Vie del Gusto 2008

proft.com.pk Bears return with venom, index down 98pts Page 03 Wednesday, 14 March, 2012 Regulations governing system audit of KSE brokers revamped ISLAMABAD: To enhance trans- parency and reinforce investor confi- dence in the capital market, the Securities and exchange Commission of Pakistan (SeCP) has revamped regulations governing system audit of the brokers of the Karachi Stock exchange (KSe). The revised regulations aim to strengthen monitoring and compliance of market intermediaries with the applicable regulatory provi- sions and improve enforcement power of the regulators. The scope of the audit has been broadened to in- clude broker’s regulatory compliance with various applicable laws, rules and regulations. This includes compliance with the requirement of for- mulating and implementing effective know your customer and customer due diligence internal policies at broker level and frameworks that reinforce requirements of the Anti-Money Laundering Act. Under these regulations, brokers if found non-compliant with any regulatory requirements in an audit exercise will be subject to limited scope audit by the exchange in the following six months to check rectification of non- compliances highlighted in the audit report. For effective deterrence of non-compliances, the limit of fines has been increased - along with em- powering the exchange to have the broker audited/inspected at any time, in addition to the routine audits. It is expected that the revised regulations will facilitate in achieving the objectives of market integrity and investor protection while putting in place effective checks and balances to deter, detect and rectify instances of market abuse. Meanwhile, the SeCP has also advised the exchange to initi- ate work on developing its capacity and capabilities to conduct in-house audits of its brokers to ensure improved compliance and effective monitoring in line with best international practices. STAFF REPORT KARACHI ISMAIL DILAWAR T he analysts see the country’s trade imbalance taking a breather during the month of February (2012) as Pakistan Bureau of Sta- tistics (PBS) data shows the gap declin- ing by 15.8 percent month-on-month (MoM). “This was reinforced by four percent MoM increase in exports and five percent decline in import balances,” said Farhan Bashir Khan of InvestCap. During 7MFY12, country’s oil bill surged by 35 percent YoY, while its con- tribution in total imports remained bounded to 35 percent compared to 31 percent same period last year. Although the oil prices rallied during the month of Feb-12 (+5 percent MoM), the impact on import bill as per PBS figures appear muted. “Nevertheless, we expect impact of higher oil prices to be reflected in com- ing months,” said Khan. On the other hand, the analyst said, with bumper wheat crop expected this season, estimated wheat export of two million tons could yield additional $ 500 million for the country’s exports during FY12. While it remains to be seen how trade performance would eventually be reflected in country’s balance of pay- ment during Feb-12, the current account deficit is expected to land in the vicinity of $ 200 million, accounting for 1.3 percent of GDP, for the month, further sup- ported by improved remittances that increased by 4 percent MoM). In this manner, we expect cumulative current account deficit to reach $ 2.8 billion during 8MFY12, two percent of GDP on annualized basis. “We further expect full year deficit to stay in the same range relative to GDP,” Khan said. So far, the central bank has managed to keep exchange rate from slipping further (0.8 percent depreciation against USD CY12TD, compared to 5 percent Jul-Dec11) while also keeping the currency market stable (PKR/USD move- ments 42 percent less volatile during CY12TD compared to 1hFY12). “however, the same comes at a price,” he said. Average injection under OMOs has crossed Rs 300 billion in recent sessions indicating the drying domestic liquidity at the cost of intervention at the currency counter. Although such injections might be necessary to keep markets liquid, it remains to be seen how any excess liquidity would be reflected in the system (depending upon the quantum of mop- ups) once foreign exchange reserve dwindle to a point where a free floating regime becomes inevitable. As per latest figures, reserves with SBP have fallen below $ 12 billion, down 15 percent since Jun-11, although banks are seemingly more liquid with $ 4.4 billion, up 29 percent since Jun-11. “We deem it is only a matter of time before liquidity at foreign counter dries up (current and more recently even fi- nancial accounts have been running in deficits) and eventually see more serious consequences, specifically on inflation during FY13,” said the analyst. As far as currency is concerned, we see recent spell of stability would eventually fade away, assuming no signifi- cant change in the flow of foreign funds. g Analysts see no instant knee-jerks in external accounts g Cumulative C/A deﬁcit to reach $ 2.8bn during 8MFY12 g More serious consequences ahead on inﬂation side during FY13 Bumper wheat crop may fetch $500mn extra in exports during FY12 PRO 14-03-2012_Layout 1 3/14/2012 12:14 AM Page 1

Vie del Gusto 2008

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