Pakistan's Market Policy: Economistan.com

FREE MARKETS:Pakistani economy along with the Pakistani rupee would be better served if the floor on KSE remainson for another month or so.

NO TO FLOOR REMOVAL FROM KSE

By Saad Sarwar Muhammad

Friday, October 10, 2008

Pakistan’s main index, the Karachi Stock Market (KSE) has witnessed a dramatic fall in market capitalization during the year 2008; falling from ahigh of approx 16,000 points in April in a steep fall to 9,000 points in a span of a few months. Resultantly, the Karachi Stock Market (KSE) put a floor of 9000 points on the index to arrest the unrelenting flight of capital. The market capitalization of the KSE has decreased by about $36 billion dollars during the last year. Around the same time the total liquid foreign exchange reserves have fallen from an all time high of $16.5 billion to $8.4 billion. This dollar flight has resulted in gradual erosion in the value of rupee, which has fallen from 60.74 to a dollar in October 2007 to around 80 to a dollar in October 2008 within a span of one year.

Statistically speaking, it was found after calculation that capital movement away from the stock market had a strong correlation with the depreciation of the rupee and it was found to be around 0.6057, while capital flight from the total liquid foreign exchange reserves was found to have a very weak positive correlation of 0.0525 with the depreciation of the rupee.

Foreign investors have repeatedly asked for the KSE index to be traded free from the floor imposed at 9000 points. If such a demand is met anytime soon and the market capitalization goes down by $15 billion, it would result in the further devaluation of the rupee from its current parity of 80 to a dollar to 90 to a dollar or beyond according to our extrapolation of data.

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Banks import dollar bills to meet panic withdrawals: Business Recorder

KARACHI (October 10 2008): Banks have imported a big consignment of cash US dollars in order to meet a sudden surge in panic withdrawals, according to well-placed banking and government sources. Unlike prior to 1998, banks now do not surrender their forex deposits to the State Bank of Pakistan and instead keep these funds abroad with corresponding banks or their head offices in case of foreign bank branches.

The question of freezing these deposits, therefore, does not arise. Bankers expect their clients' nervousness to end in the next couple of days as they can safely meet the clients needs. Meanwhile, the Pak rupee-dollar parity on the interbank market was stable with parity moving in a short band of Rs 79 to 79.30 per US dollar.

The end of the day rate was Rs 79.10/20 and for tomorrow value Rs 79.22/23 to a dollar. The downgrading of Pakistan risk resulted in a dip of Pak Euro bond trading. The February 2009 Sukuk was at 94 cents offer with no bids. 2016 maturing bonds at 43 cents, 2017 maturing papers 39/39 cents and 30-year bond maturing in 2036 was being offered at 33 cents.

For more on this article, please click on the following link: Banks import dollar bills to meet panic withdrawals: Business Recorder

Pakistan Central Bank to Cut Cash Reserve to Improve Liquidity: Bloomberg

By Khalid Qayum

Oct. 9 (Bloomberg) -- State Bank of Pakistan, the nation's central bank, said it will cut the cash reserve requirement for banks by two percentage points to improve liquidity in the financial markets.
The central bank will slash the cash reserve, or the proportion of deposits banks must set aside as cash, for all deposits up to one year by one percentage point to 8 percent from Oct. 11, according to a statement late yesterday by Karachi-based State Bank. The measure will be cut by another percentage point on Nov. 11, it said.
The step will release 61 billion rupees ($766 million) into the financial markets, the statement said, citing Governor Shamshad Akhtar.

"This is a temporary measure aimed at accommodating extraordinary liquidity requirements of the banking system,'' Akthar was cited in the statement as saying.

For more on the article, please click on the following link: Pakistan Central Bank to Cut Cash Reserve to Improve Liquidity: Bloomberg

Pakistan, China may enter deals for more nuclear power plants: Tehran Times

Pakistan will seek help from China in installing two more nuclear power plants at Chashma, materialising the Diamer-Bhasha Dam project, and joint ventures in manufacturing and assembling cars during the visit of President Asif Ali Zaradri to Beijing that is to start from October 14.

According to a senior government official at Finance Ministry, Pakistan and China may also strike deal in manufacturing and assembling of trucks. “This is basically the proposal of Heavy Mechanical Complex.” Islamabad and Beijing may also enter into agreements for setting up steel mills and cement plants and for developing the agriculture industry. China would be invited to invest in pesticide production and hybrid seed industry. During the visit, Pakistan would also seek cooperation in developing the electronics industry and home appliances.

For more on this article, please click on the following link: Pakistan, China may enter deals for more nuclear power plants: Tehran Times

SBP injects $100 million in market: The News

Updated at: 1215 PST, Wednesday, October 08, 2008

KARACHI: The State Bank of Pakistan has injected US$100 millions in market today (Wednesday).

For more on this article, please click on the following link: SBP injects $100 million in market: The News

KSE-100 index recomposed: Daily Times

KARACHI: The Karachi Stock Exchange (KSE) has recomposed its benchmark 100 index, effective from October 06, 2008.

As per the recomposition rules, seven news companies have been included in the KSE-100 index. These companies are Askari Leasing, Nskshbandi Industries, Colony Sugar Mills, Arif Habib Bank, JS Bank, Altern Energy and Hinopak Motors Limited.

For more on this article, please click on the following link: KSE-100 index recomposed: Daily Times

UAE's imports from Pakistan rise 50% to $1.8b: Gulfnews

By Nadia Saleem
Staff ReporterPublished: October 03, 2008, 23:41

Dubai: The UAE's imports from Pakistan increased 50 per cent this year compared with the previous year, according to trade figures from the Pakistani Commercial Office in Dubai.
Imports increased from $1.2 billion in 2007 to $1.8 billion in 2008. The UAE was the largest importer from Pakistan in the Arab region.
The Arab region imported goods worth $3.36 billion in the July 2007-May 2008 period, an increase of 40.4 per cent from the year before.

For more on this article, please click on the following link: UAE's imports from Pakistan rise 50% to $1.8b: Gulfnews

Marriott Hotel Islamabad opened in Pakistan: Pakistan Daily

Reconstruction work is gaining momentum at Marriott Hotel following gruesome blast on 20th of last month.
Reliable Sources of Marriott Hotel informed that it has been temporary re-opened while in the initial stages The Patisserie, Outdoor Catering Laundry Sops and Pearl Tours are now ready to serve its respected customers.

For more on this article, please click on the following link: Marriott Hotel Islamabad opened in Pakistan: Pakistan Daily

Commies in Washington? End of Free Markets: Economistan

By Saad Sarwar Muhammad
Monday, September 22, 2008

When Pakistan’s central bank blocked foreign currency accounts to control the flight of capital to foreign banks in the aftermath of nuclear tests that it conducted, it was considered as interventionist and the measures were considered anti-economy and opposed to what free markets were all about. A similar thing happened again early this year when Pakistan’s main stock market shed more than $36 billion dollar of market capital in a very short span, the Securities and Exchange Commission of Pakistan put a floor on the points to curtail flight of money. Pakistani rupee also suffered at the hands of the flight of capital and the exchange rate fell from roughly Rs. 60 to a dollar to Rs. 78 to a dollar within a span of a few months. All these measures were criticized around the world because of the interventionist policies of Pakistani institutions who wanted to keep the economy in check.

The collapse of the investment banks like Lehman brothers and Meryl Lynch and firms like Fannie Mae and Freddie Mac along with the imminent fall of the US insurance giant AIG put the global markets in a tailspin. UK responded with a ban on short selling of stocks to arrest the fall of FTSE its main index. The US followed suit with the ban on short selling of stocks for a month. Short selling is speculative in nature with investors betting on a company’s stock to fall driving the whole market down. Even profitable investment banks like Morgan Stanley were feeling the pinch because of the short sale. The measures worked and the stock markets around the world recovered within a day with a long and wayward week coming to an end. In the process, the Fed also ended up bailing out the insurance company AIG for a big sum of $85 billion dollars and it is estimated the cost of the Fed’s intervention to the US taxpayer might amount to $700 billion dollars overall driving the domestic debt even higher to upwards of $11 trillion dollars. All these measures, with no clear and definitive answer to whether they will work or would be enough to save the ailing US economy.

For more on this article, please click on the following link: Commies in Washington? End of Free Markets: Economistan

Despite turmoil, Pakistan pips rival India: Bangkok Post

Despite the rush by entrepreneurs to participate in the growth of the Indian economy, the country with the most attractive regulatory environment in South Asia countries is its arch-rival, Pakistan according to the World Bank.

In Doing Business 2009 politically unstable Pakistan ranked 77th, far behind Mauritius and Maldives which were ranked 24th and 69th respectively, though they offer relatively limited business opportunities.

Among the other countries in South Asia were Sri Lanka (102nd), Bangladesh (110th), Nepal (121st), India (120th), and Bhutan (124th).

The report said that although regulatory reforms in South Asia continued this year, the regulatory burden of doing business was eased the most in four countries - Bangladesh, Bhutan, India, and Sri Lanka - between June 2007 and June 2008.

For more on this article, please click on the following link: Despite turmoil, Pakistan pips rival India: Bangkok Post

Pakistan's New Strategy

In the light of the worsening situation at Pakistan's tribal areas and the repeated violation of the international border of Pakistan by the US, it is imperative that Pakistan evolve a strategy that would stop the gung-ho American crusader cowboys at their tracks. American policy of attacking Pakistan's tribal areas are a clear violation of the international law and Pakistan (Army) has repeatedly reiterated that this violation would no longer go unanswered. There is a new wave of antipathy against the US growing in Pakistan in the light of the latest developments. The Pakistani government is also in a tight spot to respond and support the statements coming from the Pakistani military. In the light of the above mentioned scenario, Pakistan should evolve a strategy that demands the following from the US,

a. Pakistan should tell the US that it is in clear violation of the international law by violating Pakistan's sovereignty and US soldiers would be tried in international court if they are guilty of killing innocent Pakistani civilians in the tribal agencies of Pakistan whose defense is the responsibility of the Pakistan Army.

b. In case the above mentioned policy fails, Pakistan should stop all fuel supplies and support to the coalition forces as a second step and let the US beg its enemies like Iran and Russia for transport of fuel supplies through their territories (better luck USA).

c. If all else fails Pakistan should make a comprehensive defense strategy that should involve strategic positioning of Pakistan's missiles to hit the US Aircraft carriers and other ships in the Arabian sea as a last resort. US can ill afford to start another theater of war and that should be made perfectly clear to the United States of Warica.

US has already annoyed a great deal of countries on the international stage like Venezuela, Bolivia, Cuba, North Korea, Russia, Iran, Syria, Thailand, Sudan and a host of other countries. I hope common sense prevails and Pakistan and Pakistani Army can truly guarantee the safety and security of Pakistan and its civilians. Long Live Pakistan, our heart and soul.

Jeevey Jeevey Pakistan: The Nation

By Shamshad Ahmad

For the past 60 days or so, since the end of June, the people of Kashmir have been free. Free in the most profound sense. They have shrugged off the terror of living their lives in the gun-sights of half a million heavily armed (Indian) soldiers, in the most densely militarised zones in the world.-Arundhati Roy, 'Azadi'- Outlook India)Kashmir is in crisis and aflame again. This time nobody can blame any foreign hand in it. It is indigenous and an inevitable eruption of volcanic suffocation simmering underneath among the Kashmiri people for several decades. Since after 1947, Kashmir has been at the core of South Asia's issues of peace and security, and is today a sombre reminder to the world that despite universalisation of fundamental values and freedoms, the people of Kashmir remain deprived of them.In a remarkable piece on the current uprising in Kashmir, Arundhati Roy, a Booker Prize winner and world's renowned humanist has challenged the world's and India's conscience on this issue drawing their attention to a huge price being paid in terms of military, material, moral and human costs in keeping the Indian occupation of Kashmir against the wishes of its people.

She narrates how an ill-conceived move over the transfer of a small piece of land to the Shri Amarnath Shrine Board "suddenly became the equivalent of tossing a lit match into a barrel of petrol. She acknowledges that "rightly or wrongly, the land transfer was viewed as the thin edge of the wedge. It triggered an apprehension that it was the beginning of an elaborate plan to build Israeli-style settlements, and change the demography of the valley."In reaction, the Kashmiris mounted massive protests bringing the valley to a complete shutdown. In no time, despite curfew and crackdown, the political revolt spread from the cities to villages and developed into a mass movement which not only resurrected memories of the Kashmiri uprising in the 90s but also gave a new dimension to their struggle for freedom. Numerous Kashmiri people were killed by the Indian armed forces in street clashes.

For more on this article, please click on the following link: Jeevey Jeevey Pakistan: The Nation