"FAIR VALUE OF MAPLE LEAF CEMENT - MLCF RS. 16"

We recommend buy of MLCF as its fair value is Rs. 16 on the basis of the followings:

1) Local Demand expected to grow 30% YOY Basis
2) Infrastructure Development programs
3) Housing and Dams Constructions
4) Export to Middle East, India and South Africa
5) Rs. 320/Bag rate in Local Market and also increasing due to inrease in production cost as Fuel, Coal and Power is of 65% of Production Cost of Cement.

If you have any query please email me at stockmarketpk@gmail.com or leave comments here.

Muhammad Ijaz

“Fair Value of Shares”

“Fair Value of Shares”

In current Pakistan Economy and Political position, “Fair Value of Shares” is suggested as under:

“Fair Value of PSO” is Rs 535
“Fair Value of OGDCL” is Rs 138
“Fair Value of POL” is Rs 440
“Fair Value of PPL” is Rs 287
“Fair Value of HBL” is Rs 195
“Fair Value of MCB” is Rs 273
“Fair Value of UBL” is Rs 120
“Fair Value of NRL” is Rs 355
“Fair Value of INDUS” is Rs 232
“Fair Value of SUZUKI” is Rs 172
“Fair Value of FFC” is Rs 126
“Fair Value of FFBL” is Rs 45
“Fair Value of PTCL” is Rs. 44
“Fair Value of LUCKY” is Rs 136

Remember if Economical and Political position improved, then we will update the “Fair Value of Shares” as downward or upward as appropriate.

If you need any kind of suggestion please email me on stockmarketpk@gmail.com or leave comments on my WEB.
Muhammad Ijaz

“Petroleum Consumption in Pakistan”

“Petroleum Data- 11 Months”

Petroleum consumption for 11 months increased by 6.9% to 17.65m tons as compared to 16.51m tons in the corresponding period of last year mainly due to increasing demand for power, industrial consumption and transport sector.

Major increase was in the consumption of HSD and Gasoline, which increased 14.2% and 29.3% respectively.


“Pakistan State Oil” – “PSO” Shares Increased in Consumption

Pakistan State Oil – PSO is with biggest market capitalization with 67.9% of the total market share during 11 months as compared to 64.7% in the same period of last year. Total sales volume of petroleum products is at 11.98m tons as compared to 10.68m tons in the corresponding period of last year.



“Shell Pakistan Limited” - “Shell” Shares Almost Same in Consumption

Shell Pakistan Limited – Shell growth of 7.2% in its petroleum products, which stood at 2.40m tons during the period, as against 2.24m Overall market share of the company was remained almost same and stood at 13.6% during the period under review. Major improvement was brought about by rise in sales of Furnace Oil and Gasoline.

“Attock Petroleum Limited” – “APL” Shares decline in Consumption

Attock Petroleum Limited - APL depicted a decline of 0.8% in its total POL sales, which stood at 1.13m tons in 11mths’08 as compared to 1.14m in the same period last year. The total market share of APL fell to 6.4% during the said period as compared to 6.9% in the corresponding period of last year due to fall in sales of furnace oil, sales of which fell by12.2% to 0.47m tons from 0.53m tons.

“Increase in Cement price Expected”

“Increase in Cement price Expected”

Manufacturers are planning to increase the cement prices by Rs20-30 from next week in the wake of high tax burden. The further rise by Rs20-30 per 50-kg bag is being expected in the cement price from next month, after which cement will be available at Rs340-350 per 50-kg bag.

Increase in “Electricity prices” due to budgetary support

Increase in “Electricity prices” due to budgetary support


Electricity prices will cross Rs10 per unit for all categories except those small consumers using up to 50 units per month. The increase in prices is part of the conditions attached to $500 million World Bank program lending support the bank has extended to Pakistan for budgetary support

Maybank and MCB Bank shares

Maybank and MCB Bank shares

Maybank of Malaysia has finally acquired 15% MCB Bank shares and remitted a total of S$667m to Pakistan. The confirmation of acquisition of 15% MCB shares was sent to KSE. The deal was finalized on May 5. According to SBP, the deal amount worth US$667m was remitted to
Pakistan on June 23.

Privatization of PIA and PSO

Privatization of PIA and PSO dropped from sell-off plan:

The Privatization Commission has dropped PIA and PSO, two short-listed entities, from its
sell-off program and got approved from its board the entities to be offered to the investorsin 2008-09.

KSE LATEST NEWS - KSE POSITION

AS I HAVE MENTIONED ON THAT DAY WHEN MARKET WAS ONE TIME HIGHEST IN THE HISTORY, TODAY IS GOODTIME FOR WEAKHOLDERS. IF ANY ONE AGREE AND QUIT THEN HE MUST BE HAPPY AS THERE IS NO ROOM TO QUIT FROM THE MARKET UNLESS WAITING FOR A GOOD NEWS.

MUHAMMAD IJAZ

Budget Impact on Auto Sector

Budget Impact on Auto Sector


FOLLWINGS ARE IMPORTANT MEASURES FOR AUTO SECTOR

A) Federal Excise duty of 5% has been imposed on import as well as locally manufactured
cars with engine capacity above 850cc.

Imposition of 5% FED will increase product price, which will further dampen already dwindling auto demand.


B) Duty rate on import of cars/jeeps above 1800cc has been increased to 100% from
90% earlier.

Auto manufacturers like Indus Motors will loose margins on their imported products because most of which are above 1800cc.

C) Fixed import duty on old and used cars and jeeps has been increased by 10%.

This would protect the local industry through expected increase in the cost of used imported vehicles, thus providing cost advantage to local assemblers.

D) A withholding tax (WHT) of 2.5% on purchase of locally manufactured motor car or A member company of group will increase the car prices, which are already on the high side.

E) Rate of General Sales Tax (GST) on car purchase has been proposed to increase from 15% to 16%.

It will further increase the car prices, which will likely to have a dampen impact on cars sales volume.

Budget Impact on Cement Sector

Budget Impact on Cement Sector

Following are important measures for Cement Sector

1) The government has allocated Rs550b for the PSDP in the 2008-09 budget as
compared to revised allocation of Rs450b in 2007-08, showing an increase of 15.6%. Under the sectoral distribution of the PSDP, an amount of Rs165b has been made for infrastructure, Rs188b for social sector and Rs18b for agriculture and Industry. It will have a positive impact of cement sector because it shows the government’s focus toward infrastructure development, which will support the local sales growth.

2) Central Excise duty on cement has been enhanced to Rs900 per ton from current Rs750 per ton. It will increase the CED on each bag by Rs7.50 per bag to Rs45.0 per bag from existing Rs37.5 per bag. In our opinion, cement manufacturers will easily pass on this to the consumer by increasing cement price per bag in the range of Rs10-15.


3) The government has increased the GST by 1% to 16% from earlier 15%. It will have a negative impact on the sector it will further increase the cement prices, which may hit its demand. It will also erode the positive effects of the recent price hike in the local market.

Pakistan Oilfields Limited (POL) Production

Pakistan Oilfields Limited (POL) Production

POL showed decline in both oil and gas production. Oil production showed doubledigit decline of 12.5% to 5,287bpd in 10mths’08 as against 6,039bpd in 10mths’07. Beside Pindori field, which showed continued problems from last six month and oil production from the field declined 40.9% during the period under review, Uchri and Pariwali fields also showed a negative growth of 14.2% and 0.8% respectively. These three fields contributed 65.5% of the total oil production of the company. Gas production stood at 45mmcfd in the said period as compared to 47mmcfd in the parallel period of last year, showing a fall of 4.0%.

Pakistan Petroleum Limited (PPL) Production

Pakistan Petroleum Limited (PPL) Production

PPL continued to depict handsome rise in crude production on the back of additional production from Mela 1. During the period under review, crude oil production by the company stood at 4,059bpd in 10mths’08 as against 2,661bpd in the same period last year. In addition to Mela field, production from Tal block also showed an impressive growth of 42.2% during the period under review and contributed 17.0% of total oil production of the company. Gas production remained almost same and stood at 991mmcfd during the period under review as compared to 992mmcfd in 10mths’07. Despite 2.8% decline from Sui gas field, which has a significant weightage of 64.2% in PPL’s total gas production, increased production from Kandhkot and Sawan fields supports the company to maintain its gas production.

Oil & Gas Development Company Ltd (OGDC) Production

Oil & Gas Development Company Ltd (OGDC) Production
OGDC showed 5.5% increase in crude oil production and stood at 43,453bpd during 10mths’08 as against 41,170bpd in 10mths’07 mainly due to rise in production from Kunnar, Chanda, Bobi and Mela fields. Gas production also showed an increase of 3.7% to 1,008mmcfd in 10mths’08 as compared to 972mmcfd in 10mths’07 on the back of increased production from Qadirpur and Uch fields, which contributed 58.8% of the total gas production of the company.

Hubco plant:

Hubco plant:

The tariff structure for Hubco’s 225MW power plant has been agreed with the Nepra. The statement said that Hubco had received the government’s formal approval for setting up the combined cycle power plant at Narowal with an investment of US$300m. It said the plant,
which would be based on Reciprocating Engines Technology having an ISO-installed
capacity of 225MW, would start supplying electricity to the National Grid from March
2010.

MEEZAN BANK STAKE

MEEZAN BANK STAKE

Kuwaiti firm to hike stake in Meezan Bank: Kuwait’s Noor Financial Investment Co
plans to raise its stake in Pakistani Islamic lender Meezan Bank to 42% from 35% with
an investment of approx. US$20m, its managing director said.

Economic Survey of Pakistan 2007-2008

Economic Survey of Pakistan 2007-2008

The government has recently issued the Economic Survey 2007-2008. The salient features of the report are as follows;

GDP and per capita income
Real GDP grew at 5.8% in 2007-08 as against 6.8% compared from the last year against the target of 7.2% growth. Pakistan’s economy has grown at an average rate of almost 6.6% per annum during the last five years (FY’04-FY08). Per capita income in dollar term has grown at a compound average growth rate of 10.8% over the period of six years to US$1,085 in 2007-08 from US$586 in 2002-03.


Agriculture
Agriculture is still the single largest sector of the national economy but has shown a dismal performance this year. Overall agriculture growth this year is estimated at just 1.5% in 2007-08 from 3.7% of last year. Except sugarcane production, which grew by 16.8% during 2007-08, the other major crops were showing decline. Rice production has shown an increase of just 2.3% in 2007-08.
Wheat production was declined by 6.6% to 21.7m tons in 2007-08 as compared to 23.3m tons last year. Cotton production at 11.7m bales in 2007-08 also declined 9.3% during the year. As far as pulses are concerned, the minor crop, exhibited an impressive growth during 2007-08. A member company of group


Large Scale Manufacturing
Manufacturing is the second largest sector of the economy. Overall manufacturing grew by 5.4% this year as against the target of 10.9%. Large-scale manufacturing (LSM), accounting for nearly 70% of overall manufacturing, grew by 4.8% against the target of 12.5%.


Money and Credit
During Jul-May10 FY08, money supply (M2) grew by 9.0% against the annual target of 13.7% last year’s expansion of 14% for the same period last year. Net domestic assets increased to Rs656.7b as compared to the increase of Rs395.5b in the same period last year. Net foreign assets recorded a decline of Rs289b against the increase of Rs84.6b in the same period last year.

Inflation
The CPI-based inflation stood at 10.3% in 10mths’08 — significantly higher than 7.9% recorded in the corresponding period of last fiscal year — remained above the target of 6.5%for the year. Food inflation is estimated 15% over 10mths of FY08 as against 10.2% of last year.

Fiscal Development
The overall fiscal deficit was targeted at Rs398b or 4.0% of GDP for FY08 but this percentage could cross 6.5% of GDP. Government borrowing for budgetarysupport grew phenomenally by Rs362b during 2007-08 as compared to Rs263.4b in the last year. Therefore, M2 growth is expected to go beyond the target of 13.7%. Credit to private sector amounted to Rs369.8b during Jul-May10, FY08 as compared to Rs263.4b in the same period last year.


Balance of Payment
Pakistan’s current account deficit (CAD) further widen to US$11.6b (6.8% of GDP) in 9mths’08 from US$6.6b (4.6% of GDP) in the same period last year. Much of deterioration has taken place due to the rising trade deficit and the outflows from services.


Workers Remittances
Worker remittances totaled US$5.31bb in 10mths’08 as against Rs4.45b in A member company of group
the same period last year, depicting a growth of 19.5%. Major portion came from USA 27.5%, Saudi Arabia 18.8% and UAE17.1%. If this trend continues worker remittances are likely to touch US$5.8b for the year, the highest so far in country’s history.


Investments
Total investment as a percentage of GDP could not sustain the record height of 23% in FY07 and declined to 21.6% in 2007-08. During FY07 the fixed investment was 21.3% which has declined to 20.0% in 2007-08. The overall foreign investment during the 10mths’08 declined by 32.2% and
reached at US$3.6b against US$5.3b in the same period last year. Foreign direct investment (FDI) reached at US$3.48b as compared to US$4.18b in the comparable period of last year, depicting a decline of 16.7%
.
Trade balanceThe merchandise trade deficit widened to US$17b in 10mths’08 as against US$11b in the same period last year. However, as a percentage of GDP, trade deficit is likely to be 12.3% in FY

FFBL AND ENGRO WILL BE GREATER BENEFICIARY BY BUDGET MEASURES

FFBL AND ENGRO WILL BE GREATER BENEFICIARY BY BUDGET MEASURES

Budget 2008-09 Impact on fertilizer sector

Important budgetary measures for the fertilizer sector in Budget 2008-09 are as follows:

1) Govt has decided to increase the subsidy on DAP fertilizer by Rs530 per bag or 112.8% to Rs1,000 per bag from the existing Rs470 per bag in view of steep increase in its international prices. Subsidy on other fertilizers will also continue.

A) FFBL, being the sole producer of DAP; will be the main beneficiary as increased raw material cost would be mitigated by the increased subsidy, which will help the company to maintain its margin.


B) ENGRO (DAP) Importer is also likely to have a positive impact on its bottom line in the shape of inventory gains.

2) The government has also increased the total allocation for fertilizer subsidy by Rs10b or 40% to Rs35b for the next fiscal year from Rs25b allocated for the outgoing fiscal year. It is expected to have a positive impact on the sector because these subsidies will pass on to the farmers in the shape of cheap fertilizer, which will further improve the fertilizer offtakes figures.



3) The government will provide additional Rs30b credit to agricultural sector in addition to total credit to agricultural sector amounting to Rs130b disbursed this year. An increase in agricultural credit target will benefit the farmers in terms of more liquidity and will likely to have a positive impact on the fertilizer sector.


4) General Sales Tax (GST) on imported and local supply of fertilizer and pesticides
has been reduced to 0% from existing 15%. It will have a positive impact on the sector as it is likely to act as another trigger for fertilizer sales because now farmers can get fertilizer and pesticide at cheaper rates. Exemption of sales tax will reduce the urea and DAP prices by Rs49.95 per bag and Rs34.5 per bag respectively.


5) The government has also proposed to waive the levy of 5.0% FED on premium
of crop insurance policy. This step is also to encourage crop insurance in the country.

6)The GoP has increased the wheat support price to Rs625 per maund from earlier Rs510 per maund. In Budget 2008-09, government has mentioned that further upward revision of wheat support price is also expected for the next year’s wheat crop in Aug-Sep keeping in view the higher input cost and escalating international prices. It will improve the farmer’s purchasing power, hence potentially boosting fertilizer offtake.

Islamic Banking in Pakistan

Islamic Banking in Pakistan

Islamic banking in Pakistan has been flourishing from the couple of years. FY’07 was also witnessed significant growth in the Islamic Banking industry. The market share of Islamic banking assets in the overall banking system rose to 4.3% at the end of December 31, 2007 which was 2.9% in December 2006.

Deposit Base
The total deposits of the banking sector at the end of Dec’07 stood at Rs3.5t in which the share of Islamic Banks has grew to 4.1% (Rs147b) in Dec’07 from 2.9% (Rs83b) in Dec’06. The total deposits of the Islamic banks have grown with CAGR of 107% in last four years and stood at Rs147b at the end of Dec’07 from just Rs8b in Dec’03. The growth in Islamic banks deposits was much higher than Islamic banking divisions (IBDs) of conventional banks. Islamic Banks’ deposits grew by 93% in FY’07 as compared to 44% growth in IBDs. A member company of group

Financing
The total financing of Islamic Banking industry has reached at Rs107b at the end of December 2007 which is 62.8% higher than the corresponding figures of Rs66b recorded in December 2006. Out of total financing, Rs69b was done through Islamic banks and remaining Rs38b was covered by IBDs. Total financing of the Islamic Banking Institutions (IBIs) has covered 4.3% share of the total industry figures of Rs2.5t.

Investments
The percentage share of Islamic Banking institutions (IBIs) in total investments of the banking sector was 2.6% recorded at the end of December 2007 and the figures have now reached at Rs31b in total industry figures of Rs1.2t recorded in December 2007. As compared to December 2006, the total investments of the IBIs grew by 322.5% in FY’07. The share of IBIs in total investments was 71% as compared to 29% by IBDs.

Loan against shares

Loan against shares

SBP directive to banks:
The SBP has instructed banks to make sure that loan against shares is absolutely on the name of beneficiary. The SBP has issued BPRD Circular Letter No 15 to the president and chief executives of all banks and has instructed that banks/DFIs that while accepting shares as security.

MARI GAS FAIR VALUE RS. 420/-

MARI GAS FAIR VALUE RS. 420/-

Mari Gas Company Limited is one of the largest oil and gas exploration and production companies in Pakistan which is actively contributing to the national economy. Mari Gas Company Limited was incorporated in mid 80’s by Fauji Foundation ,Govt of Pakistan and Oil & Gas Development Corporation (now Oil & Gas Development Company Limited) to takeover the assets, liabilities and operation of Fauji Foundation (Mari Gas ) and Pak Stanvac Petroleum project. The company commenced business in its own name on December. Mari Gas is listed as a public limited company on all the stock exchanges of Pakistan.


SHAREHOLDER PERCENTAGE

Fauji Foundation 40% Rs 147.00 million

Government of Pakistan 20% Rs 73.50 million

OGDCL 20% Rs 73.50 million

General Public 20% Rs 73.50 million


IMPORTANT BASIS FOR FAIR VALUE:

Mari Gas reported its profit after tax of Rs. 1.4 billion in 9moinths’08 as against Rs0.4 billion in the same period of the last year, a robust growth of 219% was demonstrated.

Earning per share of the company showed an increase of 220% from Rs.12.51 to Rs.39.97 YOY basis.

Mari Gas sales rose by 82% to Rs.4.4 billion.

Operating expenses of the company increased by 12%.

Surging oil & gas prices led the operating profit of the company at the highest pace from Rs.925 million to Rs. 2.4 billion during the period under review.

HBL FAIR VALUE RS. 215

HBL FAIR VALUE RS. 215

HBL FAIR VALUE IS RS. 215 ON THE BASIS OF FOLLOWINGS:

Increase and promote the investment in Pakistan by financing of various projects jointly with Chinese Development Bank (CDB)

CDB is taking Pakistan’s economy full of growing investment opportunities.

SBP’s policy regarding bank’s deposits will enhance the prospect of the banking sector

Crude Oil Prices Story and kse Sectors

Crude Oil Prices Story and kse Sectors

OPEC having 77% of the world’s crude reserves and currently supplying 37% of world crude supply has significant impact on market mechanism. However in the recent past we have seen that Market volatility due to speculations, dominated by a number of other factors like fluctuating US dollar and geopolitical concerns have escalated crude oil prices which have now posed serious concerns for world economies. Boone Pickens has predicted that crude oil prices could hit US$150/bbl while Goldman Sachs has forecasted average price of crude oil for the second half of 2008 at US$141/bbl. The government of Pakistan under pressure from WB and increase to consumers in phases by Dec’08 despite already increasing POL prices overnment, bodes negative for the OMCs and the refineries profitability. Any rise in the prices of POL products will also negatively impact those sectors that depend on these fuels for their production like power, industrial, transport and agriculture.

REMOVAL OF DUTY FROM REFINERIES MARGINS

REMOVAL OF DUTY FROM REFINERIES MARGINS

The National Assembly has yet to decide on the removal of the deemed duty from
refineries margins which will have a substantially negative impact on refinery’s
margins.

ECC of the Cabinet in its next meeting will review the oil pricing mechanism to
reduce the profit margins of OMCs, refineries and inland freight margins. This would
help reduce the taxation burden on consumers, but on the other hand it will alsoreduce revenues of both the government and oil sector entities.

Crude Oil Forecasts for next one to Five Years

Crude Oil Forecasts for next one to Five Years

The unprecedented rise in crude oil prices have thrown the world economies under pressure and have resulted in burgeoning oil import bills, coupled with rising inflation. The most affected by this are developing countries as the main demand for crude is coming from these countries like China and India. Billionaire investor T. Boone Pickens has predicted that crude oil prices could hit US$150 a barrel in the next six months, while investment firm Goldman Sachs raised its forecast for the average price of crude oil for the second half of 2008 to US$141 a barrel and US$200/bbl for next 2 years. WB says global oil prices which are up around US$40 this year, will remain high in a range between US$104 and US$108 a barrel over the next three to five years.

Pakistan’s oil Bill and End of Subsidies

Pakistan’s oil Bill and End of Subsidies

With rising crude oil prices and no ease in these prices in the foreseeable future,
the government in its budget for FY’09 has fixed average crude oil prices at
US$110/bbl for subsidy calculation purpose. The total amount of subsidy that was
provided during FY’08 almost equaled US$160b. The WB and IMF have asked the
government to totally withdraw subsidies by the end of the calendar year. At present
the subsidies on HSD stands at Rs37.07/liter while that on gasoline is Rs7.15/liter.
The country’s oil import bill is likely to touch US$13b during the current financial
year as it has already ballooned to highest ever level during the July-May period as
compared to US$7.33b in FY’07. The oil import bill during 11mths’08 went up by
52.2% to reach US$10.09b from US$6.6b during the same period last year.

READY COUNTER FOR TRADING OF KASB SHARES

READY COUNTER FOR TRADING OF KASB SHARES


The company is proposed to be finally listed w.e.f Monday, August 4, 2008 and accordingly the trading in the shares of the company will be shifted to Ready Counter under T + 2 settlement System from the Monday, August 4, 2008.

PROVISIONAL TRADING OF KASB SHARES

PROVISIONAL TRADING OF KASB SHARES

The provisional Listing shall takes place w.e.f Tuesday, June 24, 2008 in accordance with

“ The Regulation for Future Trading in the Provisional Listed Companies”.

Name of Company: KASB Securities Ltd
KATS Symbol: KASBSL
Opening Date of Contract: 24-06-2008
Closing Date of Contract: 01-08-2008
Settlement Date: 06-08-2008Market
Lot for Trading: 100 shares

KASB OFFER ON KARACHI STOCK EXCHANGE

KASB OFFER ON KARACHI STOCK EXCHANGE KASB Securities Ltd is to be listed on the Karachi Stock Exchange (Guarantee) Limited by an offer for sale of 24 million ordinary shares by KASB Capital Limited at PKR 67.5/- per share

PPL FAIR VALUE KSE KARACHI STOCK EXCHANGE

PPL FAIR VALUE KSE KARACHI STOCK EXCHANGE

PPL FAIR VALUE IS RS. 305

ON THE BASIS OF FOLLOWINGS

1) STRONG EARNING GROWTH
2) STRONG APPRAISAL UPSIDE
3) STRONG PAYOUTS DPS
4) POTENTIONAL PRODUCTION
5) AMERICAN THINK TANK FORECAST OF USD 250/ BARREL

REMEMBER TO TAKE EXPOSURE RELATIVE TO OTHER FACTORS ALSO LIKE POLITICAL AND GDP SLOW GROWTH

MUHAMMAD IJAZ

MARKET STRATEGY KARACHI STOCK EXCHANGE KSE

TODAY KSE (KARACHI STOCK EXCHANGE) CLOSED AT HIGHEST IN ONE DAY TRADING HISTORY.

MAIN CONCERN WAS TO CLEAR THE JUNE FUTURE CONTRACTS.

PLEASE NOTE THAT IN

LONG TERM IT IS BETTER TO REMAIN AND TAKE EXPOSURE

AND

IF SHORT TERM THEN POFIT TAKING IS SUGGESTED ON STRENGTH.

IJAZ

IMPACT OF NEW TRADING RULES KSE

IT IS SAID IN THE MARKET, NOW THERE WILL BE ONE SIDED TRAFFIC IN KSE AS 10% UPPER CIRCUIT AND ONLY 1% LOWER CIRCUIT. IT MEANS DECLINING TREND TRIED TO STOP.

IT MAY BE THERE ARE SOME DULL ACTIVITIES IN NEAR FUTURE IF POLITICAL ISSUES NOT SETTLED AND IF CIRCUMSTANCES ARE NOT SUPPORTING THEN THERE WILL BE HARD TO QUIT FROM MARKET. HENCE IF SOME ONE IN TROUBLE THEN QUIT FROM THE MARKET. BETTER


IJAZ

KSE LATEST NEWS - NEW TRADING RULES

FOLOWING ARE IMPORTANT NEW RULES

1) SHORT SELL BANNED FOR A MONTH
2) LOWER CIRCUIT IS 1% & uPPER cIRCUIT IS 10%
3) BANK GUARANTEE INSTEAD CASH ALLOWED

TIPS FOR SHARES KSE

TIPS FOR SHARES

TIPS FOR OGDC RS. 150/-
TIPS FOR POL RS. 480/-
TIPS FOR PPL RS. 305/-
TIPS FOR ENGRO RS. 310/-
TIPS FOR FFC RS. 140/-
TIPS FOR FFBL RS. 39/-
TIPS FOR PTC RS. 52/-

HUBCO FAIR VALUE 34.75

HUBCO

FAIR VALUE FOR HUBCO IS 34.75

WE RECOMMEND TO ACCUMULATE HUBCO ON THE BASIS OF FOLLOWING FACTS:

225 MW EXPANSION DUE BY FR2010
OTHER PROJECTS ARE ALSO IN PIPELINE
LOW-LEVERAGED BALANCE SHEET
STRONG DPS GROTH

ONLY RISK FOR HUBCO IS LIQUIDITY CRUNCH EMANATING FROM WAPDA PAYAMENT DELAYS.

IJAZ

OIL AND GAS MARKETING COMPANY PORTFOLIO

OIL AND GAS MARKETING COMPANY PORTFOLIO


OGDC

Positives for OGDC:

1) News flow on development projects and exploration Programs
2) Possible reserve appraisal of recent finds
3) Potential reserve addition in Tal block

Risk For OGDC

1) Decline in international oil prices;
2) Delays in implementation of development plans;

Pak Oilfields Ltd ( POL)

Positives for POL
1) News flow on Mamikhel find
2) Reserve appraisal of recent finds and earnings Announcement
3) Potential reserve addition in Tal block

Risks for POL

1) Decline in international oil prices
2) Higher costs of future diversification strategy



Pakistan Petroleum Ltd ( PPL) .

Positives for PPL

1) Strong earnings growth outlook
2) Strong appraisal upside in recent finds
3) Potential production upside from Tal and Mela blocks

Risks for PPL

1) Delays in implementation of development plans
2) Decline in international oil prices

Shares for Portfolio in Fertilizer Sector

Shares for Portfolio in Fertilizer Sector


Engro Chemical

Positives for Engro Chemical Growth:

1) Inventory gains on DAP from rising global prices
3) Better than expected performance by Engro Foods;

Risks

1) Natural hazards affecting fertilizer demand



Fauji Bin Qasim

Positives for Fauji Bin Qasim Growth:

1) Recovery in DAP demand
2) Increase in subsidy will insulate FFBL from rising input costs
2) Backward integration through investment in phosphoric acid plant in Morocco

Risks for Fauji Bin Qasim

1) Delay in Saudi expansion in DAP beyond 2011;
2) Significant increase in DAP or major crop price subsidy




Fauji Fertilizer

Positives for Fauji Fertilizer Growth:

1) Allows best exposure to urea market
2) Growth in urea margins
3) Most defensive play in the sector
4)
Risks for Fauji Fertilizer

1) Longer shut downs than expected for plant debottlenecking;

Tight monetary policy Impact on Stock Market

Tight monetary policy Impact :


In the third week of May 2008, State Bank of Pakistan (SBP) further tightened its
monetary policy citing rising external current account deficit, growing balance of
payments, liquidity constraints in global financial markets, domestic political uncertainty,
complications on financing of external current account deficit, weakening of the rupee
against major international currencies, surging budget deficit, high growth in private
sector credit and the continued growth in headline inflation.


Accordingly, the central bank raised the policy rate by 150bps to 12.0% w.e.f. May 23,
2008 besides increasing the Cash Reserve Requirement (CRR) for all deposits up to one
year maturity by 100bps to 9.0% while keeping the CRR for deposits of over one year
maturity unchanged at zero percent. In addition, the Statutory Liquidity Requirement
(SLR) was increased by 100bps to 19% of the total time and demand liabilities. Further,
effective 1 June 2008, all banks were also required to pay a minimum profit rate of 5% on
Saving/PLS saving products.


It needs to be highlighted, however, that the success of monetary tightening measures
would depend critically on the fiscal strategy of the government. In its statements and
documents, the State Bank has all along been urging upon the government to reduce the
budget deficit to sustainable levels and finance it from sources other than the State Bank
in order to soften its inflationary impact.

Please leave your comments here

STOCK MARKET OF PAKISTAN: E&P Production Data Analysis 10 month 2008

STOCK MARKET OF PAKISTAN: E&P Production Data Analysis 10 month 2008

E&P Production Data Analysis 10 month 2008

E&P Production Data Analysis 10 month 2008


The overall crude oil production of the E&P sector rose by 4.8% during 10mths’08
to 70,104bpd. Total Natural Gas production also rose by 2.5% to 3,982mcfd during
10mhs’08 as compared to 3,883mmcfd in the same period last year. On MoM basis
the production of both gas and oil showed declining trend mainly due to fall in
production from Pindori, Sui, Miano and Dhodak fields.



E&P Production Update – 10mnths 2008

As per data issued by PPIS OGDC continued to lead the market in both crude and
gas production with oil production showing an increase of 5.3% during 10mths’08
whereas gas production also showed an increase of 3.7% during the said period.
Oil production by OGDC depicted increase mainly on the back of increased
production from Mela, Bobi and Chanda fields. Gas production increased because
of rise in production from Uch, Qadirpur and Bobi fields however fall in production
from Miano and Dhodak fields.



Gas Production

PPL showed handsome gains in crude production due to additional production
during the period from Mela field, on the other hand gas production showed
negligible decline of 0.1% in 10mths’08 and also on MoM basis by 4.2% mainly on
the back of fall in production from Sui, Miano & Kandkot. Crude production from
Mela and Tal block boosted oil productin volume for the company.
POL showed double-digit fall in production of crude by 12.7% in 10mths’08 to
5,304bpd whereas on MoM basis crude production rose by 4.6% mainly on the
back of improvement in production from Pindori field, overall production from which
rose to 2125bpd in Apr’08 from 1,588bpd in Mar’08. Gas production showed decline
of 4.0% to 45mmcfd due to fall in production from Meyal Uchri and Pindori.

Crude Oil Natural Gas


Drilling Status

The total drilling target for FY’08 was of 42 exploratory wells and 45 appraisal wells,
of this 52% of exploratory and 100% of the appraisal wells have been achieved
during 10mths’08. OGDC had estimated its drilling target for FY’08 at 17 exploratory
wells and 24 development wells, of which the company has achieved 29% of its
exploratory target and 67% of its development target, making it unlikely for the
company to achieve its full year’s target.

Exploration and Production data 10 months 2008

Exploration and Production data 10 months 2008

Conclusion:
The overall crude oil production of the E&P sector rose by 4.8% during 10mths’08 to 70,104bpd. Total Natural Gas production also rose by 2.5% to 3,982mcfd during 10mhs’08 as compared to 3,883mmcfd in the same period last year. On MoM basis the production of both gas and oil showed declining trend mainly due to fall in production from Pindori, Sui, Miano and Dhodak fields.

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FAIR VALUES

Fair Values of Shares

I hope all are well. Please note that following strategy will be good for trading in stock market for the next week:

Please also note that daily sale & purchase is dangerious, always play in normal conditions and according to situation.


Shares
.
Bank Sector Buy when Less than HOLD SELL when greater than

AKBL 45 45-55 55
MCB 260 260-280 280


OMCS Sector

POL 415 415-440 440
PPL 275 275-290 290
OGDCL 120 120-135 135
APL 550 550-570 570
PSO 500 500-530 530
SSGC 20 20-25 25

FERTIZER Sector

FFBL 45 45-50 50
ENGRO 330 330-350 350
FFC 135 135-150 150


CEMENT Sector

DG 110 110-120 120
LUCKY 130 130-150 150


TEXTILE Sector

NML 85 85-100 100


AUTO Sector

INDUS 250 250-285 285

INSURANCE Sector

ADAMJEE 290 290-315 315

Please note that I need your comments for better result and search


Thanking you

Muhammad Ijaz
www.stockpk.blogspot.com

Fertilizer - Budgetary Steps

Fertilizer - Budgetary Steps

Relief to the agriculture sector

The following measures have been taken to ensure relief and motivation to the farmer as well as incentives to the agriculture sector:

a) Increase of support price of wheat from Rs 510 to Rs 625 per 40 KG.
b) Review of the support price for the next year's wheat crop in August September i.e. before the next sowing season keeping in view the input cost and prevailing international prices.
c) Provision of Rs 75 billion in the PSDP to improve the availability and efficient use of water resources through construction of dams, rehabilitation of irrigation, improve drainage system, lining of canals and water courses throughout the country.
d) To ensure that agriculture produce retains it value and quality and to facilitate its export. Cold chains will be set up in the country.
e) Arrangements for import of bulldozers through foreign collaboration to increase and improve the cultivable area.

Subsidy on DAP

The subsidy for the fertilizer sector has been enhanced to PKR32bn against PKR25bn in Budget FY08 attributable primarily to the phenomenal rise in global fertilizer prices, especially phosphates. The government has raised the DAP subsidy from the previous level of PKR470/bag to PKR1,000/bag.

Agri-Credit

Budget FY09 has remained focussed on the agriculture sector especially in light of spiralling food prices & supply shortages. Accordingly, the agri-credit target has been set at PKR160bn for FY09. In addition, the government is also revamping ZTBL in an attempt to broaden its outreach.

Grain handling & storage facility

Duty free import of machinery and equipment for grain handling and storage facilities to be de-linked from the conditionality of local manufacture. This will largely help in improving the grain handling and storage facilities in the country.

Crop Insurance Policy

It has also been decided to waive-off the levy of 5% Federal Excise Duty on premium of crop insurance policy.

Quality seed supply

To enhance supply of quality seed to farmers, a National Commercial Seed Production Program is being prepared. Negotiations have been started for fast track, formal release of Bt cotton varieties in Pakistan.

Exemption of sales tax on import and local supply of fertilizer

Sales tax on import and local supply of fertilizers and pesticides has been exempted. Exemption of sales tax on import and local supply of fertilizers and pesticides is aimed at providing fertilizers and pesticides at cheaper prices to the farmers.
Fertilizer
Impact - Positive
• The government had made it clear that it would realign its focus on the agricultural sector given the shortfall in the global grain market; rising pressure on the import bill from oil and spiraling food inflation. We understand that what is good for the agricultural sector would turn out to be good for fertilizer companies in terms of
stronger demand and margin outlook.

• The increase in DAP subsidy should help drive DAP sales, which in turn should help the country achieve self sufficiency in major crops particularly wheat. This should also help fuel a major DAP sales rebound and help improve pricing power for FFBL in particular; facilitate placement of fresh import orders and hence result in inventory gains on old stocks.

• The exemption from sales tax and other duties would have little impact on fertilizer price. It would, however, not help reduce fertilizer prices down to a level which could fuel its application.

• An increase in agri-credit would bode well for the fertilizer sector in terms of enhanced liquidity available to the sector and hence fertilizer companies.

• The decision to faciliate establishment of grain handling and storage facilities: crop insurance policy and ensuring availibility of quality seeds should augar well for fertilizer sector in general.

Telecom - Budgetary Steps

Telecom - Budgetary Steps

Duty on imported mobile phones

Specific customs duty of Rs500/- per set has been levied on imported mobile cellular phones.

Rate of FED raise on services

To generate additional revenue for meeting dire national needs, rate of FED on telecommunication services is being enhanced to 21%.

General Sales Tax (GST) raised

GST has been raised by 100bps to 16%.

Rate of FED raise on franchise

In order to meet the revenue requirements, FED rate has been enhanced from 5% to 10% on banking, insurance and franchise services.

Customs duty on Voice Cards and Vast Terminals

Customs duty on Voice Cards and Vast Terminals - meant for use in the telephone call centers – has been slashed to the lower slab of 5% with exemption from sales tax.

Recipient of services

The liability of recipient of excisable services to pay duty has been established. Accordingly, an enabling provision has been made to charge duty from the recipient of services coming from abroad and terminating in Pakistan.

Impact - Neutral to Negative

• Duty on imported mobile phone sets will help check rising consumerism in the country.

• The decision to raise FED on telecommunication services; enhance FED on franchise and establish the liability of recipents of excersiable service coupled with a marginal incraese in GST will not have any significant implact given the pass-through nature of these costs.

Auto Assemblers - Budgetary Steps

Auto Assemblers - Budgetary Steps


WHT increase on car registration

The rates of advance tax, collected at the time of renewal of registration of private motor cars, are proposed to be rationalized by making about 30% to 40% increase in WHT rates.

Increase in duty rates on 1800cc cars or above

Increase in duty rates on import of cars/jeeps above 1800cc from 90% to 100%. Fixed duty/tax rates on old and used cars/jeeps increased by 10%.

Imposition of 5% FED on imported and locally manufactured car of 850cc

To generate revenue from well to do people, FED @ 5% has been levied on import as well as locally manufactured cars having engine capacity exceeding 850cc.

Tariff based system

Tariff based system of the auto industry is being improved further. The new tariff lines will continue to attract additional duty at the rate of 15% as the respective items are being manufactured locally.

CNG Buses

In order to encourage import of dedicated CNG buses, 15% customs duty on their import will be abolished.

Impact - Neutral to Negative

• We feel that overall Budget FY09 would bode negatively for the auto sector. Steps such as increase in withholding tax at the time of renewal of car registration, imposition of 5% FED onn imported and locally manufactured cars of 850cc and the rationalisation of tariff based system would increase the input costs of local auto assemblers.

• Luxury vehicles account for approximately 25% of imported units. The government’s decision to increase duty rates on 1800cc cars should help divert a major portion of their demand towards locally assembled cars in the luxury segment thus boding favourably for the domestic auto assemblers.FEDERAL BUDGET 2008-09

Refineries and E&P - Budgetary Steps

Refineries and E&P - Budgetary Steps

Recipient of services

The liability of recipient of excisable services to pay duty has been established. Accordingly, an enabling provision has been made to charge duty from the recipient of services coming from abroad and terminating in Pakistan.

Reduction of duty on lubricating oils

Duty rate on base oil for lubricating oils reduced from 20% to 10%.

Impact - Negative for refineries
• The slashing of duty on lube base oils would depress the Gross Refining Margins (GRMs) of National Refinery Ltd. - the only lube producer in the country - and hence bode negatively for the local refinery.Refinery

Oil & Gas Marketing – Budget Impact

Oil & Gas Marketing – Budget Impact


Reduction and exemption of duty on bi-products

Bitumen, JP4 & JP8 have been exempted from duty.


PDL and GDS targets for FY09 set

The target for Petroleum Development Levy (PDL) has been set at PKR14bn against PKR8.2bn lasy year while that for Gas Development Surcharge has been set at PKR17.375bn against PKR21.057bn last year.


Impact – Neutral to Positive

• We understand that while the Petroleum Development Levy collection target will decide local petrol prices in FY09, Gas Development Surcharge will have no implications for gas companies.

• The decision to cut down some taxes on bi-products such as bitumen, JP4 and JP8 will help increase the volumetric sale of such products.

FEDERAL BUDGET 2008-09

Power – Budget Impact

Power – Budget Impact

NSS rates & Govt. Commercial Paper

Given the huge fiscal deficit and domestic revenue constraints, the government has announced a raise in the return on National Saving Schemes (NSS) by 200bps. Further, the Central Directorate of National Savings has also been directed to launch 3-, 6- and 12- month papers --- Government Commercial Papers ---, rates of which would be market competitive. The rates on NSS schemes would now be revised quarterly instead of biannually so as to minimise the gap between NSS and market rates.

Subsidies to WAPDA & KESC

The subsidies for WAPDA have been set at PKR74.612bn for FY09 against PKR113.658bn last year while that for KESC has been set at PKR13.8bn against PKR19.596bn last year.

Import of power generation plants

WAPDA and its generation companies have been allowed temporary import of power generation plants free of customs duty as against the existing rate of 5% duty.

Allocation for power sector

An allocation of Rs. 66 billion has been made for a number of power sector projects. It is estimated that 2,200 MW of power will be brought on stream by the early next year.

Tax on transfer of profits

Profit transferred by a branch of foreign company out of Pakistan are proposed to be treated as dividend and chargeable to tax @ 10% as final tax.

Recipient of services

The liability of recipient of excisable services to pay duty has been established. Accordingly, an enabling provision has been made to charge duty from the recipient of services coming from abroad and terminating in Pakistan.

Impact - Neutral to Negative

• An allocation of PKR66bn for the purpose of setting-up of new power sector projects should not only improve the power shortage in the country but also help produce electricity at much cheaper rates compared to thermal power generation.

• Increase in NSS rates by 200bps shall have material negative impact on the valuations of IPPs that are considered close to corporate bond due to fixed project tenure and relatively stable dividend stream.

• We understand that the subsidies allocated to the power utilities would help partially off-set the impact of rising crude price and help insulate the utilities’ consumers from the impact of rising electricity generation costs.

Cement - Budget Impact

Cement – Budget Impact

Public Sector Development Program

The Public Sector Development Program (PSDP) has been marginally raised by 5% to PKR549.7bn for FY09 against the last year’s budgetary target of PKR520bn. The government has announced the construction of 314 small dams while continuing with major infrastructure projects such as raising of Mangla Dam and budget allocations for Mirani Dam, Sabakzai Dam, Kurram Tangi Dam, Gomal Zam Dam, Greater Thal Cannal, Kachhi Canal etc. Meanwhile, the government has deferred any announcement on the construction of the controversial, Kalabagh Dam.

Central Excise Duty (CED)

Central Excise Duty (CED) which stood at PKR750 per ton (PKR37.5/bag) has been raised to PKR900/ton (PKR45/bag).

General Sales Tax (GST)

GST has been raised by 100bps to 16%.

New tax system on real estates

A new taxation system is being introduced for builders and developers, whereby the builder would be required to pay tax @ Rs.50 per sq. ft. of the covered area of a unit. The developer of open plots would be subjected to tax @ Rs.100 per sq. yard of the plot.

Low cost housing

It has been proposed that 1 million housing units be added to country's housing stock, for low income groups and government employees. It has also been decided to allocate Rs.2 billion as a revolving fund which will be further expanded in future.

Impact – Neutral

• The decision to marginally raise PSDP allocation would not have any major impact on cement sales since cement demand largely emnates from private sector projects and exports. We would, however, like to caution that any major issue on the macro economic front like the persistent twin deficits may force the government to slash PSDP allocation during the year.

• A marginal increase in CED by PKR7.5/bag would not have any major impact on the costing of cement companies especially given the sector’s orientation towards exports, where margins are high. Accordingly, we foresee exports rising during the times to come and serving as a mitigant to the government’s decision to maintain CED at current levels.

• The decision to raise GST by 100bps would not have any significant impact given its pass-through nature.

• The announcement to build 1.0 million housing units to the country’s housing stock should augur favourably for the sector.

• On the other hand imposition of tax on real estate may hamper rising foreign and local investment in the sector, which may result in a decline in construction activity in the country.

Textile, PSF and Chemicals - Budgetary Impact

Textile, PSF and Chemicals – Budget Impact


Minimum wage up to PKR6,000

The minimum wage level has been raised from PKR4,600/- to PKR6,000 per employee per month.

Withdrawn of 0.5% on turnover

Minimum tax payable on the declared turnover @ 0.5% is being proposed to be withdrawn.

R&D subsidy

R&D subsidy on exports of fabrics and value added products has not been mentioned in Budget FY09 against a net subsidy of PKR19bn for FY8.
Reduction of duties on various items

Duty has been reduced on calcium carbide from 15% to 5%; PTA from 15% to 7.5%; PSF 6.5% to 4.5%; Caustic soda from Rs.5,000/MT to Rs.4,000/MT and Textile Buckram from 25% to 10%.

Zero rating of Acetic Acid

Acetic acid is used extensively in the textile industry which is zero rated. To save the manufacturers of acetic acid from the hassle of refunds, its raw materials including molasses has also been zero rated.

Zero rating of Caustic Soda etc

It is being proposed that caustic soda/.flakes, cotton linter and sequins should be zero rated so that financial liquidity in the textile sector is increased and the textile producers are free from the hassles of delays in getting refunds on this account.

Duty on polyester films reduced

The rate of duty for polyester films is proposed to bring at par with other items of the same category and it will also become liable to 20% duty.

Impact - Neutral to Positive

• The increase in minimum wage rate would further add to the cost pressures for the industry especially for spinning and weaving segments.

• On the other hand zero rating of some major inputs for textiles should augur well for the sector.

Insurance - Budget impact

Insurance – Budget Impact


Capital Gain Tax (CGT)

Exemption available to capital gains on shares of listed companies upto the tax year ending June 30, 2008 has been extended to June 30, 2010 without any change in the withholding tax and CVT regime.

Accumulated loss in case of amalgamating companies

To encourage amalgamation of banking companies, modarabas and insurance companies the facility of carry forward of “accumulated loss” is proposed to be allowed for a period of six years in the case of amalgamated or amalgamating companies.

Exemption of unrealized gains for tax purpose

Income shown as unrealized gains in the case of non life insurance companies would be excluded from the taxable income and not charged to tax.

Imposition of 5% WHT on reinsurance premium

It has been proposed that reinsurance premium paid to overseas insurance companies may be subjected to withholding tax @ 5% which would be a final tax.

Rate of FED raise on franchise

In order to meet the revenue requirements, FED rate has been enhanced from 5% to 10% on banking, insurance and franchise services.

Impact - Neutral to Positive

• It is worth mentioning that investment income constitutes a major portion of the profitability of insurance companies. With the government having granted exemption on CGT, we see insurance companies benefitting from this move.

• The facility of carryforward of accumulated loss should help encourage amalgamation in the banking sector.

• The decision to exclude income shown as unrealised gains from taxable income in the case of non-life insurance companies should bode favourably since unrealised gains contribute heavily to the bottom line of insurance companies.

• The decision to raise FED rate on insurance services will increase the cost of insurance business and henc bode negatively for the insurance sector.

• The decision to subject re-insurance premium to 5% withholding tax would not have any impact given the fact that insurance companies can pass through this cost in the form of high premiums.I

Commercial Banks - Budget impat

Commercial Banks – Budget


Tax on cash withdrawals

The previous 0.2% With Holding Tax (WHT) on cash withdrawals of PKR25,000 or more has been raised to 0.3%.


Agri-Credit

Budget FY09 has focussed on the agriculture sector especially in light of spiralling food prices & supply shortages. Accordingly, agri-credit target has been set at PKR160bn for FY09. In addition, the government is also revamping ZTBL in an attempt to broaden its outreach.


NSS rates & Govt. Commercial Paper

Given the huge fiscal deficit and domestic revenue constraints, the government has announced a raise in the return on National Saving Schemes (NSS) by 200bps. Further, the Central Directorate of National Savings has also been directed to launch 3-, 6- and 12- month papers --- Government Commercial Papers ---, rates of which would be market competitive. The rates on NSS schemes would now be revised quarterly instead of biannually so as to minimise the gap between NSS and market rates.


Accumulated loss in case of amalgamating companies

To encourage amalgamation of banking companies, modarabas and insurance companies the facility of carry forward of “accumulated loss” is proposed to be allowed for a period of six years in the case of amalgamated or amalgamating companies.


CVT on Power of Attorney

In the case of bank no CVT is proposed to be charged on General Power of Attorney unless it is used into force the mortgage of property offered as collateral against a loan.


Imposition of tax on profit transfer

Profit transferred by a branch of foreign company out of Pakistan are proposed to be treated as dividend and chargeable to tax @ 10% as final tax.


Thin capitalization

Thin capitalization rule is proposed to be made applicable to branches of foreign companies operating in Pakistan.


Elimination of provisions of 7th Schedule

The provisions of 7th Schedule allowing deduction on account of non-performing loans as per prudential regulation issued by the SBP are proposed to be deleted. From the next financial year such deductions would be allowed under sections 29 and 29A of the Income Tax Ordinance, 2001.


Rate of FED raise on franchise

In order to meet the revenue requirements, FED rate has been enhanced from 5% to 10% on banking, insurance and franchise services.



Microfinance

The government will strive to increase the outreach of microfinance services to 3 million borrowers by 2010 including increase in rural microfinance.
Bank
FEDERAL BUDGET 2008-09

Impact – Neutral

• We believe tax on cash withdrawal is unlikely to have any significant effect since banks will transfer the relevant costs on to their customers.

• In addition, the decision to increase agri-credit and SMEs’ financing will help boost banks’ advances since both – agricultural sector and SMEs – are the untapped segments of the economy.

• Further, the current upward revision in NSS rates and the launch of new short-term savings schemes could expedite a shift of deposits from low cost current and saving accounts to these papers. However, what one needs to appreciate is the fact that banks in Pakistan are used for transactional and safety purposes. They also offer a high level of flexibility and service quality. Further, there is a segment of depositors who avoid interest due to religious reasons. A quick analysis of the depositors’ profile indicates that banks drive most of their large deposits from corporate depositors who in most cases fetch market returns and will therefore remain unaffected by the current surge in NSS rates. Accordingly, we feel that the net impact of a raise in NSS rates on banks would be mutted.

• The facility of carryforward of accumulated loss should help encourage amalgamation in the banking sector.

• U/S 29A of Income Tax Ordinance, 2001 3% of total income for consumer loans may be deducted against the said income to banking companies for creation of a reserve for the purpose of setting off any future bad debts pertaining to consumer banking loans. However if the bad debts arising on consumer loans actually written off exceeds the said reserves, it will not be adjustable against any other income of the bank but shall be carried forward for adjsutemnst against such reserves for the next year. The decision to allow deductions on account of NPLs under the above clause implies classification of debts as doubtful for tax purposes. This shall bode negatively for banks in future.

• The decision to increase the outreach of micro-finance is bound to augur positively for NBP in particular.

USAWORLD2008

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