Posts

Showing posts from August, 2008

Desperate Times, Desperate Measures for Pakistani Investors

Image
Fearing a complete meltdown of stock prices at Karachi Stock Exchange, Pakistan's Securities and Exchange Commission imposed a floor of 9144 for the market's benchmark KSE-100 index. The index closed at 9144 level on Wednesday, Aug 27, the day the KSE and SEC announced their decision to not allow the KSE-100 to trade below this arbitrary level. This extraordinary action, the first of its kind since the exchange opened its doors in 1948, came after investors pushed down the index to its lowest level in more than two years.

Karachi stock exchange saw very thin trading on Friday and the KSE-100 index finally closed at 9,208.26 points, with a meager gain of 4.48 points. The KSE-30 index increased by 15.87 to close at 10,198.05 level.


The KSE-100 has lost 34.6% of its value this year, as investor confidence has been been hurt by political uncertainty and a long list of economic troubles, including skyrocketing inflation, disappearing foreign exchange reserves, declining rupee and a …

Harry Potter Versus Hari Puttar

Image
"We have recently commenced proceedings against parties involved in the production and distribution of a movie entitled Hari Puttar," Warner Bros spokeswoman Deborah Lincoln told The Hollywood Reporter.

"Warner Bros values and protects intellectual property rights.

"However, it is our policy not to discuss publicly the details of any ongoing litigation."

Hari Puttar, made by Mirchi Movies of India, tells the story of a 10-year-old Indian boy, named Hari, who moves to England with his parents and becomes embroiled in a battle over a secret microchip. The boy, left home alone, fights off burglars when his parents go away on vacation - a plot more reminiscent of the popular film Home Alone, starring Macaulay Culkin.

In response to the Warner Bros. lawsuit, Munish Purii, chief executive officer of Mumbai-based producer Mirchi Movies, said, "There is absolutely nothing to link Hari Puttar with Harry Potter." Hari is a common name in India and puttar is Punab…

Dawn of Mobile Internet Revolution

Image
Mobile application developers and high-bandwidth wireless data network operators are being dramatically boosted by latest innovations, growing popularity and rising demand of smartphones such as iPhone, Blackberry, Palm Treo and other mobile platforms. Some 10 percent of phones shipped worldwide — and some 19 percent of phones sold at retail in the United States — are smart-phones. Taiwanese smartphone maker High Tech Computer Corp. (HTC) expects its sales in India to double in 2008, from 100,000 in 2007 to 200,000 in 2008. Although reliable figures are not available, Blackberry is finding traction in Pakistan and HTC is promoting its low-cost smartphones. Overall, there is room for substantial growth. In terms of wireless voice and data, markets with large populations and relatively low penetration rates, such as India, China, Philippines, Pakistan, Vietnam and Indonesia, will continue to grow at a rapid rate, according to an Aug 2008 report by Paul Budde Communication Pty Ltd.

Each …

Scrabulous Removal Angers Indian Brothers

Image
Jayant and Rajat Agarwalla, the Calcutta-based developers of the Facebook application Scrabulous, have lashed out at Facebook for worldwide removal of their popular creation. With over half a million users, Scrabulous is likely the most popular online version of Scrabble (Hasbro's own Facebook version of Scrabble, which was released in July, has a little over 9,000 users). The Agarwalla brothers have a point: Why did Facebook yield to bullying by Mattel in the absence of a court order?

The Indian brothers are not alone in their criticism. Prof. Peter Fader, co-director of the Wharton Interactive Media Initiative, told the Knowledge@Wharton online business journal that Hasbro’s move was an “incredibly bad business decision.” Scrabulous “has been such a fabulously good thing for the Scrabble franchise [that] Hasbro should have been celebrating. ” The Wharton online article notes that Scrabulous in 2007 had about 1.3 million monthly users and had 600,000 players each day.Not only is …

Quality Problems Plague Indian Wind Turbines

Image
India's Suzlon Energy (SUZL: BSE), with 8% market share of wind turbines in the US, is beset by quality issues at home and abroad, according the Wall Street Journal.

Suzlon Energy, with market cap of INR 270B, is a wind power company in India. In terms of market share, the company is the largest wind turbine manufacturer in Asia and the fifth largest worldwide. With headquarters in Pune it has several manufacturing sites in India including Pondicherry, Daman, Bhuj and Gandhidham as well as in mainland China, Germany and Belgium. The company is listed on the National Stock Exchange of India and on the Bombay Stock Exchange.

The window of opportunity for Suzlon opened up with growing demand for green energy amid global-warming fears and the soaring cost of oil, coupled with shortages of turbines from more established players. The company's less-expensive turbines raised hopes for a reduction in the cost of wind power, which currently is subsidized in many countries, including the…

Sri Lanka's Economic Troubles

Image
It may not be any consolation to an average Pakistani but Pakistani economy is not alone in returning to the bad old days. Sri Lanka is keeping pace with Pakistan.
While Sri Lanka's long running civil war has largely been limited to the north and east, leaving the populous, well-off west largely unscathed, its stresses are beginning to show in the island nation's economy.

The Economist reports that Sri Lanka's annual inflation is close to 30%, the highest in South Asia. The rupee has appreciated against the dollar, further hurting exporters. By one estimate, economic growth—which was 7.6% in 2006—will be 4.3% this year. As elsewhere, inflation is being driven by high food and energy prices. But in Sri Lanka, 25-year average annual inflation is 12%. Monetary policy has been too loose, in part to finance the war. Including the cost of resettling refugees, the war eats up around 30% of the government’s budget.


Sri Lanka's exports and economy have been propped up by special …

Musharraf's Economic Legacy

Image
Regardless of the criticism of President Musharraf's politics or personality, there is general agreement among independent economists that, through his structural reforms and economic management, President Musharraf left Pakistan's economy in much better shape than he found it when he seized power in 1999.

Here are some of the key highlights of the results of Musharraf era economy:

1. Pakistan's tax base and government revenue collection more than doubled from about Rs. 500b to over Rs. 1 trillion.

2. Pakistan's GDP more than doubled to $144b since 1999.

3. Most recent figures in 2007 indicate that Pakistan's total debt stands at 56% of GDP, significantly lower than the 99% of GDP in 1999.

4. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. Contrary to accusations by Musharraf's detractors that it was an artificial consumer-led growth, it was really an investment-led boom that Pakistan exp…

Declining Food and Fuel Prices to Help South Asians

Image
Wheat is down from a record high of $900 per ton earlier this year to $300 per ton today. For December 2007 delivery, Pakistan paid an estimated import price of $380-400 per ton, exclusive of transportation. Earlier in April-May 2007, Pakistan had exported wheat at the then-prevailing $225 per ton.

The rising oil import bill has been the biggest budget buster for Pakistan and other developing nation which must import oil. Pakistan's dollar reserves have dramatically dropped from $15.5b to $10.5b this year. The fact that oil is down from the peak of $145 a barrel to $114 a barrel is good news for Pakistanis and South Asians. Since June 30, oil on the New York Mercantile Exchange has fallen 18%, and natural gas has sunk 37%, to $8.349 a million British thermal units.

The pullback has spread to other commodities as well. Since the end of June quarter, gold is down more than 11%, and several industrial metals also have tanked. Agriculture has pulled way back, with a 31% drop for corn, a…

India, Pakistan and Johnson-Ali Olympics Success Model

Image
“Why are the top 10 medaling nations top 10?” Professor Daniel Johnson asks. “It’s not that athletic prowess is completely independent from wealth and population. These nations have more resources at their disposal.” Daniel Johnson, a college professor and an economist in Denver, Colorado has developed a mathematical model for predicting each nation's Olympics success.

Professor Johnson's model weighs factors such as wealth and population rather than rely on the detailed knowledge of individual athletes' abilities. The model, which was concocted by Johnson and former student assistant Ayfer Ali in 1999 at Harvard, also considers a country’s climate and the advantages of hosting.

Though the professor predicts the US will still lead the overall medals table with 103 medals this year, China will be aided by a booming economy, its host advantage and polluted air to take home the most gold medals—44 to be exact. Based on recent Olympics history, the professor has had a pretty go…

Is It Time to Invest in South Asia Again?

With political instability, rising inflation and economic slowdown, many investors are fleeing South Asian markets. India's Sensex is down 48% and Pakistan's KSE-100 is down 34.6% this year. Most of the rest of the world's emerging markets dropped, too— Shanghai lost 44 percent, Russia, down 25 percent, and Brazil, 36 percent. They're fighting inflation and their slingshot growth has eased. To investors, it looks like a no-go zone.

As far as Pakistan is concerned, a little less than seven years ago, immediately after the Sept. 11 attacks on U.S. cities, few sane investment advisers would have recommended Pakistani stocks. In hindsight, they should have. As Western governments have fretted about the resurgent Taliban or Pakistan's nuclear weapons falling into the hands of militants, the Karachi Stock Exchange's main share index has risen more than 8-fold, in spite of the recent troubles and major decline of KSE-100 this year.

Is it time again for a counterintuiti…

Cost, Challenge of Climbing K2 and Mount Everest

Image
Not only is it dangerous, climbing Mount Everest is not cheap, either in terms of lives or dollars. And yet, hundreds are drawn each year to climb it. Commercial expeditions can cost climbers $60,000 to $75,00 each. Nepalese government charges fees ranging from $25000 for one member expedition to $70,000 for seven members. The total cost for climbing is steep, according to CNN. An expedition to the world's second highest peak, K2 in Pakistan, runs around $50,000 per climber. A trip to Everest has the steepest price at $65,000. Individual climbers can easily spend $5,000 on equipment. The total Mt. Everest annual revenue runs into tens of millions of dollars and provides employment to several thousand people. 3,681 people have made the summit so far, but thousands more have tried. About 170 climbers have died in their attempts to reach the summit.


While Mount Everest is considered the tallest peak at 8,848 meters (29,029 feet), it is K2, believed to be the second tallest at 8,611 me…