A Nikolayev port spokeswoman said:
“There were no coal shipments to these directions (the United Arab Emirates and Iran) during the past four weeks,” without giving further details. Official data from Ukraine’s Statistics Service showed overall exports to Iran in the period from January to August of this year rose 10 percent to $800 million compared with the same period last year. Coal exports in the period reached $421 million, just over 20 percent lower than in the same period last year. Trade sources say the figures do not reflect the full extent of the trade and between 170,000 to 200,000 metric tonnes a month of coal are exported from Ukraine, especially using vessels belonging to Iran’s top cargo firm, the Islamic Republic of Iran Shipping Lines (IRISL). “IRISL vessels work out cheaper than
using foreign ship owners, who are charging massive premiums for to Iran,” the second Black Sea trader said. “IRISL increasingly is finding it has fewer trade options, so it works out for Iran well.” An IRISL official in Tehran said: “Maybe sometimes we have some offers on coal for factories in Iran.” IRISL has been on a Western blacklist of sanctioned entities for years, accused of transporting weapons, which it denies. It has tried to dodge sanctions by using various tactics including changing its flags, and setting up front companies, the U.S. Treasury and the European Union have said. Other tactics have included changing ownership of ships and flags and falsifying cargo documents in a bid to become more invisible, the U.S. Treasury has said. IRISL’s chief said this week that if sanctions pressure continued the carrier, which is receiving state help, would face grave problems. It has already had $50 million dollars blocked by the central bank — reflecting the acute shortage of U.S. currency and underscoring the problems with trades involving Iran’s fleet. Iranian President Mahmoud Ahmadinejad has faced growing criticism over his handling of the economy, especially after the Iranian currency plunged by more than a third in recent weeks. “The regime has reason to be concerned about the budget and being able to support subsidies in the long term as its earnings from trade continue to diminish,” said Anthony Skinner of risk analysts Maplecroft. “President Ahmadinejad has received a lot of blame for the state of the economy and economic mismanagement partly explains the dire state of affairs.”
18-Business Pages- 27 October_Layout 1 10/27/2012 12:33 AM Page 2
Wall Street left to grapple with disappointing earnings AGENCIES
HE short and strained reprieve Wall Street got may not last long, as reflected by the index futures, which point to a notably lower opening on Friday. With economic data remaining just lukewarm, sub-par earnings and insipid forward guidance are tricking in thick and fast. Notable among the disappointments of the day would be Apple (AAPL), which reported belowconsensus earnings for the second straight quarter. Traders may also stay tuned to the advance estimate of third quarter GDP due for release before the markets open. As of 6:15 pm ET, the Dow futures are receding 87 points, the S&P 500 futures are declining 10.80 points and the Nasdaq 100 futures are receding 16.75 points. U.S. stocks rebounded on Thursday, although the recovery lacked conviction. The Dow Industrials ended up 26.34 points or 0.20 percent at 13,104 and the S7P 500 Index gained 4.22 points or 0.30 percent before closing at 1,413, while the Nasdaq Composite closed at 2,986, up 4.42 points or 0.15 percent. The Commerce Department is due to release its advance estimate of third quarter GDP report at 8:30 am ET. Economists expect sequential GDP growth for 1.9 percent for the growth compared to 1.3 percent growth in the second quarter. Reuters and the University of Michigan are
The dollar eased against the yen Friday after posting healthy gains on speculation the Bank of Japan will usher in a fresh easing measures. The greenback bought 80.02 yen in Tokyo morning trade against 80.26 yen in New York late Thursday, where it had touched a four-month high of 80.34 yen. The euro changed hands at 103.53 yen and $1.2934 against 103.78 yen and $1.2930. The dollar had gained ground ahead of Friday’s release of US gross domestic product data for the third quarter, with expectations of 1.9 percent growth, up from 1.3 percent in the previous three months. Citibank Japan chief currency strategist Osamu Takashima said the dollar, which sank to post-war lows around 75 yen last year, had room for more gains.
COMPANY Island TextileXD National FoodsXD Gatron Ind.XD Ismail IndustrXD J.D.W.Sugar
OPEN 330.75 324.78 112.00 122.32 117.33
Siemens Pakistan Mithchells Fruit Bata (Pak) SPOT Pak Gum & Chemical Service Industries
HIGH 347.28 341.01 117.50 128.43 121.99
LOW 347.00 308.55 117.00 122.00 116.00
CLOSE 347.28 334.05 117.33 127.62 121.77
CHANGE 16.53 9.27 5.33 5.30 4.44
TURNOVER 500 36,100 1,500 4,000 2,100
750.00 372.36 1460.00 239.75 170.05
760.00 356.11 1460.00 251.25 177.50
713.00 356.11 1387.00 227.77 161.55
713.00 356.11 1444.00 227.77 162.95
-37.00 -16.25 -16.00 -11.98 -7.10
3,300 100 300 3,900 30,400
52.49 18.75 8.00 97.40 2.89
50.77 17.57 7.60 93.00 2.45
51.73 17.57 7.82 93.27 2.54
-0.57 -1.00 0.17 -3.82 -0.33
16,997,000 11,809,000 5,302,500 5,180,800 5,122,000
Volume Leaders D.G.K.CementXD P.T.C.L.A JS Growth Fund Engro Corporation Telecard Limited due to release the final estimates of the consumer sentiment index for October based on their survey at 9:55 am ET. Economists expect the index to be left unrevised at 83.1. Apple reported fourth quarter earnings of $8.67 per share compared to $7.05 per share in the year-ago period. The earnings trailed estimates. However, net sales of $35.97 billion and also exceeded estimates. The company issued downbeat guidance for its first quarter. Amazon (AMZN) reported a loss for its third quarter, which was wider than what most analysts had expected. Net sales also trailed expectations. Weyerhaeuser (WY) reported third quarter earnings of 22 cents per share compared to adjusted earnings of 12 cents per share last year. Net sales rose to $1.78 billion from $1.57 bil-
lion last year. The earnings exceeded estimates, while the net sales were slightly below estimates. Macerich (MAC) announced a 5.5 percent increase in its quarterly dividend to 58 cents per share. Microsoft (MSFT) announced that its new PC Microsoft Surface is available for purchase at all Microsoft retail holiday and online stores in the U.S. and Canada. Asian stocks ended mostly lower as regional corporate earnings and Apple’s downbeat earnings dampened investor mood. Japanese stocks fell sharply as the yen’s brief rally against the dollar and the euro caused jittery investors to take some profits off the table following recent gains. The Nikkei average ended down 122.14 points or 1.35 percent at 8,933.
Dollar’s rally against yen eases in Asian trade TOKYO
“My view is unchanged that the dollar is on its way to 82.00,” he said. However much of the yen’s recent weakness came from expectations that Japan’s central bank will take further policy measures after a meeting next week. Poor September trade data has underlined a stall in Japan’s economic recovery while policymakers are also aiming to tackle the deflation that has haunted the world’s third-largest economy for years. On Friday, official data showed consumer prices, excluding the volatile price of fresh food, edged down 0.1 percent year-on-year in September, the fifth consecutive monthly fall. A survey of 10 analysts by Dow Jones Newswires showed they expected the bank to boost an 80 trillion yen asset-purchase programme — its main policy tool — but were split on the size of any increase, with estimates ranging from 5.0
trillion yen to 20.0 trillion yen. “It’s a chance for Japan to catch up with central bankers’ competition to ease monetary policy, in which case the yen will decline against the dollar,” said Marito Ueda, currency dealer at FX Prime. The euro has been see-sawing as markets keep a close eye on a possible Spanish bailout and the situation in Greece amid continued delays on a revised rescue plan with Athens’ key international creditors. The dollar was mixed against other Asia-Pacific currencies. It eased to 1,097.44 South Korean won from 1,101.40 won on Thursday, to 41.31 Philippine pesos from 41.34 pesos, to 53.55 Indian rupees from 53.79 rupees, and to 9,605 Indonesian rupiah from 9,621 rupiah. It firmed to 30.72 Thai baht from 30.69 baht, to Sg$1.2218 from Sg$1.2214, and to Tw$29.52 from Tw$29.26.
52.30 18.57 7.65 97.09 2.87
Interbank Rates US Dollar UK Pound Japanese Yen Euro
95.8064 154.6028 1.1953 124.7208
Dollar East BUY US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar
95.00 122.73 152.12 1.1726 94.82 12.07 25.75 25.15 97.66
95.60 124.40 154.16 1.1883 96.60 12.29 26.07 25.43 100.42
Euro gains on hopes for Greece help TOKYO AFP
The euro rose in Asia on Thursday, boosted by speculation Greece will be given more time to put in place reforms to help rein in its huge public debt, while the dollar also rose against the yen. The single currency bought $1.2975 and 103.73 yen in Tokyo morning trade, up from $1.2972 and 103.49 yen in New York late Wednesday. On Thursday, the dollar moved toward the 80 yen level, trading at 79.94 yen in Tokyo, up from 79.79 yen in New York. There are growing expectations that the Bank of Japan will take further easing steps at a policy meeting next week, which has put pressure on the yen. But currency markets were likely take a wait-and-see stance owing to a lack of fresh trading cues, said a senior dealer at a Japanese bank. “There are no signs of big movements as the weekend approaches,” he told Dow Jones Newswires. Worsening business sentiment in Ger-
many accelerated euro selling in the United States, sending it to as low as $1.2921 at one point, but hopes Greece will get an extra two years to get itself back on track provided the single currency some support. On Wednesday, Greece’s finance minister said he had agreed on a new austerity package with Athens’ international creditors and won more time to fix the debt-crippled nation’s finances. However the European Union and International Monetary Fund said only that there had been progress but no firm deal, as Greece also looks to unlock its latest batch of rescue cash. “There is an absence of hard news on the fate of Greece’s next bailout tranche” despite its progress with creditors, National Australia Bank said in note. The US Federal Reserve’s two-day policy meeting that ended Wednesday offered no new policy measures, although the central bank reaffirmed its commitment to keep its easy policy stance in place until the economy was much stronger.
CORPORATE CORNER Chilas airport’s feasibility studied MIRPUR: On the directive of the president of Pakistan, CAA DG has been tasked to carry out feasibility study for the construction of all weather New International Airport at Chilas to facilitate northern area people and to attract tourists. The DG CAA, Capt. Nadeem Khan Yousufzai, also visited Mirpur (Azad Kashmir) and had detailed discussion with the local administration in developing Mirpur into an international airport. Government of Azad Kashmir has promised to provide complete assistance in accomplishing the task.
SME BSF inks MoU with Kashf KARACHI: SME Business Support Fund (BSF) has partnered with Kashf Microfinance Bank Limited for the promotion of sustainable business support model that will utilize business expertise to provide economic opportunities through selfemployment. The MOU was signed at BSF’s head office on Thursday, October 25, 2012, the top management of both the organizations were present at the MOU signing ceremony. The scope of the project includes enterprise development and job creation through provision of entrepreneurial training, covering find management, basic sale techniques and record-keeping through innovative methodology followed by provision of microfinance loans to meet working capital requirements.
LAHORE: UMT student Rashid Rafique receives the winner’s shield from Rana Iftikhar Ahmad at the conclusion of the Punjab Youth Festival University-level Chess Championship.
tent offset through recoveries and balance sheet growth. Non interest markup income increased by Rs. 2.7 billion or 20.5% compared to corresponding period last year mainly because of higher dividend and capital gains due to higher portfolio size. Expenses increased by 14% in line with inflation related salary increases and other overhead costs. Provision charge against advances show a reduction of Rs. 929 million or 17% mainly on account of lower fresh accretion and restructuring of certain corporate loans. Provision against investments shows reduction compared to corresponding period last year by Rs. 1,370 million or 76% mainly due to lower impairment loss against shares. Deposits compare to September 2011 are higher by Rs. 91 billion.
NBP’s Board of Directors approves accounts till September 30
KARACHI: Bilal Sheikh, CCO Mobilink, handing over the keys of a new Honda Civic to Raja Shaukat Mehmood, winner of Mobilink’s Acquisition Offer Campaign.
KARACHI: After tax profit increased to Rs 11.8 billion higher from last year by 4%. Earning per share stands at Rs. 6.38 compare to Rs. 6.16 of corresponding period last year. Pre tax return on equity stands at 20.2% with pre tax return on assets at 2.0%. Bank’s net interest income in line with the banking sector was impacted due to reduction in discount rate by 200 bps last year, and 150 bps in August 2012 as well as increase in minimum profit rate on deposits to 6% effective from May 2012. Despite this impact was to a certain ex-
KARACHI: Chairman PIA Lt. General (R) Asif Yasin Malik presiding over the 343 Board of Directors meeting to approve the Financial accounts of the airline. MD PIA Muhammad Junaid Yunus, Directors Malik Nazir Ahmad, Syed Omar Sharif Bokhari and Yousuf Waqar attended.
Saturday, 27 October, 2012