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Tuesday, June 16, 2009

The Bank of Japan said the nation’s worst recession since World War II is easing after exports improved and industrial output rose the most in 56 years.

“Japan’s economic conditions, after deteriorating significantly, have begun to stop worsening,” the bank said in a statement in Tokyo today, after leaving the overnight lending rate at 0.1 percent. “In the coming months, Japan’s economy is likely to show clearer evidence of leveling out over time.”

Governor Masaaki Shirakawa may signal later today that it’s too soon to consider unwinding the bank’s policies of buying corporate debt and providing lenders with ample funds because the economy remains fragile. The yen rose, worsening the outlook for exporters, and stocks slumped the most in more than two months on concern a global recovery may be delayed.

“The BOJ is still cautious about the prospects for the economy and is still far away from an exit,” said Masaaki Kanno, chief economist in Tokyo at JPMorgan Chase & Co., who used to work at the central bank.

Japan’s currency gained 1.6 percent to 96.27 per dollar at 3:41 p.m. in Tokyo from 96.84 late yesterday. The Nikkei 225 Stock Average slumped 2.9 percent, the biggest drop since March 30, as a report on New York manufacturing damped optimism for a U.S. recovery.

The central bank said there are “continued high downside risks” facing Japan, citing developments in domestic and global financial conditions and the world economy.


(Bloomberg)

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Tuesday June 16, 2009

Asian stocks fell, sending the MSCI Asia Pacific Index down the most in a month, as commodity prices declined and investors questioned the pace of the economic recovery. The yen strengthened and Treasuries rose.

PetroChina Co., China’s biggest oil producer, sank 4.2 percent in Hong Kong and Rio Tinto Group, the world’s third- largest mining company, lost 3 percent in Sydney as oil and copper fell. Toyota Motor Corp., the No. 1 automaker worldwide, fell 3.4 percent after a New York manufacturing report missed estimates. Asia stocks extended a global slump that dragged the MSCI World Index down by the most in two months yesterday.

“Some may have believed that the deterioration of the global economy had ended, but that’s not the case,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $52 billion in Tokyo. “Those who bought stocks on a perception the economy would improve are now selling on reality.”

MSCI’s Asia index retreated 1.6 percent to 101.92 as of 3:05 p.m. in Tokyo, the biggest drop since May 14. The gauge has surged 44 percent from a more than five-year low on March 9 amid speculation the global economy is recovering. The index trades at 23.4 times estimated earnings, compared with 14.5 for the Standard & Poor’s 500 Index in the U.S.

Japan’s Nikkei 225 Stock Average fell 2.9 percent to 9,752.88 even as the central bank raised its assessment of the economy for a second month. The Bank of Japan left its benchmark overnight lending rate unchanged at 0.1 percent. Hong Kong’s Hang Seng Index slumped 3 percent.

(Bloomberg)

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Tuesday June 16, 2009

ISLAMABAD: Doubts over the "timing and nature" of the external financing that Pakistan is banking on to cover its fiscal deficit need to be removed before any review of its lowly sovereign credit rating can take place, an analyst for Moody's Investor Services said on Monday.

Rated deep in junk bond territory, Pakistan was saved from a balance of payments crisis and default by a $7.6 billion emergency loan package from the International Monetary Fund in November last year. But an annual budget announced on Saturday showed the nuclear-armed Muslim ally of the West needed more foreign support to help recover from virtual recession while also fighting a Taliban insurgency raging in its north-west.

"We recognise the improvement in terms of sovereign ratings but we need more reassurance of the timing and nature of the external financing," said Aninda Mitra, Moody's sovereign analyst for Pakistan. Moody's cut Pakistan's credit rating to B3 last year with a negative outlook due to the balance of payments crisis.

Pakistan's foreign reserves dropped to $6.6 billion in November last year, but have since recovered to $11.5 billion. Pakistan targeted a fiscal deficit of 4.9 of GDP in the budget for 2009/10 (July-June) announced on Saturday. The budget foresaw external borrowing covering nearly 265 billion rupees ($3.2 billion) of the projected 722.5 billion rupee deficit. Mitra described the budget as "supportive" but the dependence on foreign inflows created uncertainties. "It's a matter of flows being smooth enough to meet expenditure needs," he said.


(Reuters)

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Tuesday June 16, 2009

KARACHI: The currency market on Monday welcomed the new budget as the rupee depicted firm trend against both the dollar and the euro, dealers said. The rupee gained 10 paisa in relation to dollar on the interbank market for buying and selling at 80.95 and 81.00, they said.

Explaining the impact of new measures of the 2009-10 budget on money circulation, they said that withholding tax on commercial imports has been raised to 4 percent from 2 percent. This factor may be a hurdle in achieving the government's claim of bringing down inflation rate and the interest rate to single digit.

It was announced in the budget speech that inflation decreased from 25 percent to 14 percent and present interest rate is 14 percent. The State Bank of Pakistan (SBP) cut its discount rate on 20 April, 2009, the key policy rate by 100 basis points to 14 percent for the rest of the fiscal year ending on June 30, On that occasion, the State Bank of Pakistan Governor Salim Raza had said that inflation was expected to come down to 8 percent by next year.

In the first Asian trade, the dollar rose broadly as investors took profits on other major currencies, which had climbed to multi-month highs on hopes for a recovery in the global economy.

Some traders said a cautious tone from policy makers who gathered at a Group of Eight finance ministers meeting on the weekend helped temper recent optimism about the economy, encouraging bets in riskier assets to be cut further. Commodity currencies, including the Canadian and Australian dollars, also fell after sharp gains this week in tandem with a drop in oil prices, and as G8 finance ministers prepared to meet in Italy.


(BRecorder)

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Tuesday June 16, 2009

ISLAMABAD: Civil society has strongly criticised the budget 2009-10 with a view that the government has mainly relied on indirect taxes for revenue collection during the next fiscal year, which will further burden the poor and weak sections of the society, besides higher inflationary impact.

(BRecorder)

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Tuesday June 16, 2009

ISLAMABAD: The Pakistan State Oil (PSO) has requested the government to immediately release Rs 50 billion to enable it to continue to supply fuel in the country. Sources told Business Recorder that it is the second letter which PSO management has written to Petroleum Ministry and to other concerned ministries to bail it out of its financial crisis.

Earlier, PSO management had requested for the release of Rs 30 billion. That was not entertained due to Finance Ministry's reluctance. PSO has informed the Petroleum Ministry and others that if its letters of credit (LCs) defaulted, it would face serious problems in placing an order for oil imports in future. PSO credibility would be badly affected and it would lose market's confidence.

Sources said that Petroleum Ministry approached the Finance Ministry several times to arrange for the money for PSO but no positive measure has been taken so far by Finance Ministry in this regard. PSO management has warned the government that its LCs to import oil may default due to non-availability of money, and has urged the government to release funds immediately.

PSO dues against different clients have mounted to Rs 81.009 billion, putting heavy burden on the company. PSO is the major supplier of furnace oil to power sector that is to recover Rs 20.292 billion from Water and Power Development Authority (Wapda), Rs 32.253 billion from Hubco, Rs 20.046 billion from Kapco and Rs 2.736 billion from PIA. PSO is to recover Rs 5.092 billion price differential claims (PDCs) on petroleum products from the government.

Sources expressed fear that the country may undergo a serious oil and power shortage if PSO fuel supply is disturbed due to cash problems. PSO is depending on oil imports due to lower production of oil refineries, while refineries are also facing financial problems attributed to the circular debt.

Owing to non-payment of dues by the power sector, PSO has defaulted to oil refineries. PSO is to pay Rs 62.023 billion to oil refineries, Rs 30.221 billion to Parco, Rs 9.698 billion to PRL, Rs 9.187 billion to ARL, Rs 7.871 billion to NRL and Rs 5.046 billion to Bosicor on the fuel supply.


(BRecorder)

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Tuesday June 16, 2009


KARACHI: Habib Bank Limited (HBL) has decided not to participate in the bidding for Royal Bank of Scotland (RBS) Pakistan Limited, and has withdrawn its interest from acquisition. The HBL had expressed interest in acquisition of RBS Pakistan Limited. It was also granted permission by the State Bank of Pakistan (SBP) to conduct due diligence of RBS.

Accordingly, it did conduct due diligence of the information made available to it. In a notice sent to Karachi Stock Exchange (KSE) on Monday, HBL said that after careful consideration it decided not to participate in the bidding of RBS Pakistan Limited, and has withdrawn its interest from its acquisition. Total four parties-HBL, MCB, JSBL and Orascom-had expressed interest to buy RBS Pakistan Limited. However, after withdrawal by HBL, now three remaining parties will participate in the bidding process of RBS Pakistan Limited.


(BRecorder)

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Tuesday June 16, 2009

KARACHI: Sindh Chief Minister Qaim Ali Shah on Monday unveiled in Sindh Assembly Rs 327.182 billion budget for fiscal year 2009-10, marking "a big" deficit of Rs 16.84 billion. The proposed budget showed an increase of 22 percent against the current fiscal year's revised estimates of Rs 267.568 billion.

As per proposed budget, total revenue receipts are estimated at Rs 310.34 billion, which are Rs 42 billion higher than current year's revised revenue estimates of Rs 268.271 billion. The Chief Minister, who also holds the portfolio of finance, however, told the house that the bulk of increase in new fiscal receipts was on account of possibility of getting arrears on account of sale of land and the province's revenue held in bank guarantees.

Estimated revenue receipts from Divisible Pool, including Grant-in-Aid, are Rs 125 billion, with 12.7 percent increase over 2008-09 budget. The estimates under oil and gas receipts are Rs 50 billion and these are six percent less than current year's revised estimates of Rs 53.4 billion. Overall federal transfers are estimated at Rs 204.6 billion as against revised estimates of Rs 183.2 billion.

The province's own receipts have been pitched at Rs 39 billion with an increase of over 29 percent over revised estimates of outgoing year. On the expenditure side, the current revenue expenditure has been estimated at Rs 213.4 billion, with an increase of 15 percent over revised estimates of Rs 185 billion.

The current capital budget has a surplus of Rs 5.4 billion as Sindh government is expecting "Budget Support Loans" from World Bank and Asian Development Bank. The shares of local governments have been worked out to Rs 94.4 (including Rs 27.6 billion of District Support Grant) on the basis of PFC Award, and it reflects an increase of 21 percent over budget 2008-09.


(BRecorder)

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Tuesday June 16, 2009

KARACHI: Governor State Bank of Pakistan (SBP), Syed Salim Raza on Monday urged the corporate sector in the country to introduce more transparency in governance and decision making through greater disclosure of financial and non-financial information to the stakeholders.

He was addressing the 9th Best Corporate Report Awards-2008 ceremony organised by the Joint Committee of the Institute of Chartered Accountants of Pakistan (ICAP) and Institute of Cost Management Accountants of Pakistan (ICMAP) at a hotel here.

Earlier, the Governor SBP presented the awards/certificates to the representatives of the winning companies under seven sectors.

Syed Salim Raza said that there was still a need for fostering a change in the thinking of the corporate sector as the old system of protectionism cannot work in this global challenging environment.

He said that these awards would also assist the country's economy, which, he said needs sizeable investments in fixed capital.

The government's efforts towards structural reforms and recent geo-political developments in South Asian Region have once again put Pakistan in a position to attract foreign investments and these awards would serve as a catalyst in augmenting this progress, he added.

He urged the professional accountants to work with renewed zeal to enhance the prestige of the profession in the present global economic slowdown.

He said that the Best Corporate Award would certainly take us towards greater transparency in disclosure of annual accounts and to strengthen good governance practices in the corporate sector.

These awards would also narrow the credibility gap, which exists between various stakeholders and the management of the companies, he said.

The Governor SBP expressed hope that the level of reliance by all the stakeholders on the corporate reports and annual accounts will significant grow in the years to come.

He said the cross border exposure of the corporate sector, the exposure in new asset forms such as derivatives and accounting for off-balance sheet exposure are all accompaniments of globalization and liberalization and they make new demands for progress in the area of accounting and regulatory discipline.

He said that in order to maximise dividend of the global opportunity, the corporate sector has to improve the corporate governance even in tightly held ownership companies.

He observed that the modern accounting system underpins the continuity and evolution of the joint stock company, which is the base of all developments in the modern economy.

He said that from the simple-double entry book keeping system, the profession of accounting has evolved itself as a qualitative framework of methods and standards that ensure a company's affairs are well understood to all constituencies.

Syed Salim Raza said the accounting profession is one of the cornerstones that have immensely supported and contributed towards the emergence of modern day economic system and its institutions.

"The world is changing at a rapid pace and the accounting profession must come up to the international standards of accounting and good corporate governance", the Governor SBP said.

He congratulated the Chief Executives, Chief Financial Officers and representatives of all those companies, who have participated in the competition and those who have been selected as winners of the Awards/certificates.

These awards will play a major role in promotion of excellence in all forms in the corporate sector and such events should be held on regular basis to pay tributes to those who have contributed towards the profession, he added.

Earlier, the President ICAP Syed Asad Ali Shah and President ICMAP Hasan Bilgrami also spoke.


(APP)

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Tuesday June 16, 2009

LONDON: European stock markets plunged on Monday after G8 finance ministers over the weekend warned the economic outlook remained risky and uncertain despite some signs of the global crisis bottoming out.

The FTSE 100 index in London lost 2.61 percent, the CAC 40 in Paris fell 3.20 percent and the Dax in Frankfurt plummeted 3.54 percent.

The DJ Euro Stoxx 50 index of leading eurozone shares slid 3.02 percent.

On the foreign exchange market, the European single currency slumped to 1.3786 dollars on Monday from 1.4021 dollars late on Friday on concerns that the 16-nation eurozone economy may take longer to recover.

On Wall Street, the Dow Jones Industrial Average was down 2.16 percent and the tech-heavy Nasdaq index fell 2.72 percent by mid-day. Earlier in Asia, Hong Kong dropped 2.07 percent and Tokyo fell 0.95 percent.

Finance ministers from the G8 leading world economies meeting in Italy over the weekend agreed there were "signs of stabilisation" in the economic situation but also warned the outlook was uncertain and "significant risks" remained.

There were also disagreements over whether Europe should test the capital requirements of its crisis-hit banks and publish the results, and over what to do about rising budget deficits incurred by governments fighting the crisis.

Patrick O'Hare of US market analysis firm Briefing.com said: "This negative disposition is being attributed to reports that Russia made dollar-supportive comments and that G8 ministers discussed how they should prepare to unwind stimulus spending as the economic recovery begins to take root.

"Of course, this could also be a case of participants simply looking for a reason to take some money off the table," O'Hare said, noting the Standard and Poor's 500 index still stands 42 percent above its March 6 low.

Leading the plunge in Europe were mining and energy companies hit by falling commodity prices.

Elsehwere in Europe, Madrid lost 2.01 percent, Geneva 2.20 percent, Brussels 2.96 percent, Amsterdam 2.72 percent and Milan 3.01 percent.

"Miners were the main culprit ... as they took a combined hit from a strong dollar coupled with a fall in commodity prices," said analyst Philip Gillet at financial spread-betting firm IG Index.

Xstrata lost 7.11 percent to 706 pence, Rio Tinto fell 6.93 percent to 2,900 pence while Lonmin plunged 9.78 percent to 1,300 pence.

Gillet added: "Right now, investors seem happy taking any quick wins while they can, waiting to see where the next major movements will come from." Nervous investors were also keeping one eye on the latest swine flu developments after the World Health Organisation last week declared the virus to be a global pandemic, said dealer Matt Buckland at CMC Markets.

Authorities appealed for calm on Monday after Britain confirmed the first swine flu death outside the Americas since it was first reported in Mexico two months ago and the pandemic spread to isolated island communities in Asia.

"We are still some way from this having a tangible economic impact but comments suggest that the spread of a virus like this will be unpredictable in its nature so this could again add to the caution and once again give traders reason not to push the FTSE 100 back above that 4,500 (points) level," Buckland said.


(AFP)

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Tuesday June 16, 2009


LONDON: The euro fell sharply against the dollar on Monday, hit by a spike in eurozone job losses and fresh concerns the credit crunch could stifle tentative signs of recovery, dealers said.

Britain's Telegraph newspaper at the weekend quoted a top German industry group official as saying that a deepening credit crunch in Germany was threatening to slam the brakes on an economic recovery there.

Meanwhile EU data showed a record 1.2 million people lost their jobs across the 16 euro countries in the first three months of the year.

The figure, up sharply from 526,000 in the last quarter of 2008, marked the biggest jump on record, raising fears about the regional outlook

Dealers said there was little new in a Group of Eight statement over the weekend but noted that statements of support for the dollar by Russia seemed to have also helped the US unit.

In late Monday London trade, the euro fell to 1.3786 dollars from 1.4021 dollars in New York late on Friday.

Against the Japanese currency, the dollar slipped to 97.98 yen from 98.40 yen on Friday.

The eurozone "data and survey evidence point to serious weakness in eurozone labour markets in the second quarter," said IHS Global Insight analyst Howard Archer.

Following the unemployment figures, investors were braced for Germany's ZEW business sentiment survey out Tuesday, which measures the confidence of financial market players.

Investors were also awaiting Tuesday's meeting of the world's top emerging economies -- Brazil, Russia, India and China -- which will likely discuss reducing the dollar's role as the world's reserve currency.

It comes after a meeting of G8 finance ministers at the weekend that ended in disarray because of differences among the world's richest economies over how best to handle the weak banking sector.

"The G8 statement ... contained few surprises," Barclays Capital analysts wrote in a note.

Amid concerns that some countries -- especially China -- could be seeking to reduce the role of the dollar in the international financial system, the analysts said Tuesday's meeting will be closely watched.

"While there is unlikely to be explicit calls for a shift away from the (dollar) ... discussion of trade finance in local currencies and the purchase of IMF bonds could keep the issue in focus," they said.

In late trade in London, the euro was changing hands at 1.3786 dollars against 1.4021 dollars late on Friday, at 135.67 yen (137.89), 0.8470 pounds (0.8515) and 1.5097 Swiss francs (1.5124).

The dollar stood at 97.98 yen (98.40) and 1.0902 Swiss francs (1.0789).

The pound was at 1.6394 dollars (1.6442).

On the London Bullion Market, the price of gold fell to 932.25 dollars an ounce from 937.25 dollars an ounce late on Friday.


(AFP)

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Tuesday, June 16, 2009

TOKYO: The dollar and yen rose against the euro in Asia on Tuesday on renewed risk aversion after weak US and European data raised fresh doubts over the pace of global economic recovery, dealers said.

The euro dropped to 1.3769 dollars in Tokyo morning trade from 1.3793 in New York late Monday, and to 133.93 yen from 134.92. The dollar fell to 97.30 yen from 97.83. The greenback and yen gained ground following the release of data from Western economies which raised "doubts over the speed and timing of the global recovery," NAB Capital strategists wrote in a note.

The dollar and yen have been the preferred safe-haven currencies since last year's market meltdown, although the greenback has recently gained more on hopes America will make a quick exit from its recession.

The euro has meanwhile taken a beating due to weak employment data in the eurozone and worries that the region's crisis-hit banks will suffer bigger-than-expected write-downs, dealers said.

"Risk appetite is retreating. Eurozone risks remain high," Societe Generale forex chief Yuji Saito told Dow Jones Newswires.

The European Central Bank "spooked investors with its estimates of credit crisis related write-downs," wrote NAB Capital analysts.

The ECB estimates lenders' potential write-downs related to toxic assets and soured loans to total 649 billion dollars from the 2007-2010 period, much more than the 366 billion dollars forecast previously.

The International Monetary Fund has forecast the full amount could come to 900 billion euros.

The 16-nation eurozone is in the midst of a recession which is the worst for some members since World War II. Employment in the region fell 1.2 percent in the first quarter of 2009 from a year earlier, data released Monday showed.

Investors will keep a close eye on the release later Tuesday of Germany's ZEW business sentiment survey, which measures the confidence of financial market players.

Meanwhile US data for June undermined recent optimism for "green shoots" of recovery in the world's biggest economy.

The NAHB housing index was below market expectations while factory activity in the New York area fell at a faster pace than in May, according to the Federal Reserve Bank of New York's Empire Manufacturing Survey.


(AFP)

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Tuesday, June 16, 2009

SINGAPORE: Oil prices fell below 70 dollars in Asian trade Tuesday, mirroring a dive on Wall Street amid a strengthening US dollar, but traders were closely watching developments in Iran, analysts said.

New York's main futures contract, light sweet crude for delivery in July, shed 69 cents to 69.93 dollars a barrel.

Brent North Sea crude for August delivery eased 66 cents to 69.58 dollars. The July contract expired on Monday.

A strengthening greenback as well as losses on Wall Street sparked the pullback in oil, analysts said.

"The firmer tone of the US dollar and declines on US equity markets were negatives for the oil price," the Commonwealth Bank of Australia said in its daily commodities report.

A stronger dollar makes crude more expensive for buyers holding weaker currencies and that in turn tends to dampen demand and push the market lower.

The US currency particularly rose against the euro Monday following a spike in eurozone job losses and fresh concerns the credit crunch could stifle tentative signs of recovery there.

Traders are also "likely monitoring political developments in Iran," which is a member of the Organization of Petroleum Exporting Countries (Opec), the report added, referring to violent post-election protests in Tehran.

Iran is traditionally a price hawk among Opec members and is usually the leading advocate of a cut in production.

"The unrest if it continues will attract the attention of oil traders," said Phil Flynn of Alaron Trading.


(AFP)

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