WALL STREET WEEK AHEAD

Monday, 15 October, 2012

Private sector has

PCCC’s power ISLAMABAD

ONlINE

The recently re-constituted PakistanCentral Cotton Committee’s (PCCC)powers have been given to private sectorwhich may manipulate cotton dateaccording to its own interests, saysources. “The reconstituting of PakistanCentral Cotton Committee will lead thecountry to an unbiased and unauthenticdata in the future as APTMA willmanipulate cotton date according to itsown wish,” the sources said, adding thatthe government will also become helplessto fix unbiased cotton production targetand release authentic date of it. Thesources said after the reconstituting ofCotton Body the government’s role hasalmost ended to fix cotton productiontarget and to present unbiased cottondate as the government will only dependon private sector’s data. While talkingexclusively to this news agency here onSaturday Cotton Commissioner Ministryof Textile Industry Dr.Khaild Abdullahtold that after the defunct FederalCommittee on Agriculture (FCA) of thedevolved Ministry of Food andAgriculture, the targets of any cropcommodity could not officially fixed;rather provinces use their last year’sachievements as target of the next year.He said that a report published in Aprilthis year, by Global AgricultureInformation Network (GAIN) projectedPakistan’s cotton production for the year2012-13 as 10 per cent increase in areaand production. The author forecastedthe Pakistan’s cotton cultivation on 3.3million and production as 11 million bales(480 lbs per bale) equivalent to 14.1million bales (170 kg). Dr.KhaildAbdullah said that the report apparentlywas not based on any authentic source ordata. Such premature projections maydamage the cotton market, shakeinvestor’s confidence create biasestimates of global cotton stocks. Ministryof Textile Industry can not endorse suchreports. According to notification,Shahzad Khan from APTMA would headday to day affairs of PCCC as VicePresident; five more APTMA memberswill be in committee representing eachprovince, three members each fromFarmers Associate Pakistan, PakistanCotton Ginners Association and KarachiCotton Association.

ISLAMABAD

ONlINE

THE incumbent governmenthas collected Rs 5.839 bil-lion federal excise duty onpetroleum products during2011-12 from Rs 5.120 bil-

lion in previous years with an in-crease of 14 percent.

Well informed sourcestold Online that pe-

troleum productsare the highest

source ofsales tax

and

contributed more than forty three percent of the total salestax during 2011-12. The sources told that petrol (MS) is theleading source of sales tax at the import stage and the salestax on petroleum products recorded a growth of 42.3.

Sources informed that apart from the tax collection onpetroleum products, government is earning billion of ru-pees through custom duty these products as import bill ofthese products has been exceeded from 15 billion dollar in2011-12. The source also apprised that total collection oftaxes including general sales tax and federal excise dutiesstood at more than Rs 330 billion during 2011-12 showingincrease of 14% as compared to the previous years.

Sources said that although government has no controlover rise in international oil prices but what can do it toexempt the retail price of POL products from taxation toprovide maximum relief to the price stricken masses ofthe country. Every rise in petroleum prices brings moreprofits to the oil companies and more revenue to the gov-ernment exchequer at the cost of consumers. Every in-crease in price gives an opportunity to the government to

raise the collection from general sales tax, custom dutiesand federal excise duty while hike in these taxes are

born by the consumers, source added. The source said that the weekly inflation price

revision is causing an inflation impacts which isdetrimental to the national economy and indus-trialists suffered million of rupees loss due to

the weekly revision mechanism as it kept costsof production variable. Pakistan is develop-ing country and the weekly price determina-tion mechanism was not practical as it onlysuited developed economies. Governmentshould keep the diesel price comparativelylower as it was used as an input for indus-tries and agriculture. Such price varia-tions might be absorbed by the taxeslevied on petroleum products to keep

the prices stable.

5.839 billion rupees!

NEW YORK

AGENCIES

Central bank-fueled gains took marketswithin reach of five-year highs in Septem-ber, but now U.S. stock market participantsare shifting their focus back to corporateoutlooks, and the picture is not pretty.

Early earnings reports have under-lined those concerns, which may be exac-erbated when dozens of major companies- including Dow components GeneralElectric (GE.N), Microsoft Corp(MSFT.O) and International BusinessMachines Corp (IBM.N) - report nextweek. “Caution is definitely the operativeword as Europe and China look to con-tinue dragging on earnings,” said MichaelLoewengart, director of investment strat-egy at E-Trade Financial in New York.“The overall tone is so pessimistic that wemay see some upside surprises, but wecould still suffer considerable losses if thenews is bad.”

Profits of S&P 500 .SPX companiesare seen dropping 3 percent this quarterfrom a year ago, the first decline in threeyears, hurt by China’s slowing growth andEurope’s debt crisis, which recently

prompted the International MonetaryFund to cut its 2012 economic growthoutlook. Financial stocks will be espe-cially in focus, with Bank of America Corp(BAC.N), Citigroup Inc (C.N), GoldmanSachs Group Inc (GS.N) and MorganStanley (MS.N) all set to report.

Results on Friday from JPMorganChase & Co (JPM.N) and Wells Fargo &Co (WFC.N) generated some cautionabout the group despite both reportingstronger-than-expected profits. WellsFargo posted disappointing revenue anda bigger drop in net interest margin thanhad been anticipated.

Wells Fargo shares slumped 2.6 per-cent to $34.25 while JPMorgan lost 1.1percent to $41.62 despite bullish com-mentary about the housing market.

“We need to see big banks doing well,and JPMorgan or Wells didn’t give us theboost we were hoping for,” said WayneKaufman, chief market analyst at JohnThomas Financial in New York. “Citi-group is the one we’re looking for. If prof-its come in worse than expected there,that would make me more bearish aboutthe economy in general.”FEWER COMPANIES BEAT THE

STREET: With only 6 percent of S&P 500companies having reported, 59 percent ofcompanies have topped profit expecta-tions - less than the average beat rate of 67percent for the past four quarters, accord-ing to Thomson Reuters data. Half of com-panies have beaten on revenue, while aquarter missed profit forecasts.

“We need to see the beat rate pick upwell into the 60s if we want the market tohave any support,” Kaufman said.

The S&P 500 .SPX fell 2.2 percentthis week, its biggest weekly percentagedrop since June, on caution about theseason after a number of bellwethers cau-tioned on their outlooks, includingChevron Corp (CVX.N) and Alcoa Inc(AA.N). Profits are being dragged downby material .GSPE and energy .GSPEstocks. Material sector earnings are seendropping 24 percent, and energy sectorresults are expected to slide 19 percent.

In contrast, aggregate profit growthfor financials .GSPF is seen up 1.6 per-cent. Trading could be especially volatilein the Nasdaq, with a number of tech ti-tans on tap, including Microsoft, GoogleInc (GOOG.O), IBM and Intel Corp(INTC.O), which recently cut its outlook.

“Tech results can be a good proxy forbusiness spending, which will give us asense of how companies are viewing thefuture,” said John Carey, portfolio man-ager at Pioneer Investment Managementin Boston. Carey, who helps overseeabout $200 billion in assets, said out-looks were still too optimistic, “so I’vepulled in my horns a bit, and have be-come more defensive.”BLUE CHIPS, GREECE AND DATAMcDonald’s Corp (MCD.N), United-Health Group (UNH.N) and Johnson &Johnson (JNJ.N) are also scheduled toreport earnings, along with General Elec-tric, which E-Trade’s Loewengart saidwould be particularly watched, given the

company’s diversified operations.Trading will also be influenced by the

news flow in Europe, where a summit offinance ministers will take place. TheWall Street Journal reported that a dealon austerity measures for Greece could bereached in time for the meeting.

In the realm of U.S. economic data,investors will look ahead to reads on re-tail sales, the Consumer Price Index andexisting home sales. September retailsales are seen rising 0.8 percent, whilethe overall CPI for September is ex-pected to gain 0.5 percent, and Septem-ber existing home sales are forecast tofall 2 percent, according to economistspolled by Reuters.

Investors turn wary as earnings picture dims

Deutsche Telekom aims closing MetroPCS deal in 2nd-quarter 2013: report

Rs 5.839b FEDcollected onpetroleumproducts

Earnings season is heating up, but investors’ feet are getting cold

FRANKFURT: “The transaction is not likely be carried out until the secondquarter of 2013”, Hoettges told daily Boersenzeitung. Deutsche Telekom andMetroPCS on October 3 said they planned to combine their American wirelessservices units in an effective reverse merger, in which U.S.-listed MetroPCS willbuy T-Mobile U.S.[ID:nL6E8L3B1O] The merger marks a long-awaitedconsolidation in the U.S. mobile market, in which the fourth-largest mobilecarrier Deutsche Telekom’s T-Mobile aims to get the scale it needs to competewith AT&T (T.N) and Verizon (VZ.N). It will also help Deutsche Telekom lessen

the burden of investing in the U.S. by making the local unit more independent,and give the former German monopoly a liquid asset it can sell down if it wantsto exit the U.S. eventually. Hoettges reiterated that Deutsche Telekom’sshareholder remuneration policy for 2012 will not be affected by the mergerplans and that shareholders are set to receive a dividend of at least 0.70 euros($0.91) per share for 2012. “Given profits brought forward of 1.6 billion eurosand retained earnings of 15.5 billion euros there can be no doubt in our ability topay a dividend,” Hoettges told the newspaper. AGENCIES

Deutsche Telekom (DTEGn.DE) aims to complete the merger of its T-Mobile U.S. unit with MetroPCS (PCS.N) between April and June 2013, Chief Financial Officer Timotheus Hoettges told a German newspaper

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02

Monday, 15 October, 2012

Business

WASHINGTON

AGENCIES

Expectations of a looser market weighed onprices after a report by the International En-ergy Agency's (IEA) forecast higher suppliesand declining oil consumption after con-cerns about North Sea oil supplies and Mid-

dle East tensions supported Brent for most of the week.Brent and U.S. crude posted weekly gains of around

2 percent as turmoil in the Middle East, especially ten-sions on the border between Syria and Turkey, intensifiedand Europe continued to grapple with its debt crisis.

Money managers raised their net long positions dur-ing the week by over 7,000 contracts to top 196,000 dur-ing the week. Oil markets have been balancingexpectations of weaker fuel demand due to the strugglingglobal economy against the risk of output disruptionsfrom the Middle East in recent weeks.

Brent November crude fell $1.09 to settle at $114.62a barrel, while U.S. crude for November delivery tradeddown 21 cents to settle at $91.86 a barrel.

Friday's moves narrowed Brent's premium to U.S.crude benchmark West Texas Intermediate to below $23a barrel after it hit $23.69 on Thursday, the highest sinceOctober 2011. Brent's premium to U.S. crude rose morethan $8 a barrel since falling to $15.57 a barrel on Sep-tember 19 as the European benchmark was squeezed bylower North Sea output.

November output of crude from the four crude streamunderpinning the Brent crude benchmark -- Brent, For-ties, Oseberg and Ekofisk, was expected to average780,000 barrels per day, down from 871,000 bpd in Oc-tober and close to September lows of 720,000 bpd.

The Brent/WTI spread narrowing was "reflecting pos-sible profit-taking in the Brent-WTI spread after it earlierrose to its highest level in a year," Addison Armstrong,senior director at Tradition Energy, said in a note.

One trader said some investors in the spread playwere booking profits ahead of the weekend, with so much

uncertainty hovering over the market.Tension between Turkey and Syria continued to build

on Friday as Turkey scrambled two fighter planes to theborder with Syria after a Syrian military helicopterbombed the Syrian border town of Azmarin.

Fighting along Turkey's border with Syria has repeat-edly spilled over into Turkish territory in the past week.

The European Union (EU) provisionally approvednew economic sanctions against Iran over Tehran's nu-clear program, with senior diplomats giving their backingto measures against Iran's banking sector and industry.

The IEA said that Iran's oil production has fallen tothe lowest in more than two decades, with the decline at-tributed to Western sanctions.US GASOLINE, HEATING OIL PULL BACK: USgasoline and heating oil futures fell, with gasoline retreat-ing more than 2 percent and testing support below$2.8790 a gallon, its 100-day moving average, a technicallevel monitored by chart-watching traders and analysts.

Heating oil futures fell more than 1 percent, but wasretreating from a seven-month peak above $3.26 a gallonon Thursday. U.S. distillate stocks, which include dieseland heating oil, fell by 3.2 million barrels last week, theEnergy Information Administration reported, far morethan expectations. Total U.S. distillate inventories arenow 33 percent below the level of last October as refineryclosures and higher exports have cut into domestic sup-plies. <EIA/S>IEA CUTS DEMAND EXPECTATIONS: The IEA cutits global oil demand growth projection for 2011-2016 by500,000 bpd compared with its previous report, easingthe pressure on OPEC to produce more oil. <ID:nL5E8LC5QJ> The agency also cut its 2013 global oil de-mand projection by 100,000 bpd to 90.48 million bpd,citing lower consumption in Europe, the Americas andChina. "It seems like the market has reacted on the nega-tive side. Crude oil prices reversed from yesterday's gainsamid concerns over confirmation of the global oil demandgrowth," said Myrto Sokou, a senior research analyst atSucden Financial.

Brent falls $1/bbl, spreadto US crude narrows

Yellow Diamond, the newluxury fragrance by Versace

KARACHI: Italian fashion company and tradename Versace launched their newest perfume Yel-low Diamond at Shapes with the same class andstyle that is the trademark of the brand. The

evening started with a speech from the guest ofhonor H.E Roberto Franceschinis, counsel generalof Italy who praised the rapid succession withwhich the brand has spread throughout the worldand also the remarkable work done by Multitechto stop the sale of fake perfumes in Pakistan. Thegorgeous Pakistani actress and recent award win-ner for best actress at New York Film FestivalAmina Sheikh clad in a gorgeous Maheen Kareemcreation glorified the evening with the unveiling ofthe perfume Yellow Diamond. The evening pro-ceeded with a presentation with models that weremade up to look like Greek goddess in customizedgolden togas by Maheen Kareem and Yellow Dia-mond Jewellery by Nazneen Tariq walked theramp to dramatic Italian music and displayed theperfume. The entire theme paid homage to thegreek Goddess Medusa and the pure lustrousbeauty of diamonds. The evening attended by thecrème of Karachi was embezzled with morecelebrities like Humayan Saeed, Nazia Malik,Deepak Perwani, Anita Ayub, Arjumand Rahim,Momal Sheikh, Nazia Malik, Nazneen Tariq,Neshmia Ahmed, Saima Acharia, Adnan Pardeysi,and many more.

Fashion ComPassion, a uniqueonline shopping portal

KARACHI: Launched in November 2010, by so-cial entrepreneur Ayesha Mustafa, Fashion Com-Passion is a unique online shopping portal thatprovides a platform to skilled and creative womenartisans, by stocking brands that work with them.

The company retails products across the world,working in Jordon, Lebanon, U.A.E, India,Bangladesh, Afghanistan, Cambodia and Kenya.Fashion ComPassion is now considered to be oneof the most influential retailers in the field of so-cially conscious fashion with prominent celebritiessuch as Anne Hathaway, Livia Firth, Lily Cole, EvaLongaria, wearing the collection. The collection issold at high end international retailers Blooming-dales, S*uce and The British Museum in London.

CORPORATE CORNER

DANI RODRIK

In the French parliament’s recent debate onEurope’s new fiscal treaty, the country’s So-cialist government vehemently denied thatratification of the treaty would undermineFrench sovereignty. It places “not one con-straint on the level of public spending,” Jean-Marc Ayrault, the prime minister, asserted.“Budget sovereignty remains in the parlia-ment of the French Republic.”

As Ayrault was trying to reassure hisskeptical colleagues, including many mem-bers of his own party, European Commis-sioner for Competition Joaquin Almunia wasdelivering a similar message to his fellow so-cial democrats in Brussels. To succeed, he ar-gued, Europe must prove wrong those whobelieve there is a conflict between globaliza-tion and sovereignty.

Nobody likes to give up national sover-eignty, least of all, it seems, politicians on theleft. Yet, by denying the obvious fact that theeurozone’s viability depends on substantial re-straints on sovereignty, Europe’s leaders aremisleading their voters, delaying the Euro-peanization of democratic politics, and raisingthe political and economic costs of the ulti-mate reckoning.

The eurozone aspires to full economic in-tegration, which entails the elimination oftransaction costs that impede cross-bordercommerce and finance. Obviously, it requiresthat governments renounce direct restrictionson trade and capital flows. But it also requiresthat they harmonize their domestic rules andregulations – such as product-safety stan-dards and bank regulations – with those ofother member states in order to ensure theydo not act as indirect trade barriers. And gov-ernments must forswear changes in thesepolicies, lest the uncertainty itself act as atransaction cost.

This was all implicit in the EuropeanUnion’s single-market initiative. The eurozonewent one step further, aiming through mone-tary unification to eradicate fully the transac-tion costs associated with national currenciesand exchange-rate risk.

Simply put, the European integrationproject has hinged on restrictions on nationalsovereignty. If its future is now in doubt, it isbecause sovereignty stands in the way onceagain. In a true economic union, under-pinned by union-wide political institutions,the financial problems of Greece, Spain, andthe others would not have blown up to theircurrent proportions, threatening the exis-tence of the union itself.

Consider the United States. No one evenkeeps track of, say, Florida’s current-accountdeficit with the rest of the country, althoughwe can safely guess that it is huge (since thestate is home to many retirees living off bene-fits that come from elsewhere).

When Florida’s state government goesbankrupt, Florida’s banks continue to operatenormally, because they are under federalrather than state jurisdiction. When Florida’sbanks go belly-up, state finances are insu-lated, because the banks are ultimately the re-sponsibility of federal institutions.

When Florida’s workers become unem-ployed, they get unemployment checks from

Washington, DC. And when Florida’s votersare disenchanted about the economy, they donot riot outside the state capital; they putpressure on their representatives in Congressto push for changes in federal policies. No-body would argue that US states have anabundance of sovereignty.

The relationship between sovereignty anddemocracy is also misunderstood. Not all re-strictions on the exercise of sovereign powerare undemocratic. Political scientists talkabout “democratic delegation” – the idea thata sovereign might want to tie its hands(through international commitments or dele-gation to autonomous agencies) in order toachieve better outcomes. The delegation ofmonetary policy to an independent centralbank is the archetypal example: in the serviceof price stability, daily management of mone-tary policy is insulated from politics.

Even if selective limitations on sover-eignty may enhance democratic performance,there is no guarantee that all limitations im-plied by market integration would do so. Indomestic politics, delegation is carefully cali-brated and restricted to a few areas where theissues tend to be highly technical and partisandifferences are not large.

A truly democracy-enhancing globaliza-tion would respect these boundaries. Itwould impose only those limits that are con-sistent with democratic delegation, possiblyalong with a limited number of proceduralnorms (such as transparency, accountabil-ity, representativeness, use of scientific evi-dence, etc.) that enhance democraticdeliberation at home.

As the American example illustrates, it ispossible to give up on sovereignty – asFlorida, Texas, California, and the other USstates have done – without giving up ondemocracy. But combining market integrationwith democracy requires the creation ofsupranational political institutions that arerepresentative and accountable.

The conflict between democracy and glob-alization becomes acute when globalizationrestricts the domestic articulation of policypreferences without a compensating expan-sion of democratic space at theregional/global level. Europe is already on thewrong side of this boundary, as the politicalunrest in Spain and Greece indicates.

That is where my political trilemma beginsto bite: We cannot have globalization, democ-racy, and national sovereignty simultaneously.We must choose two among the three.

If European leaders want to maintaindemocracy, they must make a choice betweenpolitical union and economic disintegration.They must either explicitly renounce eco-nomic sovereignty or actively put it to use forthe benefit of their citizens. The first wouldentail coming clean with their own electoratesand building democratic space above the levelof the nation-state. The second would meangiving up on monetary union in order to beable to deploy national monetary and fiscalpolicies in the service of longer-term recovery.

The longer this choice is postponed, thegreater the economic and political cost that ul-timately will have to be paid.

Courtesy Project Syndicate

PIA Managing Director Junaid Yunus flanked by Syed Adil

Gilani advisor Transparency International Pakistn (TIP)

and justice (Retired) Trustee TIP Signing an MOU at PIA

Head Office.

THE TRuTH AbouT

SovEREignTy

Brent crude prices fell more than $1 a barrel, outpacing losses on UScrude and deflating the spread between the two contracts after it hitthe widest level in a year this week

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