22 September 2008 AT CAPITAL RESEARCH

AT Capital Weekly Update

Weekly News Update

Key themes in this issue are:

Global Markets:
• Another extraordinary week in global financial markets. The worst crisis since the
1930s prompted: 1) the US Treasury to temporarily extend insurance, similar to that on
bank deposits, to money-market mutual funds. 2) The Securities and Exchange
Commission banned short-selling of 799 financial stocks for at least 10 days. 3)
Decision to create a new entity to purchase impaired assets from financial firms.
• Secretary Paulson said that the plan would cost at least USD 500bn but the limit he
has formally requested of Congress was USD 700bn. Some estimates are as high as
USD 1trillion but to the extent the government purchases such as Fannie/Freddie/AIG
appreciate in price, the bailout costs could be much lower.
• The markets reacted with euphoria with the Dow Jones Industrial Average finished up
368.75 points, or 3.4%, at 11,388.44, off just 0.3% on the week.
• A bailout of USD 700bn - USD 1tr, if it ends up being as high as this, will undoubtedly
steepen the US yield curve substantially further. Higher long term interest rates will add
a further twist to the housing downturn.
Bangladesh:
• Bangladesh’s markets have been an island of stability in an ocean of unprecedented
volatility. This is not the result of clever policy decisions. In fact it actually reflects the
lack of successful integration of Bangladesh into the global capital market.
• We discuss some of the potential implications of the global crisis for Bangladesh.
Pressure on exports from a further slowdown in US and European growth is likely to
intensify. But this may be offset by a weaker US dollar and a fall in oil prices.
• The Bangladesh election dates have finally been announced – Dec 18 for the National
Asian Tiger Capital Partners

EDITORS
elections and Dec 24/28 for the Upazila. We discuss the need for a clear economic
strategy by the main political parties as they formulate their election manifestos..
Ifty Islam
Managing Partner
ifty.islam@at-capital.com
The end of the cult of Free Markets and the return of regulation?
Syeed Khan
Partner
syeed.khan@at-capital.com

Professor Jahangir Sultan

Senior Advisor
jahangir.sultan@at-capital.com

Asian Tiger
Capital Partners

UTC Building, Level 16

8 Panthapath, Dhaka-1215
Bangladesh
Tel: 8155144, 8110345
Fax: 9118582
www.at-capital.com
22 September 2008 AT CAPITAL RESEARCH
Contents Page

Overview – Global Markets 3

The next phase of the credit crisis and what it means for Bangladesh 3
Risks to the bailout – price uncertainty and budget deficit surge 4
The crisis of capitalism 5
Risks remain from higher bond yields, tighter credit, lower house prices and weaker USD 5
Morgan Stanley and Goldman Sachs become banks: the end of an era? 6

Overview – Bangladesh 7
What does all of this mean for Bangladesh? 7
National and Upazila election dates announced 8
Has Grameenphone cut its IPO offering? 8
Appendix 9

Stock Market Weekly 10

Weekly Stock Market Commentary 11
Stock Market News 11

Economics 14
Economic News 15

Sector News 17

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AT Capital Weekly Update 2
22 September 2008 AT CAPITAL RESEARCH
Ifty Islam, Managing Partner
ifty.islam@at-capital.com

The markets reacted with euphoria with the Dow Jones

Overview – Global Markets
Markets Industrial Average finished up 368.75 points, or 3.4%, at
11,388.44, off just 0.3% on the week.
The next phase of the credit crisis and what it Change in global equity
equity markets between September
September 18 low
means for Bangladesh and September
September 19 high
A volatile week on Wall Street as Sheriff Paulson rides to the
rescue

The “Perfect Storm” in financial markets as a result of the

Lehman bankruptcy and the AIG “Conservatorship” we
discussed in the September 15 issue of the AT Capital
Weekly continued to gather momentum of the course of last
week. The collapse in Morgan Stanley on Wednesday led the
meltdown in financial stocks. This was followed Thursday by
massive outflows from money market mutual funds as a
number were trading below pars as a result of their losses
from exposure to Lehman. Stock markets around the world
were in free fall and the prospects for a seizing up in the
global financial system triggered a USD 180bn liquidity
injection Thursday from global central banks and an
emergency response from Treasury Secretary Paulson on Source: Bespoke Investment
Friday.
Twenty-three of its 30 components, including all its financial
Treasury Secretary Paulson stated that “lax lending practices names, advanced. Citigroup was the strongest of the group,
earlier this decade led to irresponsible lending and rallying 22.7%. The table below illustrates that the net
irresponsible borrowing" and that for Wall Street, toxic change in the Dow and many other stock markets was
mortgage-backed securities had become "frozen on the modest, but this masks tremendous volatility. The Dow's gain
balance sheet of banks and financial institutions." He added, was its fourth move of at least 350 points in five trading days
"The inability to determine their worth has fostered this week. The only clear winner in the week was gold.
uncertainty about mortgage assets and even about the
financial condition of the institutions that own them." While
short on details, the highlights of the plan announced Friday
was that the Treasury would temporarily extend insurance,
similar to that on bank deposits, to money-market mutual
funds and the Federal Reserve said it would buy commercial
paper from the funds. The Securities and Exchange
Commission also banned short-selling of 799 financial stocks
- a financial bet that they will fall in price - for at least 10
days. The Treasury said it - along with mortgage giants
Fannie Mae and Freddie Mac, recently taken over by the
government - would step up their purchases of mortgage -
backed securities to help keep the housing market afloat.
The most ambitious part of the government plan is to create
a new entity to purchase impaired assets from financial firms.
Secretary Paulson said that the plan would cost at least USD
500bn, but the limit he has formally requested of Congress
was USD 700bn. Some independent analysts suggested the
cost could be as high as USD 1 trillion, but this seems unduly
pessimistic.

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AT Capital Weekly Update 3
22 September 2008 AT CAPITAL RESEARCH
The smallest daily move last week in 2Y US treasury yields Oil Prices Jump Sharply
was 29 basis points. But perhaps the extreme illustration of
the extraordinary events of last week is the chart below of US
3M Treasury-bill yields. At one stage interest rates on
Treasury bills were negative on three-month bills. This did
not even happen in the Great Depression. So this means you
needed to pay the US government to hold your money
underlining the extreme risk aversion and safe haven flows
that dominated market sentiment last Thursday.

T-Bills normalize From Extreme Levels

Source: Bespoke Investment

Risks to the bailout – price uncertainty and budget deficit

surge

Source: Bespoke Investment
The biggest rebound was in Russia where stocks surged
Friday, as a USD 120bn government rescue package and
the rebound in global markets helped avert a financial
calamity. But the Kremlin still has a long way to go to win
back investors' confidence. After nearly two days of being
closed by regulators because prices were in free-fall,
Russian share markets re-opened Friday morning to buying
so dramatic that trading had to be halted twice because of
excessive gains. The dollar-denominated RTS index closed
up 22% but was still short of its closing level in the prior
week, before two days of panic selling swamped the market.
It is still down 50% from the high seen earlier this year and
foreign investor confidence in Russian equities is likely to
remain fragile.
For the last few weeks, a growing chorus of voices has called
for the establishment of a new Resolution Trust Corporation,
the entity the government devised in the wake of the savings
and loan crisis to take over, and eventually sell off, the
assets of failed S. & L.'s. On Wednesday, Paul Volcker, a
former Federal Reserve Chairman, co-authored an op-ed
article in The Wall Street Journal, adding his support.
However, that crisis however, was very different from this
one. Most of the assets in the S. & L. crisis were real estate —
which are always going to have value. The government did
not have to acquire them; it simply took them over and over
time, sold them. This time, the assets are complex
derivatives of uncertain value that the big firms will actually
be selling to the government.

Crude oil prices rose as fears about the broader US

economy waned. Crude futures for October delivery rose
USD 6.67, or 6.8%, to USD 104.55 a barrel, the highest
settlement in 11 days on the New York Mercantile Exchange.
For the week, crude rose 3.3%. However, we doubt that oil
prices can sustain a rally for much longer in light of the
lingering threats to the global economy aside from Wall
Street's credit crisis. Demand for oil products is down over
4% from a year ago, according to the latest US Energy
Information Administration data, with the year-on-year gap
widening even as prices come off from mid-summer records. But Joe Nocera of the New York Times highlighted the
Several major European economies are in recession, though tightrope the US Treasury is walking most succinctly. In a
growth in the developing world remains strong. September 19 article highlighted the uncertainty about how

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AT Capital Weekly Update 4
22 September 2008
government is going to assess these securities — and what
price will it pay for them?
He stated that, ”In many cases, these securities aren't being
sold because they are still overvalued on a firms' books. That
is, their mark-to-market price is unrealistically high. Will the
government buy it at the too-high price? If it does, the firms
won't have to take additional write-downs — but it will
constitute a huge, unjustified bailout of Wall Street (more
moral hazard). But what if the government drives a hard
bargain, and gets the securities for what they are really worth
— 20 cents on the dollar, say, instead of 50 cents? In that
case, the firms would have to take yet more enormous write-
offs, which would further damage their balance sheets, and
they would have to raise billions more in capital. Maybe the
removal of these bad assets would allow the firms to raise
the capital. But maybe not — meaning one or more could
conceivably have to file for bankruptcy, creating yet another
spasm of financial turmoil. It's a huge roll of the dice by the
government.”
The crisis of capitalism
Looking more broadly, what we are seeing is a return to a
tradition of regulation and state control and a move away
from the free market ethos that has dominated much of the
past three decades. As noted by The Wall Street Journal in
March, the Federal Reserve shattered a half-century of
tradition in which it had lent money only to banks whose
deposits were insured by the government. Declaring
circumstances to be "unusual and exigent," as required by a
little-used statute, it lent to investment bank Bear Stearns
and eventually risked USD 29bn of taxpayer money to induce
JPMorgan Chase to buy Bear. It seemed a very big deal at
the time.
But in the past two weeks, the US government, keeper of the
flame of free markets and private enterprise, has:
-- nationalized the two engines of the US mortgage industry,
Fannie Mae and Freddie Mac, and flooded the mortgage
market with taxpayer funds to keep it going;
-- crafted a deal to seize the nation's largest insurer,
American International Group Inc., fired its Chief Executive
and moved to sell it off in pieces.
-- extended government insurance beyond bank deposits to
USD 3.4 trillion in money-market mutual funds for a year;
-- banned, for 799 financial stocks, a practice at the heart of
stock trading, the short-selling in which investors seek to
profit from falling stock prices;
-- allowed or encouraged the collapse or sale of two of the
four remaining, free-standing investment banks, Lehman
Brothers and Merrill Lynch;
-- asked Congress by next week to agree to stick taxpayers
with hundreds of billions of dollars of illiquid assets from
financial institutions so those institutions can raise capital
and resume lending.
As FT commentator Martin Wolf has noted: “A shift in the
psychology of supervision away from the presumption that
institutions know what they are doing. In particular, far more
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AT Capital Weekly Update
AT CAPITAL RESEARCH
attention must be paid to behaviour that may appear rational
for each institution, but cannot be rational if all institutions are
engaged in it at the same time. “Financing house-price
bubbles with loans equal to 100% of the barely appraised
value, because prices only go up, comes to mind.
He goes on to note when considering what went wrong? The
short answer: Minsky was right. A long period of rapid
growth, low inflation, low interest rates and macroeconomic
stability bred complacency and increased willingness to take
risk. Stability led to instability. Innovation – securitisation, off-
balance-sheet financing and the rest – has, as always, proved
a big part of the story. As Minsky warned, undue faith in
unregulated markets proved a snare.
Another of his FT colleagues, John Gapper, notes that since
the formulation of the derivatives market with the invention of
the Black Scholes Options pricing formula in 1973 “Over the
ensuing three decades, banks and insurance companies got
addicted to complexity. One reason for this is that it skews
the odds in favour of those who hold the technology. Trading
in markets is essentially a zero sum game, in which you have
an equal chance of winning or losing. But banks have been
able to shift the odds by using computer models that others
lack, to trade in volatility, for example.”
Risks remain from higher bond yields, tighter credit, lower
house prices and weaker USD
Beyond the uncertainty behind the price the US Government
pays for the toxic assets, there is additional political
opposition likely from those who believe taxpayers should
not be bailing out wealthy Wall Street professionals who bet
the bank gambling and speculating and lost. The news that
Barclays Capital would be honouring a USD 2.5bn bonus
allocation to failed Lehman bankers will only fan the flames
of discontent. Such political waves should not be dismissed a
few months before the US Presidential elections and amid
the growing opposition to UK PM Gordon Brown within his
own party.
5
22 September 2008 AT CAPITAL RESEARCH
But the economics of the bailout are also far from clear. A As the IHT noted on September 22, “As bank holding
bailout of USD 700bn - USD 1tr, if it ends up being as high as companies, the two banks, which have seen their shares
this, will undoubtedly steepen the US yield curve lose about half their value this year, will have to reduce the
substantially further. Higher long term interests will add a amount of money they can borrow relative to their capital.
further twist to the housing downturn. The chart above, That will make them more financially sound but will also
courtesy of the Financial Times, illustrates the problems most significantly limit their profits. Today, Goldman Sachs has
effective. The US housing collapse is mid-phase but that in USD 1 of capital for every USD 22 of assets; Morgan Stanley
the UK, Spain (and indeed other European countries such as has USD 1 for every USD 30. By contrast, Bank of America's
Ireland) the housing downturn has a long way to go. The has less than USD 11 assets for every USD 1 of capital.”
collapse in US commercial paper outstanding seen in the
second chart below is a graphic illustration of the rapid
contraction in credit available not only to Wall Street, but also
Main Street or non-financial corporate America. The price of
borrowing is also rising, as a result of wider credit spreads
seen in the third chart. Finally the collapse in Wall Street
banking stops will reduce their ability to borrow.

Morgan StStanley and Goldman Sachs become banks:

banks: the end
of an era?

In the latest twist to the rapidly evolving saga of the greatest

financial crisis since the 1930s, Goldman Sachs and Morgan
Stanley have been converted into bank holding companies,
which on the one hand will make them safer by allowing
them to access depositors and also borrow from the Fed’s
discount window. But will also curtail their potential
profitability and subject them to far greater regulatory
scrutiny.
The most fundamental problem is how to generate profit
On Sunday Evening, Sep 21, the US Federal Reserve, growth in a world that no longer tolerates high leverage. At
announced the following: Merrill Lynch, the leverage ratio soared to 28 last year, from
15 in 2003, according to UBS. Morgan Stanley's leverage
“The Federal Reserve Board on Sunday approved, pending a ratio climbed to 33, while Goldman's hit 28. The profit upside
statutory five-day antitrust waiting period, the applications of isn't as high as it is on Wall Street, but the downside isn't as
Goldman Sachs and Morgan Stanley to become bank steep. If a bank loses USD 1bn on a loan, it has twice the
holding companies. To provide increased liquidity support to capital an investment bank might have to absorb it.
these firms as they transition to managing their funding within
a bank holding company structure, the Federal Reserve The ascendancy of commercial banks largely reflects their
Board authorized the Federal Reserve Bank of New York to use of customer deposits to fund much of their business.
extend credit to the US broker-dealer subsidiaries of Retail depositors tend not to pull their money out, even in
Goldman Sachs and Morgan Stanley against all types of turbulent times, thanks to backing by federal deposit
collateral that may be pledged at the Federal Reserve's insurance.
primary credit facility for depository institutions or at the
existing Primary Dealer Credit Facility (PDCF).” But US commercial banks are likely to face their own
problems as ongoing economic weakness in the household,
It was reported that the firms requested the change corporate and real estate sectors sees the further rise in
themselves, even though they ought to have received traditional defaults that are normal at this point in the
reassurance from Congress and the Bush administration’s economic cycle in the face of the sharp increase in
hurried efforts to a USD 700bn rescue of the financial unemployment.
system. Despite the “Avoiding Armageddon” rally of Friday in
financial stocks, it was a clear acknowledgment that their
model of finance and investing had become too risky and
that they needed the cushion of bank deposits that had kept
big commercial banks like Bank of America and JPMorgan
Chase relatively safe amid the recent turmoil.

But it is important to realize that such a cushion comes at a

significant cost. By becoming bank holding companies, the
firms are agreeing to significantly tighter regulations and
much closer supervision by bank examiners. Now the firms
will look more like commercial banks, with more disclosure,
higher capital reserves and less risk-taking.

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AT Capital Weekly Update 6
22 September 2008 AT CAPITAL RESEARCH
Overview – Bangladesh
What does all of this mean for Bangladesh?

Well as the chart below illustrates, Bangladesh’s capital

markets have been an island of stability in an ocean of
unprecedented volatility. This is not the result of clever policy
decisions by government regulators and officials here. In fact
it actually reflects the lack of successful integration of
Bangladesh into the global capital market. If our past efforts
to attract more foreign investors had been more successful,
they undoubtedly would have rushed to withdraw capital in
this time of global market turmoil and would have dragged
the DSE down with other emerging markets.

The prospects for Bangladesh going forward can be thought

of in the following terms:
1) Risk appetite falls:
falls: If global risk aversion persists then
this might reduce appetite for developing and EM
equities which might be negative for Bangladesh. Merrill
Lynch’s most recent survey of fund managers found that
they are now holding more bonds than normal for the
first time in a decade (indicating a flight to safety). They
also have smaller positions in emerging-market equities
than at any time since 2001. In the past three months
emerging-market funds have seen an outflow of USD
26bn, compared with an inflow of USD 100bn in the
previous five years.
Source: AT Capital Research
4) USD weakens again: A renewed downturn in the US
dollar seems likely as global investors worry about the
fiscal implications of the US bailout and the reduced
creditworthiness of the US government as a result of a
massive rise in bond issuance. This is likely to offer
some offset for Bangladeshi exporters since the taka is
tied with the USD and more of the country’s exports go
to Europe than the US.

2) Diversification attractions: However, the volatility of the

BRICs (Brazil, Russia, India and China) in 2008 may
actually trigger a greater hunt for alternative investments
in more frontier markets like Bangladesh which are less
correlated with developed markets and hence offer
diversification benefits.

Index Performance: DGEN vs.

vs. S&P 500 (rebased
(rebased to 100)

5) Oil prices reverse recent gains: If oil prices continue to

rise then this is bad news for Bangladesh growth and
inflation. Higher energy prices will take more money out
of consumer pockets although the impact will come
through with a lag given the subsidies paid by the state
towards energy costs. But we believe the current
uptrend in energy markets reflects wishful thinking in
terms of the bailout triggering global economy recovery.

Source: AT Capital Research
3) Economic slowdown: If the US and European
economies continue to move into recession then
Bangladeshi exporters will see a further decline in
demand and hence weaker GDP growth here.
The US bailout will not reverse the fundamental drag on US
growth from the fallout of the bursting of the US housing
bubble and the process of credit deleveraging. But looking
beyond the prospects for a further near-term slowdown in
Bangladeshi growth, we believe turmoil in the developed and
BRICs markets, and the relative stability of the DSE, will
potentially increase interest in Bangladesh’s attractions as a

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AT Capital Weekly Update 7
22 September 2008
diversification destination further. The stock market
authorities need to continue to encourage more large IPOs to
attract foreign investment along with the necessary reforms
to encourage liquidity. The next elected government in 2009
also needs to remain focused on re-energizing the Board of
Investment to maximize the chances of translating greater
interest into frontier markets into a substantial increase in
Bangladesh FDI.
National and Upazila election dates announced
In a televised address to the nation on Saturday evening,
Chief Adviser Dr. Fakhruddin Ahmed announced that the
ninth parliamentary elections would be held on December 18
and upazila polls on December 24 and 28. He said certain
emergency measures could either be lifted or relaxed to help
the electoral process.
There was some opposition from the two leading parties,
Awami League and BNP, on the reluctance of the Caretaker
Government to lift the state of emergency fully. In addition,
there were some criticism of the decision to hold the upazila
and national elections so close together.
However, we believe that international investors generally
will be encouraged by the fact that an election date has
finally been agreed. There were concerns about how tight the
schedule had become with no announcement. The key
issues in the near-term will be the confidence level among
investors that the elections will be held without major
disruption in the political process from the two major factions.
But from a longer-term perspective, as we highlighted in last
week’s ATC weekly in our analysis of the Better Business
Forum, the key challenge is to ensure that the next elected
government takes ownership of the economic reform agenda
to deliver tangible results. We need to see greater focus and
discussion in the parties’ respective manifestos in terms of
their strategies for overcoming the power shortages and
relieving the traffic congestion that has hampered growth.
Also, continuing reforms to strengthen the BOI to ensure
Bangladesh can attract FDI flows. In that context, the iftar
party September 20 held by the Federation of Bangladesh
Chambers of Commerce and Industry for both parties is to be
welcomed.
Annisul Hq, FBCCI President made the following noteworthy
comments:
“We are passing through a critical juncture and people are no
more willing to recall the horrifying memories of general
strikes and violence. The announcement of the election
dates has brought to us another chance to bring about
qualitative changes in politics. Let us not miss this train.
Everyone is now worried about how the next elections would
be as the political parties have become people-centric, but
they become simply rulers soon after assumption of office.
The prime need of the time is the practice of a democratic
culture and mutual understanding among politicians on
national issues. Shrug off conflicts and anarchy, please! Feel
the pulse of the people. We want a transparent, active and
conscientious parliament. We want a clear stand against
corruption, accountability in the administration and an
assurance of end to general and other forms of strike. It is
high time the parties initiated changes in politics if we want to
do so.” He said the Federation would come up with a charter
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AT Capital Weekly Update
AT CAPITAL RESEARCH
on a national consensus and hoped the political parties
would do so.
Global investors are ultimately likely to come to Bangladesh
if they feel that a more favourable economic and enabling
environment in terms of stability and infrastructure. Cheap
labour costs are an important attraction. But given the
competition Bangladesh faces from Vietnam, India, Pakistan
and others in the region, the next elected government and
parliament needs to formulate an effective economic strategy
if the country is to maximize its opportunities.
Has Grameenphone cut its IPO offering?
offering?
The drama surrounding the country's largest mobile phone
company Grameenphone continues with the news, albeit
from the press and market sources, that it is likely to halve its
proposed initial public offering size as an NBR directive
denies it a 10% tax benefit if it makes any pre-IPO
placement, according to sources.
The National Board of Revenue (NBR) cuts corporate taxes
of a company by 10% if it goes public, but it is not applicable
to the companies which raise money in pre-IPO placements.
"The NBR does not believe that pre-IPO money is a part of
public subscription. As a result, GP which intends to raise
USD150mn in pre-IPO placement, will not get the corporate
tax benefits," a market source said.
"Grameenphone has therefore moved to reduce its IPO size
to USD 150mn including pre-IPO placement from the
proposed USD 300mn," he said.
When contacted, company spokesman Yamin Bakht refused
to comment on the latest development. However, a source
associated with Grameenphone's proposed new IPO size
said there might be no foreign placement. Meanwhile, the
weighted average share prices for pre-IPO placement have
already been fixed at BDT 11.58 per share after bidding from
local financial institutions.
It may be that GP’s plans have not been changed and what
we are seeing is a public negotiation between GP and NBR
on their tax benefits. No tax benefit will see GP threaten to
reduce their IPO size. But the ongoing confusion in the GP
IPO listing and the suggestion there will be no foreign
placement is clearly a negative development as far as the
deepening of Bangladesh’s capital markets is concerned.
Foreign investors will, justifiably in our view, be reluctant to
invest a lot of time and energy in the midst of the global
market turmoil if Bangladesh’s flagship capital markets issue
continues to suffer some extreme volatility. It is important that
the company agrees a clearly defined IPO strategy with the
capital markets authorities and sticks to it.
Whether it likes it or not, GP’s issue remains the bellwether
in terms of the transition of Bangladesh towards a more
institutionally dominated market – both foreign and local. We
might argue that the recent global turmoil reduces the
attractions of foreign capital. But let us not forget that in an
economy that is as capital starved as Bangladesh, the
benefits of substantially greater foreign investment still, in our
view, outweighs the costs in terms of potential market
volatility and sensitivity to global financial market trends.
8
22 September 2008 AT CAPITAL RESEARCH
Appendix
Evolution of the Global Credit Crisis

Merrill Lynch CEO saw the writing on the wall; Richard Fuld of Lehman Brothers did not

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AT Capital Weekly Update 9
22 September 2008 AT CAPITAL RESEARCH
Stock Market Weekly
DSE performance: 52 weeks
weeks Market news

• GP may halve IPO size due to NBR directive on pre-IPO

placement
• DSE wants GP share face value at BDT 10
• SEC approves IPOs of BDT 455mn and a new asset
management company
• SEC fines directors of Saleh Carpet and Rose Heaven
Ball Pen
• Share trading of First Security Bank likely from Sept 22
• Dhaka Bank signs deal with IDLC on issuance of bonds

DSE performance: 30 days Regional stock market performance (last week)

Market summary Valuation snapshot

DSE General Sector P/E

Index performance DSE 20
Index Apr-08 May-08 Jun-08 Jul-08
Opening of this week 2,850.2 2,442.3 Banks 22.2 22.6 21.7 19.2
Closing of this week 2,838.5 2,383.7 Cement 14.7 17.6 12.4 11.2
Change within a week (%) -0.4% -2.4% Ceramic 43.7 42.7 42.0 50.3
Change within a week (Point) -11.6 -58.6 Engineering 38.9 41.4 39.1 38.4
Food & Allied 28.2 28.5 13.2 19.3
Fuel & Power 25.8 26.2 23.6 16.1
This Last %
Capitalization and turnover Insurance 28.1 32.4 26.9 22.8
Week Week Change
Investment 64.9 65.2 53.1 33.5
Number of Trading Days 5 5
IT 18.4 17.6 20.0 20.3
Market Capitalization (USD bn) 14.47 14.52 -0.3%
Jute 16.4 16.0 16.0 16.3
Total Turnover (USD mn) 235 253 -6.9%
Miscellaneous 23.0 25.9 23.2 25.2
Daily Avg. Turnover (USD mn) 47 51 -6.9%
Paper & Printing 9.2 9.5 9.2 7.9
Total Volume (mn) 130 126 2.9%
Pharmaceuticals 26.7 29.8 28.1 25.6
Daily Avg. Volume (mn) 26 25 2.9%
Service & Real Estate 20.5 19.5 20.8 20.5
Tannery 25.1 23.1 19.8 21.3
This Last 15.2 16.3
Weighted avg. P/E Ratio* Issues Textiles 14.9 14.4
Week Week
Source: Dhaka Stock Exchange
This Week 20.51 Advanced 65 121
Last Week 20.63 Declined 172 118
% Change -0.58% Unchanged 8 12
*Weighted on Market Cap. Not Traded 43 37

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AT Capital Weekly Update 10
22 September 2008
Weekly Stock Market Commentary
Bangladesh remained completely unaffected by the turmoil in
the financial markets globally. The benchmark DGEN index
remained almost unchanged. The intra-week volatility was
low. The average trading volume was down by 7%.
The banking shares, which account for more than 50% of the
country’s market capitalization, remain subdued. Prices of
most of the bank share are now at the lowest in the last six
months. None of the banks featured among top 30 gainers
last month. The bank shares have been largely unaffected
during the 11-week downturn that started on June 1 and the
subsequent recovery. Some market players believe that the
volatility of the banking shares is low because, due to
relatively large free floats of bank shares, it is difficult for
speculators to manipulate their prices.
National Bank Limited (NBL), a first generation commercial
bank, has decided to acquire 30% of LR Globlal Asset
Management Company Limited, one of the four private
sector asset management licensees in Bangladesh. NBL
also holds a brokerage license from Dhaka Stock Exchange
Limited. The involvement of the Banks and Non-bank
financial institutions (NBFIs) in the Capital market have
increased greatly in the recent months. The banks are the
major institutional investors in the capital market. The
stockmarket, once dominated by family owned brokerages, is
now dominated by the banks and NBFIs. Recently, Premiere
Leasing, an NBFI, has started a brokerage operation. Banks
are also getting into merchant banking. BRAC bank limited
has acquired the controlling stake of GSP Finance Company,
an NBFI that holds a merchant banking license.
First Security Bank, a relatively small private commercial
bank, starts trading on September 22. Though the bank is
one of the poorest performing private commercial banks in
the country in terms of profitability, it succeeded in raising
BDT 1035mn (USD 15mn), a large IPO by Bangladesh
standard. After the listing of First Security Bank, Bangladesh
Commerce Bank Limited is the only private commercial bank
that remains unlisted.
Dhaka Bank Limited has declared that it will raise tier II
capital from the public market by issuing corporate bonds.
The corporate bond of Dhaka Bank will be the second
corporate bond traded on the stock exchange. To support
their high asset growth (the asset base of the commercial
banks of the country is growing by about 35%) and to comply
capital adequacy norms under Basle II, a number of other
commercial banks are actively considering issuing corporate
bonds.
The drama involving the Grameen Phone (GP) IPO
continues. This time the DSE has added to the confusion by
suggesting GP increase the proposed denomination of its
shares from BDT 1 to BDT 10. DSE mentioned that the
denomination of BDT 1 will result in very high number of
shares and will strain the capacity of DSE’s trading platform.
DSE also mentioned that such a small denomination may
fool the retail investors who may confuse the small
denomination with the share price being cheap. Though the
face value or denomination of shares should be irrelevant in
a rational market, it can sometimes be a very important price
determining factor in Bangladesh. Recently, Islami Bank’s
_______________________________________________________________________________________
AT Capital Weekly Update
AT CAPITAL RESEARCH
decision to change the denomination from BDT 1,000 to BDT
100 prompted a huge rally in the stock.
Stock
Stock Market News
DSE wants GP share face value at BDT 10
The Daily Star, Thursday, September 18, 2008
The Dhaka Stock Exchange has recommended to the
Securities and Exchange Commission that the face value of
the shares (i.e. excluding any proposed premium) of the
Grameenphone IPO be fixed at BDT 1 rather than BDT 10,
due to constraints in the trading system – the proposal would
mean that the number of shares issued would be reduced by
a factor of ten.
With a BDT 10 face value one would expect GP to issue 1.48
billion shares at IPO, while the DSE is able to handle 0.1mn
trades per day, with this expected to increase to 0.25m
shares a day in 6 months time following completion of a
trading platform upgrade project. When GP makes its debut,
the number of trades may cross 0.25mn a day, the DSE
official said.
The DSE added their concerns over the risks of retail
investors inappropriate evaluation of the GP IPO of BDT 1
shares: “besides, there will be another problem with the face
value of BDT 1. The retail investors may evaluate the
Grameenphone shares wrongly, as they are used to deal
with shares with face value of BDT 10 and BDT 100,” he
said.
“Considering investors' interest and to avoid any untoward
situation in the trading system, we have sent a letter to the
commission requesting it to fix the face value of each
Grameenphone share at BDT 10,” the DSE official said.
http://www.thedailystar.net/story.php?nid=55322
SEC approves IPOs of BDT 455mn,
455mn, a new asset
management co
The Financial Express, Wednesday, September 17, 2008
This week the SEC approved two new IPOs with combined
value of BDT 455mn (USD 6.6mn) and issued a license to a
new asset management company, Race Management
Private Company Limited.
BSRM Steel Co Ltd plans to raise BDT 200mn (USD 2.9mn)
through issuing 2,000,000 shares of BDT 100 (USD 1.4)
each to meet the working capital requirements of the
company which is already in commercial operation. BSRM
Steel has an authorised capital of BDT 2.0bn (USD 29.2mn)
and paid up capital of BDT 1.25bn (USD 18.3mn). The
company auditor certified that the company's net asset value
(NAV) would be BDT 100 per share.
Bay Leasing and Investment Company plans to raise BDT
255mn (USD 3.7mn) through issuing 1,020,000 shares of
BDT 250 per share, including a premium of BDT 150 each, to
meet the regulatory requirement of increasing their paid up
capital. The company which has paid up capital of BDT
102mn (USD 1.5mn), is authorised to raise capital up to BDT
500mn under the merchant banking license that it holds. The
company auditor certified its net asset value at BDT 370.30
per share and earnings per share of BDT 77.30.
11
22 September 2008
Race Management Private Company Limited has been
issued an asset management licence by the SEC – the sixth
licence issued to date. Farhad Ahmed of the SEC, said they
prefer small investors to invest through asset managers to
reduce risks for investors. He added that the company plans
to launch mutual funds.
AT CAPITAL RESEARCH
First Security Bank will be the 30th listed bank and it is the
first private commercial bank that offered largest number of
primary shares to the general investors. The bank which
began its operation in 2000 issued 11.5 million shares with
the face value of BDT 100 per share raising BDT 1.15bn
(USD 16.8mn) through initial public offering

http://www.thefinancialexpress- http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45728 bd.info/search_index.php?page=detail_news&news_id=45817

SEC fines directors of two

two companies Dhaka Bank signs deal with IDLC on issuance of bonds
The Daily Star, Tuesday, September 16, 2008 The Financial Express, Sunday, September 21, 2008

The SEC has fined 10 directors of two listed companies on Dhaka Bank Limited (DBL) has signed an issue management
charges of violating securities laws. The Securities and agreement with IDLC Finance Limited for the forthcoming
Exchange Commission imposed a BDT 0.1mn fine on four Repeat Public Offering (RPO) of the former. The RPO is
directors of Saleh Carpet Mills each, for not submitting aimed to raise Tier 2 Capital of the Bank through issuance of
audited financial statements for the year ended December Subordinated Convertible Bonds in the capital market.
31, 2007 to the SEC.
http://www.thefinancialexpress-
The fined Saleh Carpet directors are Chairperson Dilara bd.info/search_index.php?page=detail_news&news_id=46088
Begum, Managing Director Shamim Ara Begum and
directors Rezaul Karim and Badrul Huq. Earlier on
September 10, the DSE suspended the trading of Saleh
Carpet, a Z-category company, for a day on finding some
irregularities in the company.

A DSE probe found that 90 percent of the company's

machinery are out of order. The company has not been
running any corporate office since 2003 and not submitting
financial reports to the DSE or SEC since 2002. Saleh
Carpet owes BDT 3bn to Bangladesh Shilpa Rin Sangstha,
Investment Corporation of Bangladesh and Sonali Bank.

Saleh Carpet, which now runs with only 5% of its machinery

in operation, sells its products only in Chittagong.

The SEC also fined six directors of Rose Heaven Ball Pen
BDT 0.1mn each, for not submitting accounts for the half-
year to December 31, 2007.

http://www.thedailystar.net/story.php?nid=54983

Social Investment Bank changes name; Approves 17 pc

stock div, 1:1 right share
The Financial Express, Tuesday, September 16, 2008

Social Investment Bank Ltd (SIBL) has been renamed as

Social Islami Bank Ltd. The approval came at the 5th EGM of
the bank where an allocation of 1:1 right shares was also
approved.
Following the EGM, the 13th AGM was held where a 17 per
cent stock dividend, was approved for the 2007 financial
year.

http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45644

Share trading of First Security Bank likely from Sept 22

The Financial Express, Thursday, September 18, 2008

Share trading of the First Security Bank Limited is likely to

commence from 22 September 2008, subject to approval of
the DSE board. The DSE listing sub-committee, approved
the listing application and recommended it to be placed
before the DSE board for final approval.

_______________________________________________________________________________________
AT Capital Weekly Update 12
22 September 2008 AT CAPITAL RESEARCH
DGEN Performance LTM DGEN Performance YTD

Turnover leaders Best performers* Worst performers*

(All figures in mn) BDT USD % Change % Change
Titas Gas 1,842 26.9 BEXIMCO 25.1 B.Monospool Paper -22.5
BEXIMCO 1,005 14.7 Shinepukur Holdings 22.6 Saleh Carpet -20.9
ACI Limited. 948 13.9 BDFINANCE 21.9 Bd.Thai Aluminium -15.4
ICB AMCL 2nd NRB M.F. 934 13.6 Beximco Fisheries 19.7 Dulamia Cotton -8.6
Grameen One: Scheme2 916 13.4 Bangladesh Online 18.3 Sajib Knitwear -7.7
Lankabangla Finance 598 8.7 Aims 1st M.F. 15.9 Reliance Insurance -7.5
Aims 1st M.F. 495 7.2 Delta-Brac Housing 15.7 Libra Infusions Limited -7.2
Beximco Pharma 455 6.6 Aramit 15.2 Rangamati Food -7.1
S. Alam Cold Rolled 1st BSRS 13.5 Samata Leather -7.1
440 6.4
Steels Ltd. Grameen One: Scheme2 13.5 Wonderland Toys -7.0
Union Capital 409 6.0
Source: Dhaka Stock Exchange *By closing price
Source: Dhaka Stock Exchange
Market cap. by sector*
Banks 52.6%
Fuel & Power 12.2%
Pharmaceuticals 10.4% Correlation with other Indices*
Cement 5.7% S&P NIKKEI KSE FTSE
500 Sensex 225 100 SSECI 100 HangSeng DSE
Insurance 5.7%
S&P500 1
Miscellaneous 3.0%
Sensex 0.49 1
Engineering 2.6%
NIKKEI225 0.40 0.50 1
Foods 2.4%
KSE100 0.13 0.31 0.10 1
Textile 2.1%
Tannery 1.5% SSECI 0.28 0.41 0.22 0.04 1
Service & Real Estate 1.0% FTSE100 0.81 0.48 0.41 0.21 0.38 1
IT 0.5% Hangseng 0.65 0.58 0.46 0.09 0.50 0.73 1
Ceramics 0.1% DSE 0.10 0.14 0.09 0.06 0.03 0.13 0.11 1
Paper & Printing 0.1% * Based on the last 80 months’ USD returns
Source: AT Capital Research
Jute 0.03%
Total 100%
*As of July 31, 2008

Research Team

Professor Jahangir Sultan

Shahidul Islam
Senior Advisor
Investment Manager
jahangir.sultan@at-capital.com
shahid.islam@at-capital.com

Rashed Hasan Syed Najibullah

Research Associate Research Assistant
rashed.hasan@at-capital.com syed.najibullah@at-capital.com

_______________________________________________________________________________________
AT Capital Weekly Update 13
22 September 2008 AT CAPITAL RESEARCH
Economics

Selected macroeconomic indicators Market news

16-
16-Sep-
Sep-07 30-
30-Jun-
Jun-08 16-
16-Sep-
Sep-08 • Bangladesh Bank pulls out of risky foreign ventures
Forex reserves (USD mn)
4,963.54 6,148.82 5,322.70
USD-BDT average rate • Exports set new record in July
68.7037 68.5297 68.5200
Call money rate (%)
6.95 4.78 13.81
• Food price hike forces dropouts to work reveals
Aug-
Aug-07 Aug-
Aug-08 2007-
2007-08 Shamunnay research

Remittances (USD mn) 470.95 732.98 7,914.78

Annual percentage change -0.06 55.64 32.39 • Credit demand fuels inflationary pressures

Jun-
• Bangladesh Bank back to a tightened monetary policy
Jun-07 Jun-
Jun-08 2007-
2007-08
again
Imports (USD mn) 1,521.00 2,156.60 21,629.00

Annual percentage change 9.67 41.79 26.07

• ADB backs fuel price cut on zero subsidy
Exports (USD
(USD mn) 1,218.03 1,469.51 14,110.80

Annual percentage change 9.52 20.65 15.87

• IMF finds Bangladesh Bank's rate hike timely
Tax revenue (USD mn) 438.06 541.77 6,906.54

Annual percentage change 22.55 23.67 27.06

Latest
Latest Treasury yields

Source: Selected Indicators by Bangladesh Bank, 17 Sep 2008

Weighted
Auction date Tenor & security type
average yield

14-Sep-08 91-day T-bill 7.78%

Top exported items (USD mn)
14-Sep-08 182-day T-bill 8.05%
7-Sep-08 364-day T-bill 8.51%
Jul-
Jul-07 Jul-
Jul-08 Change
16-Sep-08 5-year T-bond 10.60%
Total domestic credit 30.1 36.8 22.4% 2-Sep-08 10-year T-bond 11.72%
Credit to government 5.4 7.1 30.6% 9-Sep-08 15-year T-bond 12.14%
Credit to private sector 22.1 28.1 26.9% 26-Aug-08 20-year T-bond 13.07%
Source: The Daily Star Source: Bangladesh Bank

S Adeeb Shams
Research Associate
adeeb.shams@at-capital.com

_______________________________________________________________________________________
AT Capital Weekly Update 14
22 September 2008
Economic News
News
Bangladesh Bank pulls out of risky foreign ventures
The Daily Star, Monday September 22, 2008
Bangladesh Bank has pulled its foreign currency investments
out from different risky ventures, in the wake of a looming
financial crisis in the US and some other parts of the world. A
high-profile FX investment committee of the central bank
monitors the situation every day according to a senior official
of the central bank. The committee headed by a Deputy
Governor of the BB started monitoring the situation on a daily
basis instead of every 15 days after the recent developments
crippled some of the leading players in the financial services
industry.
The central bank's forex investments are estimated at around
USD 5bn, according to Yasin Ali, Executive Director of
Bangladesh Bank. He also mentioned that the central bank
has already withdrawn investments from a few institutions
affected by the US downturn. BB has investments in some
institutions such as Wachovia and a few mortgage
companies in the US. BB also has an investment worth USD
5mn in Bear Stearns, which was purchased by JPMorgan,
adding that it has no investments in Lehman Brothers, the
Wall Street investment bank that filed for bankruptcy last
week.
http://www.thedailystar.net/story.php?nid=55900
Exports set new record in July
The Financial Express, Monday September 22, 2008
Bangladesh's exports started the financial year with a fresh
all-time monthly record, spurred by an impressive show by
knitwear and woven garments, according to industry officials.
They said the country shipped goods worth around USD
1.5bn in July with garments contradicting expectations that
the financial market meltdown in the US and the EU -
Bangladesh's major markets - would drag down exports.
Shipments are nearly 35% more than the figures of last July
and at least USD 73mn more than that of June, when the
previous highest exports recorded in a month.
However, it might also be noted that the country's exports fell
by 5.37% in the July-September period last year, as garment
exports nose-dived, owing to protracted impact of the
emergency and labour unrest in garment factories. But
shipments staged a comeback in the last nine months, as top
global garment buyers increased their orders to Bangladesh,
finding its products relatively cheap when compared to
surrounding markets.
It was reported that the export of agri products, footwear and
frozen food have also been better than expected.
Shahab Ullah, Vice Chairman of the Export Promotion
Bureau said that the export data will be made public after the
government sets a target for the current fiscal year and he is
optimistic that this will be done by the end of September.
The country exported goods worth USD 14.1bn against a
target of USD 14.5bn in 2007-08, which is more than 19%
higher than the shipments of the 2006-07.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=46230
_______________________________________________________________________________________
AT Capital Weekly Update
AT CAPITAL RESEARCH
Food price hike forces dropouts to work reveals Shamunnay
research
The Daily Star, Monday September 22, 2008
The June-August issue of Bangladesh Economic Outlook,
the quarterly of research organization Shamunnay, has
revealed that the food price hike has led to an increase in
school dropouts and in many cases in order to earn money.
Dropout rates are higher in rural areas compared to the
urban areas. 84% of the female-headed households
responded that their children had to quit schools because of
surging food prices. The report also stated that 19% and
11% of rural and urban households respectively lost their
capabilities to meet their children's educational expenses
because of falling real incomes.
Selim Raihan, Associate Professor of Economics at Dhaka
University, presented highlights of the research released at a
function, organised by Shamunnay and Manusher Jonno
Foundation, a local NGO. The research especially focused
on the impact of food price hike on school enrolment and
dropout in the poor and vulnerable households.
http://www.thedailystar.net/story.php?nid=55904
Credit demand fuels inflationary pressures
pressures
The Daily Star, Friday September 19, 2008
The central bank has identified excessive credit growth over
the last few months in both the public and private sectors as
the probable reason for current inflationary worries and rising
food prices, according to officials. Bangladesh Bank has also
found commercial banks to have become increasingly
dependent on the central bank to meet growing credit needs
for financing investment ventures.
Bangladesh Bank has hiked the repo rate after more than
three years, as a means to discourage banks to borrow from
the central bank. The central bank through repo auctions,
injected over BDT 21bn (USD 307mn) at 8.75% last week,
up from 8.5% which prevailed in the past three years.
According to Bangladesh Bank data, credit growth in the
2007-08 fiscal was 26.1% and 30.4% in private and
government sectors respectively. The central bank found that
banks are financing more deals, getting involved in risky
lending and in the process, crossing the limit set by
Bangladesh Bank. Central bank statistics have revealed that
a lot of private commercial banks have had a credit-deposit
ration in excess of 82%. The regulator has started making a
list of banks that are violating the limit that has been set for
lending,
http://www.thedailystar.net/story.php?nid=55484
Bangladesh Bank back to a tightened monetary policy again
The Financial Express, Thursday September 18, 2008
Bangladesh Bank has raised interest rates after a period of
over three years, aiming to curb inflationary pressures on the
economy, according to officials. The interest rate on
repurchase agreement (repo) auction was re-fixed at 8.75%
from 8.50% for lending fresh funds to commercial banks and
non-banking financial institutions (NBFIs).
15
22 September 2008
Bangladesh Bank's move indicates that it is going back to its
policy of tightening monetary measures, treasury officials of
commercial banks observed.
BDT 21bn (USD 307mn) was injected on Wednesday by the
central bank through a Repo auction, aiming to ease
pressures on liquidity within the inter-bank money market
ahead of Eid-ul-Fitr. Bangladesh Bank's move came after the
Asian Development Bank suggested that Bangladesh
increase bank interest rates and initiate a tighter monetary
policy in order to tame inflationary pressures on the
economy.
AT CAPITAL RESEARCH
IMF finds Bangladesh Bank's rate hike timely
The Financial Express, Thursday September 18, 2008
The central bank's hike in interest rates after three years was
timely and would help rein in runaway inflation in the country,
according to Jonathan Dunn, the International Monetary
Fund representative in Bangladesh. He said year-on-year
credit growth shot up to 26%, fuelling inflation, which stands
at around 10% since it broke through double digits in July
2007. According to Dunn, the change in the policy rate is
fully consistent with ensuring that the inflation expectations
are anchored.

Bangladesh Bank's dramatic u-turn came a day after the

Market operator shave commented that Bangladesh Bank's
Asian Development Bank strongly suggested that the
latest move would influence interest rates on both lending
caretaker government should increase the interest rates and
and deposits within the banking system. A senior treasury
tighten money supply to tame inflationary pressures.
official at a commercial bank said that the rise in interest
rates might discourage credit flow to the private sector in the http://www.thefinancialexpress-
near future. Credit growth to the private sector recorded a bd.info/search_index.php?page=detail_news&news_id=45852
significant 25% increase in the 2007-08 fiscal to BDT
379.6bn (USD 5.5bn).

http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45850

ADB backs fuel price cut on zero subsidy

The Daily Star, Wednesday September 17, 2008

The Asian Development Bank has suggested the

government consider a reduction in petroleum prices, in an
attempt to cut inflation, if Bangladesh no longer requires to
subsidise all prices should global oil prices continue to fall. It
also said the accommodative monetary policy, currently
being executed by Bangladesh Bank, might trigger higher
inflation if credit expansion is not followed by any quick or
substantial supply response.

The ADB official's recommendation came at a press

conference organised at its office in Dhaka marking the
release of its report titled 'Asian Development Outlook 2008
Update'. The ADB expects the Bangladesh economy to grow
at 6.5% in 2008-09, as agriculture and industry output could
grow, buoyed by farmers' response to high food prices and
improved business confidence. According to Paul Heytens,
the ADB Country Director, the Bangladesh economy was
remarkably resilient in the last fiscal year, due to a positive
factors such as a rebound in exports, consistent remittance
growth and improvement in revenue collection.

The ADB however said some downside risks remains such

as higher oil and commodity prices, political uncertainty in
the run up to the promised parliamentary elections in
December and natural disasters. It said high prices of oil are
likely to stay despite a recent declining trend. It also
predicted Bangladesh's average inflation to stand at roughly
9% in 2008-09, up from its previous forecast of 8% percent,
partially owing to a 34-50% increase in fuel prices on the
domestic market since July 1.

http://www.thedailystar.net/story.php?nid=55140

_______________________________________________________________________________________
AT Capital Weekly Update 16
22 September 2008
Sector News
Agriculture
ACI eyes UK curry industry
The Daily Star, Friday, September 19, 2008
ACI, a branded company in Bangladesh, has planned to grab
a slice of about USD 6.4bn curry industry in the United
Kingdom (UK) with its spices. The company will enter the
British market through sponsoring the British Curry Awards
(BCA), due in London next month, under its spice brand ACI
Pure.
About 9,500 Indian restaurants are operating in the UK
employing about 100,000 people, with about 25 percent or
around 24 million people in the UK consuming the Indian
cuisine. These restaurants are the main target of ACI’s
promotion.
http://www.thedailystar.net/story.php?nid=55497
Aviation
GMG hits rough patch
The Daily Star, Thursday September 18, 2008
GMG Airlines has sent 150 employees (out of a total pool of
over 1,000 employees), including senior and mid level
officials, on leave without pay for up to four months in order
to cut costs amidst high fuel prices and acute shortages of
aircrafts. The country's largest private carrier however
promised to bring back the employees after it resolves its
problems.
The terms of leave in many cases are effective from
September 15. Employee affected include those working in
different wings such as customer services, ground handling,
traffic, sales and reservations and some senior officials in
administration, including some expatriates.
GMG Airlines had earlier set a very ambitious revenue target
of BDT 13.5bn (USD 197mn) for the year. Faced with an
increase in fuel costs and a looming price war in the local
market, the carrier started incurring operational losses,
according to a GMG official.
http://www.thedailystar.net/story.php?nid=55317
Biman eyes Singapore Airlines for partnership
New Age, Thursday September 18, 2008
Biman Bangladesh Airlines, which lost billions of BDT in
recent years due to chronic inefficiencies, plans to target
Singapore Airlines to become its strategic partner to run and
manage the national flag carrier, according to a top official.
Ziaul Huq Mamun, who sits on the Board of Directors, said
the state-owned airline would also target Emirates, British
Airways, Qatar Airways and Thai Airways. However, to form
an alliance with either Singapore Airlines or Emirates would
be Biman's priority. According to Mamun, the foreign airline
could opt for a stake in Biman, or just take responsibility for
its management.
http://www.newagebd.com/2008/sep/18/busi.html
_______________________________________________________________________________________
AT Capital Weekly Update
AT CAPITAL RESEARCH
Banking
ATC Comment:
Comment:
This week we have seen couple of news items on the Non-
bank Financial Institutions (NBFIs) in the country.
Unfortunately, none of them is good news for the sector.
First, some NBFIs are facing liquidity problems. Second, the
asset quality of some of the NBFIs has deteriorated in the
recent months.
The NBFIs have a competitive disadvantage vis a vis the
banks due to their business model and some regulatory
environment. The NBFIs compete with the banks for retail
deposits. But the NBFIs have certain restrictions. They
cannot offer savings accounts and cannot take fixed deposits
for a tenor of less than one year. Therefore, though some
leading NBFIs have succeeded attracting significant amount
of retail deposits, the NBFIs in general depend heavily on the
banking sector for their funding. Their borrowings from the
banks are not cheap. Typically, the banks ask for interest
rate equivalent to their lending rates to large corporates. In
the interbank overnight call money market, the NBFIs are
generally on the borrowing side and their cost of borrowing is
significantly higher than that of the banks. Therefore, the cost
of funds of the NBFIs is generally higher than that of the
banks. And, due to their net borrowing position in the
interbank call money market, when there is a liquidity crunch,
the NBFIs take the first hit.
On the lending side, the NBFIs need to compete with the
banks. As the cost of funds of the NBFIs is higher than that of
the banks, they normally charge higher rate of interest.
Therefore, they end up booking riskier loans. The NBFIs are
not allowed to offer services related to international trade and
remittance, the major sources of revenue for the commercial
banks. Commercial banks can offer lower lending rate to
corporate customers by charging higher commissions for
Letter of Credit and Guarantee issuance transactions and
higher spreads on foreign exchange transactions, rendering
the NBFIs uncompetitive.
Some of the NBFIs are facing this competitive threat by
diversifying into capital market related activities such as
merchant banking, broking and asset management. This
trend has become stronger in the recent months. The NBFIs
such as IDLC, Lanka Bangla and Prime Finace that made
early foray into capital market activities have already
assumed dominant positions in the NBFI sector. The rest of
the NBFIs need to look for greener pastures to be able to
survive in this competitive environment.
BB moves to make farm loan mandatory
The Daily Star, Wednesday, September 17, 2008
Bangladesh Bank (BB) has announced that it will make
disbursements of agriculture loans to farmers mandatory for
all banks, including the foreign banks, to ease farming
activities in the country.
The BB would first ask the banks to disburse loans to
farmers, said the BB Deputy Governor Nazrul Huda, adding
that if the banks do not comply with this, the central bank will
17
22 September 2008
force them to place a certain percentage of their annual
credit aside for agriculture loan disbursements.
The BB took the decision at a meeting of its Agriculture
Credit Monitoring Committee. The meeting also decided that
the banks should introduce a Revolving Crop Credit facility,
to distribute loans to farmers and to disburse collateral-free
loans to fishermen and share croppers.
"More investment in agriculture sector is inevitable in the
wake of high food prices on the international market. That is
why we took the initiative to increase the amount of
agriculture loans," Nazrul Huda told newsmen after the
meeting. He said directed lending practices to the sector
have not been in place since the inception of the Financial
Sector Reform Programme in 1990.
“I think that the banks will comply with the Bangladesh Bank
directives for disbursing loans in agri sector because they
have realised that agriculture loan is profitable," Nazrul Huda
said.
http://www.thedailystar.net/story.php?nid=55192
Foreign banks cautious over farm credit
The Daily Star, Thursday, September 18, 2008
Foreign commercial banks seem cautious to make
comments on Bangladesh Bank's (BB) decision to make farm
loans mandatory for all banks operating in the country.
“We are aware of the news, but have not received the
circular from Bangladesh Bank as yet,” said Mahbub-ur-
Rahman, head of corporate banking of HSBC. Standard
Chartered Bank (SCB), another major foreign bank operating
in the country for long, also echoed HSBC. “We have been
informed about the news through media. We are now waiting
for detailed direction from Bangladesh Bank in this regard,”
said Sarwat Ahmad, senior manager of SCB's corporate
affairs. A Citi NA official said the bank authority would not
make any comment before receiving the BB guidelines on
mandatory credit to the farmers.
http://www.thedailystar.net/story.php?nid=55319
Eid to push remittance 20pc up
The Daily Star, Wednesday, September 17, 2008
Banks are expecting a 20 percent rise in overseas remittance
inflows by Bangladeshis over the Ramadan and Eid period.
Inward remittance inflow, which was USD 733mn in August,
may exceed USD 900mn in September. Remittances
normally increase over this period.
“We expect over USD 50mn remittance in this month, which
is USD 7mn more than the amount sent home by expatriates
last month,” said Shamsul Huda Khan, executive vice
president and head of international division of National Bank
Limited (NBL). Islami Bank, the current leader in remittance
transaction in Bangladesh with USD 174mn transaction only
in August, also expects a 20 percent increase this month.
BRAC Bank, claiming to be the country's fastest growing
private commercial bank, expects a 25 percent increase in its
remittances.
_______________________________________________________________________________________
AT Capital Weekly Update
AT CAPITAL RESEARCH
Bank remittance
remittances
emittances in August (USD mn)
Islami Bank 174
Sonali Bank 101
Agrani Bank 58
Janata Bank 58
National Bank 43
Uttara Bank 41
Brac bank 39
Source: Bangladesh Bank
Strong remittances by expatriates help Bangladesh offset the
impact of the trade shortfall and keep the overall balance of
payments in surplus. Bangladesh received USD 7.9bn in
remittances in fiscal 2007-08, nearly 30 percent higher than
the previous fiscal year's. Remittance may reach USD 10bn
this fiscal year, Bangladesh Bank officials said. Banks are
increasingly adopting modern technologies and delivery
channels to render fastest remittance services to its clients.
http://www.thedailystar.net/story.php?nid=55142
NBFIs' default loans climb to 8pc in June
The Financial Express, Tuesday, September 16, 2008
The rate of overall default loans in the non-banking financial
institution sector climbed to 8.0 per cent in June this year
from 6.0 per cent in the previous three months, officials said.
The non-performing loans (NPLs) have increased by 2.0
percentage points mainly due to poor recovery by some non-
banking financial institutions (NBFIs) during the period.
The central bank has already instructed at least seven NBFIs
out of 29 for taking necessary steps to reduce the amount of
classified loans immediately. This is against a backdrop of a
rising trend in NPLs that are now range between 10 per cent
and 26 per cent of the total outstanding loans of the NBFIs.
The total classified loans of all NBFIs stood at BDT 7.9bn
(USD 115.4mn) against their total outstanding loans of BDT
96.7bn (USD 1.4bn) in June this year, according to the
central bank statistics.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45705
Sonali Bank earns 'Best Brand Bangladesh 2008' award
The Financial Express, Tuesday, September 16, 2008
Sonali Bank has earned "Best Brand Bangladesh 2008"
award in the financial category. Bangladesh Brand Forum
distributed the award to the bank. This year the award has
been given among the best performers in seven different
sectors. Brac Bank and AB Bank Limited were other
nominated banks for this award.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45649
18
22 September 2008
Liquidity shortage hits NBFIs
The Financial Express, Sunday, September 14, 2008
Liquidity issues have become a major problem for the
country's non-banking financial institutions (NBFIs) which are
finding it difficult to mobilise deposits from the market, and is
now seriously affecting the business operations of the NBFIs
which are mainly engaged in lease financing.
Reduced rates of the implementation of the annual
development programmes (ADPs) and higher interest rates
offered on deposits by banks have been major hurdles to the
flow of funds to the NBFIs, market operators said.
Additionally, commercial banks are charging higher interest
rates when lending to NBFIs, demanding rates between 14
per cent and 15.50 per cent compared to previous rates
ranging between 12.50 per cent and 14.00 per cent, due to
banks paying higher deposit rates.
"Fund is a big problem for the NBFIs to run their business
smoothly," Chairman of the Bangladesh Leasing and
Finance Companies Association (BLFCA) Anis A Khan told
the FE in an exclusive interview.
Mr. Khan, who is also Chief Executive Officer (CEO) and
Managing Director of the IDLC Finance Limited, the country's
largest NBFI, said that the overall deposit of his company
recorded lower growth during the past few months.
A senior official of the Bangladesh Bank (BB) while admitting
the fund crisis in the NBFIs said the overall deposits with the
NBFIs might have declined due to higher interest rates being
offered by commercial banks on deposits in recent months.
The country's commercial banks currently offer deposit rates
from 5.25 per cent to 13.50 per cent on fixed deposit
schemes, depending on the duration, while the rates for
saving accounts vary between 2.50 per cent and 8.00 per
cent, according to the central bank statistics.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45510
Ceramics
Ceramics sector eyes USD 100m export
bdnews24.com, Monday 15 September, 2008
The Bangladesh Ceramic Ware Manufacturers' Association
(BCWMA) has estimated that the country can export ceramic
wares worth USD 100mn by 2012. The growth of the sector
has been remarkable in recent years. In FY 2006-07, 21
Bangladeshi manufacturers exported ceramic ware worth
USD 38.3mn to over 50 countries, up by 28% from the prior
year. The domestic ceramics industry has invested USD
292mn so far and employs around 100,000 workers.
The BCWMA members said that if the government ensures
uninterrupted energy supply and expedites the refund of
import duties upon execution of exports, Bangladesh could
become one of the three largest global ceramics exporters.
They added that Bangladeshi manufacturers use the most
advanced 'Bone China' technology and labor costs here are
relatively low. Additionally, as an LDC and member of the
WTO, Bangladeshi ceramic wares enjoy tax exemptions in
developed countries. The BCWMA also recommended that
_______________________________________________________________________________________
AT Capital Weekly Update
AT CAPITAL RESEARCH
the government take steps to excavate superior quality clay
found in the coalmining regions of north Bengal.
http://www.bdnews24.com/details.php?cid=4&id=62420
Infrastructure
Infrastructure & Energy
ATC Comment:
Bangladesh is now facing a severe power crisis with a supply
shortfall of around 1,500MW. One of the major reason of this
current power crisis is the shortage of primary source of
energy which is mainly natural gas in Bangladesh. At
present, 1,800mmcft gas is produced everyday where the
demand is 2,000mmcft per day, resulting in a shortfall of
around 700MW of power generation. Furthermore, gas will
start depleting after 2012 unless gas fields are discovered.
Due to the current gas shortage, the government has
planned to suspend the implementation of eleven large and
medium power projects with their total production capacity of
around 3,200MW.
Bangladesh recently has taken a number of initiatives
including inviting a third offshore bidding round to augment
its gas production. However, it will take around 5 years to get
the benefit from this project when the power crisis will be
more severe. We believe that, ensuring the primary energy
source for the country for longer term should be the primary
target of the energy sector of a country.
Source: Bangladesh Power Development Board
Bangladesh has a proven-probable coal reserve of 3.3bn
tonnes. Sixteen mn MT of coal can generate 5,000 MW
power for one year. In this Limited Gas Scenario, we assume
that 5,000 MW of new power plant capacity could be
developed using domestic coal that can generate power for
up to 66 to 90 years. In the FY 2006, only 1.7% power was
generated using domestic coal while 88.5% of power was
generated by natural gas. In terms of heating value, coal
reserves of Bangladesh is much higher than the current gas
reserves. It is of no economic benefit to Bangladesh to keep
coal or other conventional non-renewable energy unused
under the earth for an indefinite period of time. Bangladesh
should diversify its’ dependency on another fossil fuel from
natural gas and therefore, should utilize its coal resource
immediately.
19
 22 September 2008
Policies on merchant power plants, renewable energy soon
The Financial Express, Monday September 22, 2008
The government will adopt a couple of policies relating to
merchant power plants and renewable energy by October
next to encourage private sector investments in the country's
ailing power sector. Besides, Energy Conservation
Ordinance is expected to be adopted within this period. Once
approved, the policies and the act would help mitigate the
country's electricity crisis.
A good number of industries are now closed or operating
partially mainly due to power crisis. The power ministry has
already drafted the policies and the act and sought
necessary comments from the stakeholders to quicken its
implementation. An inter-ministerial meeting would be
arranged soon to finalise the drafts of these policies and act.
AT CAPITAL RESEARCH
According to the power ministry, the country's installed power
generation capacity should reach 9,666MW by 2012 against
a peak demand for 7,887MW. To achieve this target, the
nation must produce around 5,000MW more within that time
where the present initiatives would ensure only around
1,100MW additional power in the next few years, leaving a
shortfall of around 4,000MW. Petrobangla however assured
gas supply to some rental power projects with a total
production capacity of around 300MW and 450MW Bibiyana
IPP scheme, Sylhet150 MW scheme, Siddhirganj 220MW
peaking power (now nearing completion) and Bhola 150MW
projects.
http://www.thedailystar.net/story.php?nid=55651
Government to raise domestic coal price
The Financial Express, Saturday September 20, 2008

Under the proposed merchant power policy, the sponsors of
power plants would be free to arrange fuel on their own to set
up power plants and select their customers. The private
entrepreneurs would be allowed to fix electricity tariffs
through negotiations with their respective clients. They would
also be allowed to have access to transmission and
distribution lines of utilities in exchange for payment of
agreed wheeling charges to the state-owned Power Grid
Company of Bangladesh (PGCB).
The renewable energy policy would help tapping of the
ample potentials to generate electricity from renewable
energy resources. Several public, private and non-
government organisations installed a good number of
renewable energy units using solar, wind, bio-gas sources
across the country with financial assistance from donor
agencies. Generation from renewable energy could be
increased significantly through smooth growth and expansion
of their renewable energy projects under the policy.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=46225
The government is likely to raise the domestic coal price by
nearly 20% at USD 71.5 from current USD 60 per tonne as a
proposal is awaiting approval of the relevant authority. The
new coal price will be applicable for the state-owned
Bangladesh Power Development Board (PDB) alone. The
price hike will reduce the losses of Barapukuria Coal Mine
Company Ltd (BCMCL), the country's lone coal mining
company, but it will raise electricity generation cost at
Barapukuria 250 megawatt (MW) coal-fired power plant. The
private sector will be able to purchase Barapukuria coal at a
price to be determined through open tenders, but that will not
be less than USD 115 per tonne.
Production cost of the BCMCL coal stood at USD 84 per
tonne as per the latest audit report for 2006-07. But the
international price of similar quality coal now ranges between
USD 190 to 195 per tonne, the BCMCL managing director
claimed. The necessity of the price hike was felt when the
BPDB purchased low quality Indian coal at USD 89 and USD
120 per tonne for importing two separate consignments last
year to run the Barapukuria coal-fired power plant in absence
of coal production at the BCMCL.

Gas crisis to put a stop to 3,

3,200MW new projects http://www.thefinancialexpress-
The Daily Star, Sunday September 21, 2008 bd.info/search_index.php?page=detail_news&news_id=46008

The failure to overcome persistent gas crisis is now resulting Government to amend policy for agencies to buy power from
in suspension of 11 large and medium power projects with private sector
their production capacity totalling around 3,200MW, pushing New Age, Friday September 19, 2008
the country towards a deeper power crisis in the coming
years. Petrobangla said recently it would not be able to The government will amend the policy guideline for small
supply gas to these projects in the next three years. Gas may power plant in private sector allowing the state-run power
be given to some of these after 2011 on completion of certain companies to buy electricity from such plants. The Power
other gas related projects. Cell in the past week sent a proposal for the amendment to
Power System Development Plan up to 2020 the policy guideline, made in 1997, after a meeting at the
division. Once the policy guideline is amended, private
2004-
2004-05 2006-
2006-07 2008-
2008-12 2013-
2013-20
entrepreneurs will be able to sell electricity to power
agencies from small plants such as captive power plants.
Installed capacity (MW) 5,025 6,441 9,666 17,765

Peak demand (MW) 3,743 5,368 7,887 14,600 The government in 2007 formulated a policy guideline for
power agencies to buy electricity from the captive plants. The
Transmission line (km) 242,832 266,375 345,530 477,558 Rural Electrification Board (REB) has so far signed at least
Consumers (mn) 8.84 9.03 12.75 20.76 five agreements with private investors to buy up to 30MW of
power from captive plants. The Bangladesh Energy
Per capita generation (KWh) 158 190 260 450
Regulatory Commission (BERC) has recommended
Access to Electricity 38% 47% 65% 100% amending the policy guideline for small power plants to allow
Investment Requirement (BDT
0 115 307 575
power agencies to buy electricity from small plants such as
bn) captive power plants. BERC officials said the commission
Source: Power Ministry had so far issued licences for the installation of captive and
_______________________________________________________________________________________
AT Capital Weekly Update 20
22 September 2008
small power plants with a combined capacity of more than
1,500MW. Some of the captive power plants have shown
interest in selling electricity to power agencies.
http://www.newagebd.com/2008/sep/19/front.html#17
USD 355mn power deal with World
World Bank signed
The Daily Star, Thursday September 18, 2008
The caretaker government on September 17 successfully
completed its negotiation with the World Bank (WB) to raise
funds for the USD 355mn for Siddhirganj 300MW peaking
power project and associated gas pipeline construction. The
World Bank will finance about USD 275mn concessional
credit for the Siddhirganj Peaking Power Project (SPPP) and
USD 80mn for the construction of a gas pipeline from
Bakhrabad gas station to the proposed Siddhirganj plant
through the International Development Association (IDA).
The financing proposal now needs to be approved by the
board of the WB which is expected to sit in October.
The SPPP plant will be state-of-the-art, with two 150MW
simple-cycle gas turbines. The Electricity Generating
Company of Bangladesh (EGCB), a new and corporatized
BPDB owned entity, will implement the project. EGCB will
also implement another 240 MW to be built at Siddhirganj
under a parallel Asian Development Bank project. The power
transmission line will be owned and operated by the Power
Grid Company of Bangladesh (PGCB).
http://www.thedailystar.net/story.php?nid=55344
Bangladesh-
Bangladesh-India maritime boundary talks go barren
The Financial Express, Thursday September 18, 2008
A three-day technical level meeting between Bangladesh
and India over the maritime boundary delimitation ended in
Dhaka on September 17 without any tangible outcome
following disagreements over the midstream flow of the
common coastal river Haribangha that determines ownership
of the disputed South Talpatty Island. The next meeting to
resolve the issue will be held in India.
The additional foreign secretary said, "India was favouring
the 'equidistant' or 'median-line' principle for the demarcation
of maritime boundaries, but we favoured the 'coastal
frontage'." India was arguing that it had demarcated the sea
territory with the Maldives and Sri Lanka following the
equidistant principle. However, Bangladesh has declined to
accept the principle as the Maldives and Sri Lanka are
located on the opposite side of India, while Bangladesh is
located adjacently.
International oil companies (IOCs) remain uneasy about
investing in exploration in territories where maritime
boundaries remain unsettled. According to UK-based firm
Wood Mackenzie a total of five Bangladesh offshore gas
blocks have been wholly or partly licensed by India. This
issue was not raised at the meeting with neither
party discussing the issue of overlapping of gas blocks.
Bangladesh recently invited bids for its 28 offshore blocks
and received bids for 15 blocks. Of them, 9 blocks have been
selected for awarding to the IOCs. According to the United
Nations Convention on Law of the Sea, Bangladesh must
demarcate its sea boundaries by 2011 while India and
Myanmar by 2009.
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AT Capital Weekly Update
AT CAPITAL RESEARCH
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45854
Summit Power keen to double generation from its 4 plants
The Financial Express, Thursday September 18, 2008
The Summit Power Ltd. (SPL) will submit a proposal to the
power ministry for approval to double the generation capacity
from its four small power plants (SPPs). SPL is scheduled to
initiate new electricity generation of 110MW from its four new
plants shortly. Capacity from its existing plants is is 105MW.
If SPL can double the capacity from its upcoming four plants
(220MW), the company's electricity generation capacity
would extend to a total of 325MW.
The company, which initiated electricity generation in 2001
from three small plants at Savar, Narshingdi and Comilla, is
the pioneering local enterprise to produce electricity for the
national grid. Initial electricity generation capacities of the
SPLs' three small plants were only 35 MW. But the company
augmented electricity generation by three-fold to 105MW,
following formal approval from the power ministry to augment
electricity generation.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45869
Errant power companies warned of no more time extension
The New Age, Thursday September 18, 2008
The Power Division on September 17 warned two errant
rental power companies saying their agreements for the
installation of four plants would be cancelled if they failed to
commission the plants by the extended deadline of October
31. The Energy Prima Consortium and GBB-Kaltimax doubt
whether they would be able to put all the short-term power
plants into operation by the extended deadlines.
Energy Prima was scheduled to start operations at the
50MW Shahjibazar and the 50MW Fenchuganj plants by
May 15, (ie within 120 days after the contract was signed),
and the 20MW Bogra on May 23 while Kaltimax was
scheduled to start operations at the 30MW Bhola plant in
May. The chief adviser, Fakhruddin Ahmed, approved a
division proposal earlier this month to allow the errant
companies till extend the deadline to October 31, 2008 for
the installation of plants by imposing additional penalties of
USD 500 per MW for each day delay.
The interim government in January 2008 initiated six short-
term rental plants to generate electricity on an emergency
basis by 120 days to give people some relief from ongoing
power outages during summer. Only two out of the six plants
have so far come into operation.
http://www.newagebd.com/2008/sep/18/busi.html#1
Real Estate
ATC Comment:
Comment:
The need for high quality commercial real estate has started
to have its effects in the Bangladeshi market. With
industrialization constantly growing, commercialization of
real estate is bound to pick up pace and it is a positive sign
that the leading players are looking to get their foothold in
this lucrative market. However, at present, the lack of good
21
22 September 2008
quality real estate is leading to an increase in price and the
shift of industrial Dhaka from Motijheel northwards to Banani,
perhaps Uttara in the near future and Gulshan in particular
has led to a sharp increase in commercial real estate prices
in those areas. The attitude of the market is positive in
general as people have already started to pick up
modernized concepts like “intelligent buildings” and the
players are definitely in favor of the government to increase
official commercial areas. Commercial real estate is definitely
more lucrative than residential estate as of now. Dhaka will
need to distinguish its commercial hubs form residential
areas in the future otherwise a mixture of office buildings and
residential apartments might reduce the quality of both
commercial and residential real estate.
Cost of office space soars high
The Daily Star, Sunday September 21, 2008
Commercial buildings have recently been more in demand
than residential structures, but still are short in supply as the
government permits the establishments of commercial
structures only in selected officially-declared commercial
locations. Tanvirul Haque Probal, president of Real Estate
and Housing Association of Bangladesh (REHAB) said that
almost all the leading real-estate companies have multiple
projects on commercial buildings to meet demand.
Bay Developments Ltd, Concord Group, and Orion Group
are among the list of major players that are concentrating on
commercial buildings. The prices of commercial real estate
are highest in areas such as Gulshan, Banani and Baridhara.
Khalilur Rahman, deputy general manager of Concord
revealed that the price of residential real estate in Gulshan is
around BDT 10,000 (USD 146) per sq. ft. whereas the price
for the same unit of commercial real estate is around BDT
25,000 (USD 365). The local players feel that the
government should increase the number of official
commercial areas.
http://thedailystar.net/story.php?nid=55793
Telecoms
GP may halve IPO size due to NBR directive on pre-
pre-IPO
placement
The Financial Express, Friday September 19, 2008
The country's largest mobile phone company Grameenphone
(GP) is likely to halve its proposed initial public offering (IPO)
size for the reason described below.
The National Board of Revenue (NBR) cuts corporate taxes
of a company by ten per cent if goes public, but it is not
applicable to the companies which raises money in pre-IPO
placement.
"The NBR does not believe that pre-IPO money is a part of
public subscription. As a result, the GP, which intends to
raise USD150mn in pre-IPO placement, will not get the
corporate tax benefits," a market source said.
"The GP has therefore moved to reduce its IPO size to USD
150mn including pre-IPO placement from the proposed USD
300mn," he said.
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AT Capital Weekly Update
AT CAPITAL RESEARCH
When contacted, company spokesman Yamin Bakht refused
to comment on the latest development. However, a source
associated with GP's new IPO size, he said there might be
no foreign placement.
Meanwhile, the weighted average share prices for pre-IPO
placement have already been fixed at BDT 11.58 per share
after bidding from local financial institutions.
Trust Bank, Prime Bank, IDLC Finance Limited, Lankabangla
Finance, AIMS of Bangladesh and AB Bank are the possible
buyers in the on-going pre-IPO placement offer, the source
said.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45945
BTCL earning drops 35pc
The Daily Star, Thursday September 18, 2008
BTCL, the state owned landline operator, announced its
earnings dropped by 35 percent to BDT 350mn (USD
5.11mn) in its second month of operations as a public limited
company. The main reason behind this decline was the
lowering of call tariffs. In July the company introduced the
lowest tariff in the market offering BDT 0.10 per minute off
peak and BDT 0.15 per minute peak, while the minimum tariff
offered by private landline operators stands at BDT 0.25.
While the mobile phone sector has grown at a CAGR of 99%
between 2003 and 2007, the landline sector has hardly seen
double digit growth. Apart from BTCL, all the other landline
operators are in the red, with substantial capital investments,
intense competition and a lack of demand for landline
phones crippling the sector.
http://www.thedailystar.net/story.php?nid=55354
BTRC unveils guideline on telecom infrastructure sharing
The Daily Star, Tuesday September 09, 2008
The Bangladesh Telecoms Regulatory Commission has
finalized the guidelines for infrastructure sharing between
telecom service operators. Under the guidelines, telecom
operators can share or lease both physical and non-physical
infrastructure (including spectrum) to other operators. This
move should help to ease the capital expenditure burden on
the 6 mobile and 12 fixedline telecoms companies. Spectrum
constrained operators such as Grameenphone would benefit
from leasing spectrum from other mobile companies while
the likes of Teletalk, an operator with limited infrastructure,
could take advantage of using base stations of other telcos.
UAE-based Warid has recently signed an infrastructure
sharing agreement with both Citycell and Banglaink. Under
the deal, both companies are now sharing their base
transceiver stations (BTS) and other infrastructure. The top
three operators have already rolled out their network across
the country. Grameenphone has 11,000 BTSs, followed by
Banglalink's 5,000 and Aktel's 3,000. Grameen and
Banglalink have also developed a fiber optic network.
http://www.thedailystar.net/story.php?nid=53940
22
22 September 2008
Textiles
ATC Comment:
Last week’s labour related circumstances improved slightly
as Gazipur based garment factory owners are now optimistic
in fulfilling this year's export target due to improved law and
order situation near their factories. Moreover, some other
industry insiders have linked this improved situation to down
supply of gas and power. However, some disturbances are
still there due to workers demand for Eid bonus.
The Multi Fibre Arrangement Forum urges Chief Advisor to
tighten limitations on trade union activities and to put into
practice a framework for mature industrial relations based on
tripartite agreements, ILO conventions and national labour
laws. Most of the participants here are major buyers and
NGOs including Oxfam, TESCO, Groupe Carrefour, Levi
Strauss and Co,
International Textile Garment and Leather Workers
Federation and SBGSKF etc. From our point of view, such
moves will help BD protect and extend its global position
implementing consistent measures to push more
manufacturers to reach international standards and ‘ethical
sourcing initiatives’ demanded by foreign buyers will increase
export competitiveness.
Global players are also continuing to move to BD. Following
the last weeks entrants, an Indian company, M/s Lenny
Apparels Limited also announced plans to invest BDT 670mn
in DEPZs.
In the global market, China is facing depressing figures in
export. One of the major reasons for such decreased exports
is weak demand from euro zone and US due to recent
economic turmoil. Other reasons are appreciation of RMB
against the EURO and USD that made the Chinese apparels
more costly to the major buyers. Moreover, China faced
stagnation in investment growth for textile industry during this
year due to low profitability among manufacturers. This
situation in China is posing both positive and negative picture
for Bangladesh. Such export losses of China can be viewed
as an opportunity for Bangladesh. On the other hand,
exporters of Bangladesh also fear fallout from the global
financial turmoil. We, suggest the exporters to increase
productivity and diversify both products and export markets
to counter any future slowdown. Moreover, reduction of bank
interest rate and enhancement of subsidy to make the RMG
sector more competitive in the period of global economic
recession may also help. We also believe that the recession
may not be prolonged as the western world is working hard
to solve the crisis. As an illustration, US Fed has proposed a
USD 700bn bailout for the distressed financial sector over a
two-year period.
BKMEA urged to open chemical management cell
The Financial Express, Monday, September 15, 2008
German Technical Cooperation’s (GTZ) Senior Business
Adviser David Ambader urged Saturday the knitwear
manufacturers of Bangladesh to open a special cell on
chemical management while speaking at a workshop. He
also added that implementation of the Registration,
Evaluation, Authorization and Restriction of Chemicals
(REACh) laws is very important in addressing the new
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AT Capital Weekly Update
AT CAPITAL RESEARCH
challenges for the RMG sector as EU wants to be confirmed
through implementing REACh that no chemicals, used in
their imported-products, will be harmful for the humans and
the environment.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45610
Growth
Growth in China's textile exports continues to slow down
The Financial Express, Monday, September 15, 2008
China continued to see a slowdown in export of textiles in the
first eight months of this year due largely to lowering orders
resulting from economic downturn in the euro zone and the
US. In August when foreign sales of garments usually
peaked, the country exported USD 12.54bn worth of
garments and accessories, down 0.95 per cent from the
same month of last year. According to Wang Rong, an
analyst with Lianhe Securities, the halted appreciation of
RMB against the USD and EURO failed to ease the
pessimistic situation of China's export of textiles. Wang
Qianjin, editor in chief of the leading textile information
provider ‘Web Textiles’, predicted the euro depreciation and
economic slowdown in the euro zone would cause the
growth rate for China's textile exports decrease from 19.96
per cent in mid 2008 to 4.26 per cent at the end of 2009.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45552
Textile sector investment slows down in China
The New Age, Monday, September 15, 2008
China saw a slowdown in investment growth for textile
industry over the first seven months this year, due partly to
export slowdown and low profitability among manufacturers.
From January to July, the textile sector enjoyed USD 22.4bn
in fixed-assets investment, a growth of 13.14 per cent on the
same period of last year. Moreover, the growth rate was 12.6
percentage points lower than that for the whole of last year.
New projects started for the sector numbered 3,796 in the
first seven months, down 10.47 per cent from last year.
http://www.newagebd.com/2008/sep/15/busi.html
Indian co to invest USD 9.78mn
9.78mn in a garments manufacturing
manufacturing
industry at DEPZ
The Financial Express, Tuesday, September 16, 2008
An Indian company, M/s Lenny Apparels Limited, plans to
invest USD 9.78mn (BDT 670mn) to set up a woven and knit
garments industry at the Dhaka Export Processing Zone.
The companies will employ 1620 Bangladeshis and 61
foreign nationals.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45651
Gazipur RMG units go back to production:
production: Owners upbeat on
achieving export targets
The Daily Star, Tuesday, September 16, 2008
The Gazipur based garment factory owners, some of whom
were affected by the month-long labour unrest in August, are
now upbeat on fulfilling this year's export target, expressing
their satisfaction over the government measures to keep law
and order situation under control. They hope that they will be
23
22 September 2008 AT CAPITAL RESEARCH
able to make up for the loss. However, the industry insiders
have linked the political stability and smooth supply of gas
and power to such achievement. Earlier, these factory
owners threatened to close their units in the trouble-torn
district for an indefinite period from the 25th of this month if
the government fails to provide security for the industry within
this stipulated time.

http://www.thedailystar.net/story.php?nid=54980

MFA Forum for lifting curbs on TU activities

The Financial Express, Wednesday, September 17, 2008

The Multi Fibre Arrangement (MFA) Forum, a global

collaboration of RMG and textile buyers and stakeholders,
sent a letter to the Chief Advisor to raise restrictions on trade
union (TU) activities and to establish and implement a
framework for mature industrial relations based on tripartite
agreements, ILO conventions and national labour laws.
They also urge to convene the Minimum Wage Board and to
introduce an annual review of the legal minimum wage
levels. The participants in the letter included Oxfam, TESCO,
Groupe Carrefour, Levi Strauss and Co, tvmania, H & M,
Marks & Spencer, BLGUF, International Textile Garment and
Leather Workers Federation and SBGSKF. They reasoned
the appeal by saying that International buyers require
freedom of association as part of their ethical compliance
codes and these requirements are directly related to the core
conventions of the ILO that were ratified by Bangladesh in
1972,

http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=45761

Costly accessories erode RMG profit margin

The Daily Star, Friday, September 19, 2008

Profit margins on the export of RMG items will erode further

due to 50 percent price hike of garment accessories globally
and 30 percent locally. local manufacturers spend 15-18
percent of total export value of their exportable RMG
products on accessories. Local RMG manufacturers have no
other way but to import capital machinery, raw materials,
dyes, chemicals and fabrics for producing RMG items. As a
result, the local RMG exporters can hardly compete with
other RMG exporting nations which produce their own raw
materials and capital machinery. Bangladesh spent almost a
third of export value for importing accessories, raw materials,
capital machinery, dyes, chemicals, fabrics, yarn and cotton.
Textile machineries worth USD 145.8mn were imported in
the last two and a half months.

http://www.thedailystar.net/story.php?nid=55483

Global turmoil threatens RMG

The Daily Star, Sunday, September 21, 2008

Exporters fear fallout from the global financial turbulence on

the local garment industry as the country's major export
destinations are hit hard by the economic turmoil stemming
mainly from the US subprime crisis. More than 72 percent of
the total export earnings from knitwear come from European
countries and more than 20 percent from the USA. The other
major destinations of knitwear products are Canada, Japan
and Poland.

http://www.thedailystar.net/story.php?nid=55792

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AT Capital Weekly Update 24
22 September 2008 AT CAPITAL RESEARCH
AT Capital Team – Dhaka
Ifty Islam Managing Partner (880-2)-8155144, ext. 132 ifty.islam@at-capital.com
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AT Capital Team – North America/Asia

Zarif Munir Senior Advisor zarif.munir@at-capital.com
Professor Jahangir Sultan, Ph.D. Senior Advisor jahangir.sultan@at-capital.com
M. Nasim Ali Senior Advisor nasim.ali@at-capital.com
Iqbal Hussain Senior Advisor iqbal.hussain@doctors.org.uk
Robert Kraybill Senior Advisor robert.kraybill@at-capital.com

© Copyright 2008. Asian Tigers Capital Partners Limited, Level 16, UTC Tower, Panthapath, Dhaka –
1215, Dhaka, Bangladesh. All rights reserved. When quoting please cite “AT Capital Research”. The
above information does not constitute the provision of investment, legal or tax advice. Any views
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Asian Tigers Capital Partners or its affiliates. Opinions expressed may change without notice. Opinions
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_______________________________________________________________________________________
AT Capital Weekly Update 25