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30 November 2008 AT CAPITAL RESEARCH

AT Capital Weekly Update

Key themes in this issue are:
Weekly News Update


• The tragic attacks on Mumbai, where almost 200 people lost their lives, have dramatically
reversed the growing sense of entente between India and Pakistan, and threaten escalating
regional instability.
• Since it seems unlikely that Pakistanis can be categorical and convincing enough to thwart
Indian demands, there are major risks that we will be deep into a crisis within the next few
months, very shortly after the situation on the ground clarifies itself.
• But Bangladesh can stand out amid the increasingly fragile regional geopolitical picture as
a moderate Muslim state and a country of relative stability.
• There is every incentive for both leading political parties in Bangladesh to fight free, fair and
trouble-free elections to show the world that Bangladesh can make a successful return to
• The prospect for the country to also benefit from greater FDI and portfolio flows, as global
investors look to reduce India and Pakistan exposure, is an added economic incentive.
• There has been a tremendous amount of debate and a heated response from the
Bangladesh government and central bank to the World Bank (WB)’s forecast that
Bangladesh's economic growth rate might come down to 4.8% this fiscal year from 6% last
year. We discuss the reliability of the Walmart effect and the meltdown in Dubai Property.
• To put the Bangladesh growth slowdown debate in perspective, it is worth looking at the
turmoil occurring in Asia’s most successful and fastest growing economy of the past two
decades. China cut interest rates by 1% last week. The WB cut their growth forecast to
• We discuss some recent trends in Cleantech funds as well as new Hydro technology.
• Last month, we published an 80 page report on Climate Change and Alternative Energy in
Bangladesh. There has been a growing number of requests to see the whole report online.
EDITORS Given our commitment to increasing awareness/debate on Bangladesh’s biggest Macro
Tigerr Capital Partners

challenge in coming decades, we have made the whole report available online.

Ifty Islam
Managing Partner

Syeed Khan

Jisha Sarwar
Senior Research Associate
Asian Tige

Asian Tiger
Capital Partners

UTC Building, Level 16

8 Panthapath, Dhaka-1215
Tel: 8155144, 8110345
Fax: 9118582
30 November 2008 AT CAPITAL RESEARCH
Contents Page

Bangladesh Overview 3

The Mumbai Attacks: Causes, Consequences and Risks for Regional Stability 3
How much are Income Inequalities to blame for extremism? 4
Reactions to the World Bank growth forecasts – Don’t shoot the Messenger? 4
Dubai Property meltdown risks 5
Trouble in China as Economy Slows 6
Increased internal tensions within China 7
The Rise of Climate Change Funds 7
The emergence of new Hydro power technology 8

Global Markets Overview 9

Stock Market Weekly 11

Weekly Stock Market Commentary 12
Stock Market News 14

Economics 16
Economic News 17

Sector News 18
Agriculture 18
Aviation 18
Banking 18
Infrastructure & Energy 19
Insurance 20
Real Estate 20
Telecoms 21
Textile 21

AT Capital Weekly Update 2
30 November 2008 AT CAPITAL RESEARCH
but on Satuday this offer was rescinded and more junior ISIS
Ifty isIslam,
officials have been sent instead. This Managing
a worrying signPartner

potential fractures between the new political government in

Bangladesh Overview Islamabad and the powerful Pakistan army.

The Mumbai Attacks: Causes, Consequences and Risks for However, bold and decisive gestures of conciliation and
Regional Stability willingness to cooperate are critical if the Pakistan link
becomes clearer. A rapid escalation of mistrust and mutual
The extraordinary and tragic terrorist attacks in Mumbai last recriminations is extremely risky and has major negative
week, with nearly 200 dead and more than 300 seriously implications for regional stability. Strafor, a geopolitical
injured saw the city suffer the highest number of fatalities strategy consultancy, has made a number of thought-
since the terrorist bombing of the Bombay Stock Exchange in provoking insights into the potential inflammability of the
1993, which saw 295 deaths. But in many ways, the latest current situation. In an email to clients on Friday, they noted
incident is closer to India’s equivalent of 9/11 given the that: “(if the Indian Government) can link the attack to an
breadth and audacity of the attacks, along with the targeting outside power: Pakistan. In that case it can hold a nation-
of foreigners, and the crisis persisting over several days in state responsible for the attack, and can use the crisis
the full glare of the global media. atmosphere to strengthen the government’s internal position
by invoking nationalism. Politically this is a much preferable
The Taj Hotel in Mumbai outcome for the Indian government, and so it is the most
likely course of action. This is not to say that there are no
outside powers involved — simply that, regardless of the
ground truth, the Indian government will claim there were.”

This, in turn, will plunge India and Pakistan into the worst
crisis they have undergone since 2002. If the Pakistanis are
understood to be responsible for the attack, then the Indians
must hold them responsible, and that means they will have to
take action by retaliating — otherwise, the Indian
government’s domestic credibility will be questioned. The
shape of the crisis, then, will consist of demands that the
Pakistanis take immediate steps to suppress Islamist
radicals across the board, but particularly in Kashmir. New
Delhi will demand that this action be immediate and public.

There is a precedent for this. In 2002 there was an attack on

the Indian parliament by Islamic militants linked to Pakistan.
A near-nuclear confrontation took place between India and
Although specifics are difficult to corroborate, the current Pakistan, in which the US brokered a stand-down in return
consensus among both Indian and International intelligence for intensified Pakistani pressure on the Islamists. The crisis
agencies is that although the Deccan Mujahadeen claimed helped redefine the Pakistani position on Islamist radicals in
responsibility, the planning was so meticulous and the scale Pakistan.
of the attack so ambitious, that the attacks were likely made
by a combination of domestic Indian Islamist extremist Strafor goes on to note that, “In the current iteration, the
groups and an external and well-organized terrorist cell. demands will be even more intense. The Indians and
More specifically, the Indian foreign minister, Pranab Americans will have a joint interest in forcing the Pakistani
Mukherjee, said early evidence explicitly pointed to government to act decisively and immediately. The Pakistani
Pakistan’s involvement. “Preliminary evidence, prima facie government has warned such pressure could de-stabilize
evidence, indicates elements with links to Pakistan are Pakistan. The Indians will not be in a position to moderate
involved,”while American intelligence and counterterrorism their position, and the Americans will see the situation as an
officials said on Friday that there was mounting evidence that opportunity to extract major concessions. Thus the crisis will
a Pakistani militant group — Lashkar-e-Taiba, which has long directly intersect US and NATO operations in Afghanistan.”
been involved in the conflict with India over the disputed
territory of Kashmir — was responsible. At the time of The degree to which the Pakistani government can control
writing, it has been reported that 10 terrorists arrived by boat the situation is unclear. But the Indians will have no choice
from Pakistan, 9 have been killed and Indian police identified but to be assertive, and the United States will move along the
the captured suspect as a 21-year-old Pakistani man, Ajmal same line. Whether it is the current government in India that
Amir Kasab. reacts, or the one that succeeds does not matter. Either way,
India is under enormous pressure to respond. Therefore the
Given that both the US and Indian authorities pointed to the events point to a serious crisis not simply between Pakistan
involvement of the Pakistani Intelligence Agency, the ISI, in and India, but within Pakistan as well, with the government
the bombing of the Indian embassy in Kabul, not surprisingly, caught between foreign powers and domestic realities. Given
the Indian government expressed concerns about the the circumstances, massive destabilization is possible —
involvement of terrorist sympathetic elements in the Pakistan never a good thing with a nuclear power.
army again. On Friday Pakistani President Zardari offered to
send the ISI Chief to New Delhi to brief the Indian authorities,

AT Capital Weekly Update 3
30 November 2008 AT CAPITAL RESEARCH
Since it seems unlikely that Pakistanis can be categorical What can be done? How to include India's Muslims in the
and convincing enough to thwart Indian demands, we economic mainstream is key. India's political parties need to
suspect that we will be deep into a crisis within the next few learn that terrorism cannot be seen as a vote-winner. It is a
weeks, very shortly after the situation on the ground clarifies security threat. If political parties link terrorism with Muslims
itself. or Hindus, they will only bring greater catastrophe closer.
Finally, India must vigorously cultivate peace with Pakistan.
How much are Income Inequalities to blame for extremism? Luckily, a government today exists in Pakistan that has made
the most resolute gestures towards peace in decades.
Professor Ashutosh Varshney of Brown University offered President Asif Ali Zardari has opened up a unique
the following valuable insight in a Nov 29th Financial Times opportunity for regional peace. After Mumbai, India needs to
article suggesting that the socio-economic divide that has respond.
widened during the past 10 years of India’s boom, might be
one underlying driver of Muslim extremism within the country: Implications for Bangladesh
“Mumbai is a paradox. It has areas of appalling squalor but is
India's city of hope… A big hypothesis beckons: India is a In 2008 Bangladesh has already differentiated itself from
highly unequal democracy in a bad neighbourhood, and as India and Pakista by the decoupling of its stockmarket, the
long as its democracy, inequalities and regional misfortunes relative resilience of growth, as well as stability in the
remain unreformed, it will be vulnerable to terrorism… Bangladeshi Taka versus the USD. As we argue later in this
Recently Indian democracy has been treated to the obverse report, we believe there are some downside risks to current
of "Muslim terror". Prima facie evidence and intelligence official forecasts for GDP growth. But Bangladesh is
suggest the rise of Hindu networks practicing terror against nonetheless likely to suffer a more modest slowdown, on a
Muslims. In India's democracy, terror has become identified relative basis, than any of its regional neighbours. How might
not as an evil but as an outgrowth of the grievances of an escalation of India-Pakistan tensions affect us? Perhaps
Muslims or Hindus, or as a sign of whether the Indian state is not directly though further turbulence in the Sensex or KSE
unfair to Muslims or Hindus. That is a recipe for further might feed through to additional profit-taking in the DSE.
disasters. Although Indian Equities rose Friday after the Bombay Stock
Exchange re-opened, this evidence of patriotism is at
Inequalities are the second part of the problem. The Indian variance with the economic realities and prospects for a
economy has been booming, but while some business slump in not only tourism but also FDI. Economic uncertainty
leaders, film stars and sports icons are Muslim, Muslims will also hit an economy that is already reeling across a
mostly come from the poorest, least educated and most number of key sectors from the global financial crisis.
poorly skilled communities.
Bangladesh can stand out amid the increasingly fragile
Nowhere is this contradiction more evident than in Mumbai. It regional geopolitical picture as a moderate Muslim state and
has some of the richest Indian Muslims but there is a huge a country of relative stability. There is every incentive for
Muslim underclass and a connection between Mumbai's both leading political parties to fight free, fair and trouble-free
underworld. Muslim gangs are among the most powerful elections to show the world that Bangladesh can make a
players in Mumbai's organised crime. To many, crime successful return to democracy. The prospects for the
appears to offer greater and easier rewards than a dogged country to also benefit from greater FDI and portfolio flows,
pursuit of regular employment.” as global investors look to reduce India and Pakistan
exposure, is an added economic incentive.
India has to ask how long it can continue to be institutionally
strong if its neighbourhoods are so violent. Its borders are Reactions
eactions to the World Bank growth forecasts – Don’t shoot
porous and the prospect of maritime terrorism, raised by the the Messenger?
Mumbai carnage, makes them more so. Foreign policy and
national security are increasingly tied with India's political There has been a tremendous amount of debate and a
health, with potential consequences for India's economic heated response from the Bangladesh government and
resilience. central bank to the World Bank (WB)’s forecast that
Bangladesh's economic growth rate might come down to
4.8% this fiscal year from 6% last year. The government has
projected GDP to reach 6.5% this year. The bank feared that
the global financial crisis would affect the country's main
export earning readymade garments (RMG) sector and
remittance inflow. “Impact of the crisis will be much more
clear after the next three months,” the World Bank said and
asked the government to chalk out contingency measures.

The WB warning came at a press briefing on 'Global

Financial Crisis and its likely impact on Bangladesh' at its
Dhaka office. The Bank’s Lead Economist Vinaya Swaroop
stated that “We don't know what will happen in Christmas
season. Three months from now, the picture may look very
different. Bangladesh has to remain watchful, particularly the
government, civil society and the media. ”

AT Capital Weekly Update 4
30 November 2008 AT CAPITAL RESEARCH
Xian Zhu, World Bank Country Director, noted that:” There is lost 80% of their value since June, and big developers are
however the risk of increasing payment default to banks by laying people off.
foreign buyers against export orders in the event of their
going bankrupt and also by local importers who are stuck Dubai
with high priced commodity stocks. “

The response from the Bangladesh government was fairly

unequivocal. Finance adviser of the interim government, AB
Mirza Azizul Islam, rejected the WB projection, saying “I don't
know how they made the estimate. However, I do not agree
with them in any way.”

Bangladesh Bank Governor Dr Salehuddin Ahmed Thursday

brushed aside World Bank's projection saying, "Their
projection is too much dependant on numbers only…The GDP
estimate of 4.8% is absurd… it's irrelevant” The Bangladesh
Bank Governor said exports and remittance still remained
strong while the macroeconomic situation remained stable.
"The foreign exchange reserve is fine and the exchange rate Several GCC economies will go into budget deficits next year
remained stable" for the first time since at least 2002, including Saudi Arabia,
whose budget is based on oil at around $50 a barrel but
World Bank Country Director Xian Zhu concluded by excludes the cost of Saudi Aramco’s massive programme of
recommending that “ Bangladesh Bank should continue to capacity expansion. Unemployment will rise as thousands
pursue a monetary policy keeping in view the downside risk more young people, many of them graduates with high
of slowing economic activity as external conditions expectations, enter the job market. Social unrest is likely to
deteriorate while at the same time ensuring that the recent brew”
high growth in private credit is moderated to ensure quality.
A major concern in recent times has been to ensure that high We continue to see sizeable risks for a slowdown in
inflation does not become a permanent feature of the remittances. In fiscal year 2008, 17% of remittances came in
economy. It would therefore be important to balance the from the US alone, the second highest after Saudi Arabia.
concerns about inflation while ensuring adequate flow of After the UAE, the UK is the fourth largest remittance
credit to the real sector. It is also important to monitor sending country for Bangladesh, with just over 11% of total
closely the exchange rate movements of currencies that remittance coming in from UK in FY 2008. It is clear that
compete with Bangladesh in its export markets and assess discretionary spending in both the US and the UK is
the imperative of the current exchange rate policy of collapsing with perhaps the largest vulnerability being in the
maintaining external competitiveness and exchange rate Indian restaurant sector.
stability. Recent declines in international commodity prices
are likely to provide policymakers some fiscal space, which Whither the Walmart effect?
may prove handy in accommodating assistance to sectors
adversely affected by the crisis. The World Bank stands There has been much debate on the “Walmart effect”
ready to provide help for expanding safety nets if needed.” benefiting Bangladeshi garments, and indeed the tragic
death of a Walmart employee last week in a stampede during
Dubai Property meltdown risks the Thanksgiving sales in the US are a testament to the
continued switch towards the discounters in the US. But we
As we highlighted in the Nov 23 and Nov 16 issues of the AT believe the resilience of garment exporters may be tested by
Capital Weekly, we also see the risks for a further slowdown a particularly bleak Christmas sales season in the developed
in remittance growth as a result of the near 60% collapse in markets.
oil prices and the prospects for meltdown in the Middle
Eastern real estate market. Things in the Middle East are In the UK, business leaders have been warned of a
looking gloomier. The extract below is from the Nov 28 issue Christmas sales meltdown today after a bigger than expected
of the Economist: fall in high street sales in the first half of November. The
bellweather retail CBI Distributive Trades Survey suggested
“They said you couldn’t create islands in the middle of a city,” a 46 per cent balance of retailers said sales were below a
shouts a property advertisement over a jammed Dubai year a year ago, while 40 per cent predicted worse to come
motorway. “We said, what’s next?” The range of answers has next month.
become gloomier by the week, as the debate moves from
whether the Dubai property bubble will burst to just how bad The gloom caps a week, which has seen Woolworths and
it is going to get. Some nervous bankers think property prices MFI crash into administration and disappointing updates from
could fall by 80% or so in the next year or so. A few months other big names such as Currys' owner DSG International.
ago, rich foreigners who had bought villas in Dubai were The aggressive liquidation of Woolworth stock at firesale or
complaining about the quality of the sand on their artificial heavily discounted prices will undoubtedly hurt all retailers,
beaches or the difficulty of getting water to circulate around even those at the low end like Tesco, Asda (a subsidiary of
the twiddly fronds of the man-made island shaped like a Walmart) and other discounters.
palm. Now prices for some smart developments have been
cut by 40% since September, shares in property firms have

AT Capital Weekly Update 5
30 November 2008 AT CAPITAL RESEARCH
global economic slowdown. Bangladesh remains well poised
to continue to outperform the rest of the world with any
slowdown in 2009 likely to be modest and temporary. The
call to monitor the situation carefully is certainly something
the government is already doing and should not cause
business people alarm. While keeping short-term stimulus
measures available makes sense, the real focus should also
be on the next elected government pursuing an economic
reform agenda in areas like power, infrastructure and
attracting FDI that will raise the structural long-term growth
rates for Bangladesh.

Trouble in China as Economy Slows

To put the Bangladesh growth slowdown debate in some

perspective, it is worth looking at the current turmoil
occurring in Asia’s most successful and fastest growing
According to the New York Times: “Laden with excess economy of the past two decades. China cut interest rates by
inventory, hungry for sales and worried because of five fewer 1% last week. The PBOC reduced its main borrowing rate by
shopping days between Thanksgiving and Christmas this 1.08 percentage points to 5.58 percentage points, the
year, the nation’s retailers went into a price-cutting frenzy biggest one-off cut since the Asian Financial Crisis in 1997.
long before the day after Thanksgiving, the traditional start of
the holiday shopping season. For weeks, they have been Chinese Economic growth is decelerating rapidly
trying to outdo one another to capture the attention of
consumers who have become numb to run-of-the-mill
discounts… “There’s no reason to suspect this will end,” said
Dan de Grandpre, editor in chief of Dealnews.com, which
has been tracking Black Friday deals for about a decade.
“This kind of heavy discounting will continue until we see
some retailers start to fail, until they start to go out of
business.”…Indeed, the intense competition could erode
profits at many chains. Some retailing analysts even fear it
could condition consumers to shop only when merchandise
is deeply discounted.”

The prospects of retailers cutting prices until they are bust

does not bode well for even low end suppliers such as
Bangladesh. There is absolutely no doubt that the latest
RMG export data is robust. But anecdotal evidence is less
comforting. One shipping company we spoke to suggested Source: NBS, staff estimates
1/ Quarterly data from national accounts
that one of the best know US budget T-shirt and Underwear
brands had slashed the containers they booked from Key Excerpts from World Bank China Report, October 2008:
Bangladesh from 2500 TUs in 2008 to 800 TUs in 2009. This
sort of behaviour does not give a positive signal for the “The
The economic impact in China of the international turmoil
turmoil is
prospects for demand next year. set to intensify. Export growth to the EU started to weaken in
August. Exports to emerging markets (including non-Japan
Another risk is towards Bangladeshi exporter margins, not Asia)—the destination of over half of China’s exports—still
only in the face of a squeeze from US and European retail grew at 32 percent (yoy) in US$ terms in the third quarter but
buyers, but also given the prospects for aggressive and these are set to weaken too. Looking ahead, prospects are
possibly loss-making discounting by Chinese and Indian for a sharp reduction in export growth as the impact of the
exporters who are desperate to keep volumes going. international turmoil deepens in the US and Europe and it
starts to hit demand in many emerging markets. Recent
The DSE fell sharply by 4% on Thursday in response to the indicators on export orders from the purchasing managers’
World Bank report. In itself, it was noteworthy that the index (PMI) point in this direction.”
Bangladesh stockmarket responded to negative economic
news given all the talk that a retail dominated market was not “The real estate sector—
sector—a key target of the policy tightening—
driven by, or responsive to, economic fundamentals. has seen a particularly pronounced slowdown. The initiative
to “cool off” the housing market included measures that
But we would take the WB forecast of softening growth as a reduced demand—especially “speculative demand”—such as
signal to the authorities to be ready to ease policy if tighter lending conditions for second houses with others that
necessary in the face of signs of slowdown. The good news reduced supply such as stricter land supply and credit
is that unlike many of its Asian neighbours, prudent policies towards project developers.
macroeconomic management leaves both monetary and
fiscal policy tools available to respond with either a rate cut,
exchange rate depreciation or targeted fiscal injections to
exporters if the economy does begin to feel the effects of the

AT Capital Weekly Update 6
30 November 2008 AT CAPITAL RESEARCH
It appears that the demand side measures had a more rapid bank in the last ten weeks as the government desperately
impact. Housing sales growth started to decline substantially battles an evident economic collapse.
and housing price increases moderated. The price weakness
In recent weeks, a series of riots across central and southern
is affecting most parts of the country, but it seems to be more China have flowered as disgruntled employees aired their
pronounced in large cities, especially those that saw rapid grievances at the downturn. Around 500 protesters rioted at
increases in recent years. Since early 2008 housing sales the Kai Da toy factory in Dongguan in the Pearl River delta,
are falling (year-over-year) at an increasing rate, probably flipping over a police car and trashing computers in a dispute
fueled further by expectations of housing price declines, over payoffs to 80 fired workers. Tens of thousands of
concerns about overall economic prospects and China’s factories across the region have already shut their gates.
The Daily Telegraph reported that Yin Weimin, China's
Social Security minister, stated that employment is the
Chinese Investment growth is down on 2007 Communist Party's number one concern in the downturn and
said the "situation is critical". Unemployment is expected to
rise from 4% to 4.5% by the end of the year and anecdotal
reports have suggested that 3mn people have already been
fired in the industrial province of Zhejiang alone.

Two major provinces, Shandong and Hubei, have already

responded by banning companies from firing staff without
permission from the government.

The Chinese government has also announced a £373bn

bailout package to stimulate domestic growth by investing in
infrastructure. However, only a fifth of the money is likely to
come from central government coffers, with the rest coming
from a mix of private enterprise and local government funds.
The reserve requirements of Chinese banks were also cut by
1pc point, and 2pc points for smaller banks, freeing up
Source: NBS, staff estimates around 360bn rmb (£34bn) for lending.

The Rise of Climate Change Funds

China’s investment heavy, industry led economy
Last month, we published an 80 page report on Climate
Change and Alternative Energy in Bangladesh. Although we
published the highlights of the paper as a special focus
section in the 19th October AT Capital Weekly, there has
been a growing number of requests to see the whole report
online. Given our commitment to increasing awareness and
debate on what will undoubtedly be Bangladesh’s biggest
macro challenge in coming decades, we have made the
whole report freely available online. Please see:


Increased internal tensions within China

The rate cut move came just one day after the World Bank
predicted that China would grow by 7.5% next year. The
level of growth may appear robust by Western standards, but
this would represent the slowest economic expansion in
China for the last two decades. It is also perilously close to
the 7% minimum level of growth that Chinese economists
believe is necessary in order to create enough jobs for the
6mn university graduates who will enter the job market next
year. It is the fourth interest rate cut from the Chinese central

AT Capital Weekly Update 7
30 November 2008 AT CAPITAL RESEARCH
One aspect of our analysis was the opportunities for many rivers as Bangladesh.
Bangladesh to attract more private sector “Cleantech” funds
that are commercially focused in investing in Alternative Existing technologies require an average current of five or six
Energy Opportunities. In this context, the recent reports knots to operate efficiently, while most of the earth's currents
outlined below, of more funds going to Climate Change as are slower than three knots. The technology can generate
well as environmentally aware investing, is encouraging. electricity in water flowing at a rate of less than one knot -
about one mile an hour - meaning it could operate on most
Generation Investment Management, the boutique fund waterways and sea beds around the globe.
manager chaired by former US vice president turned
environment activist Al Gore, has been awarded a £150m Existing technologies which use water power, relying on the
($230m) brief by the Church of England’s Commissioners action of waves, tides or faster currents created by dams, are
fund, adding to the £50m contract it was awarded in far more limited in where they can be used, and also cause
September by the UK’s environment Agency’s pension greater obstructions when they are built in rivers or the sea.
scheme. Currently Generation runs over $5bn (€3.9bn) of Turbines and water mills need an average current of five or
funds. six knots to operate efficiently, while most of the earth's
currents are slower than three knots.
The mandates come as institutional investors in Europe and
the US, including pension fund giants Calstrs and Calpers, The new device, which has been inspired by the way fish
allocate more money for investment in environmentally swim, consists of a system of cylinders positioned horizontal
friendly initiatives. to the water flow and attached to springs.

A report from Deutsche Bank Asset Management last month As water flows past, the cylinder creates vortices, which push
projected that investment in clean technology across capital and pull the cylinder up and down. The mechanical energy in
markets is projected to reach $650bn annually in the next the vibrations is then converted into electricity.
Cylinders arranged over a cubic metre of the sea or river bed
The Report said “Primarily driven by continued scientific in a flow of three knots can produce 51 watts. This is more
arguments for mitigation and adaptation, technological efficient than similar-sized turbines or wave generators, and
advancements, government regulatory action and social the amount of power produced can increase sharply if the
awareness, the climate change sector has experienced an flow is faster or if more cylinders are added.
influx of investment in 2008.”
A "field" of cylinders built on the sea bed over a 1km by
The New York Times reported in a November 27 article that 1.5km area, and the height of a two-storey house, with a flow
until recently, green investment funds were mostly a niche for of just three knots, could generate enough power for around
individual investors. But now investing with the idea of 100,000 homes. Just a few of the cylinders, stacked in a
improving the environmental actions of corporations, not just short ladder, could power an anchored ship or a lighthouse.
maximizing profit, is catching on among some big pension
funds and foundations, particularly in Europe and even in the Systems could be sited on river beds or suspended in the
United States. ocean. The scientists behind the technology, which has been
developed in research funded by the US government, say
Among the leaders are the Norwegian Government Pension that generating power in this way would potentially cost only
Fund-Global; ABP, the huge Dutch government pension around 3.5p per kilowatt hour, compared to about 4.5p for
fund; and the pension fund of the British Environment wind energy and between 10p and 31p for solar power. They
Agency. In the United States, the California State Teachers' say the technology would require up to 50 times less ocean
Retirement Fund, one of the largest pension funds in the acreage than wave power generation.
United States, is one of the few American funds that has
become a green investor. The Daily Telegraph reported on Nov 27 that “The system,
conceived by scientists at the University of Michigan, is
The California teachers' fund, known as Calsters, with a $169 called Vivace, or "vortex-induced vibrations for aquatic clean
billion portfolio, has declared climate change its signature energy".
issue and has pushed companies like Exxon Mobil and
Southern, a giant utility in the Southeast, to fully disclose Michael Bernitsas, a professor of naval architecture at the
their climate-changing activities. university, said it was based on the changes in water speed
that are caused when a current flows past an obstruction.
The Emergence of new Hydro- Hydro-Power Technologies: Eddies or vortices, formed in the water flow, can move
Opportunities for Bangladesh?
Bangladesh? objects up and down or left and right.

Our discussion of hydro power opportunities in Bangladesh "This is a totally new method of extracting energy from water
in our Oct 19 Climate Change Special Report suggested it flow," said Mr Bernitsas. "Fish curve their bodies to glide
was not likely to make a major contribution given the between the vortices shed by the bodies of the fish in front of
absence of hilly areas with the exception of the Chittagong them. Their muscle power alone could not propel them
Hill Tracts where the Kaptai hydroelectric dam has already through the water at the speed they go, so they ride in each
been established. However, alternative energy technologies other's wake."
are advancing rapidly. The report below from the Daily
Telegraph gives grounds for optimism for a country with as

AT Capital Weekly Update 8
30 November 2008 AT CAPITAL RESEARCH
Such vibrations, which were first observed 500 years ago by However, the underlying economic picture is likely to remain
Leonardo DaVinci in the form of "Aeolian Tones", can cause gloomy and beyond short-covering, we do not see the rally in
damage to structures built in water, like docks and oil rigs. global equity markets being sustained. In the week ahead,
But Mr Bernitsas added: "We enhance the vibrations and expect further aggressive rate cuts from the ECB (-75 bp)
harness this powerful and destructive force in nature. and the Bank of England (75-100 bp). The sharp fall in
Euroland inflation to 2.1% supports further monetary
"If we could harness 0.1% of the energy in the ocean, we stimulus.
could support the energy needs of 15bn people. In the
English Channel, for example, there is a very strong current,
so you produce a lot of power."

Because the parts only oscillate slowly, the technology is

likely to be less harmful to aquatic wildlife than dams or water
turbines. And as the installations can be positioned far below
the surface of the sea, there would be less interference with
shipping, recreational boat users, fishing and tourism.

The engineers are now deploying a prototype device in the

Detroit River, which has a flow of less than two knots. Their
work, funded by the US Department of Energy and the US
Office of Naval Research, is published in the current issue of
the quarterly Journal of Offshore Mechanics and Arctic

Overview – Global Markets

There was a strong rebound in global markets last week,
driven by relief on the Citigroup bailout as well as ongoing
signs of aggressive prospective monetary and fiscal
stimulus. There is also growing optimism that the “A-Team”
President-Elect Obama has put together on the economy will
be effective in pushing through a fiscal package now looking
likely to be in the USD 700-800bn range.

The chart below illustrates the Case-Shiller index of US

house prices showing how far they have fallen.

The one week gain in the Dow was the largest seen since
1937 and the return to risky assets evidenced by the strong
returns seen in Emerging Markets and REITs(Real Estate
Investment Trusts) offers some grounds for encouragement.
But as the table above illustrates, US equities have still
outperformed those overseas YTD in 2008.

AT Capital Weekly Update 9
30 November 2008 AT CAPITAL RESEARCH
However, the Price-to-rent ratio still looks high suggesting a
further downwards adjustment to US home prices. …And Finally

This suggests further downwards pressure on consumer

spending given the relationship between real house price
growth and real household expenditure illustrated in the chart

One positive support for the housing market, as a result of

the Fed and Treasury’s recent announcement of $ 800bn of
mortgage backed securities purchases is that USD 30 Year
fixed mortgage rates have declined.

Source: Bespoke Investment

AT Capital Weekly Update 10
30 November 2008 AT CAPITAL RESEARCH

Stock Market Weekly

DSE performance: 52 weeks
weeks Market news

• DSE general index witnessed largest single-day drop in

4 years

• Book-building to be introduced in Feb

• GDP growth may dip to 4.8%, according to World Bank

• TITAS gas declares 25% cash dividend

• Orion Infusions declares 10% cash dividend

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

Market summary Valuation snapshot

DSE General Sector P/E

Index performance DSE 20
Index Jun-08 Jul-08 Aug-08 Sep-08
Banks 21.7 19.2 19.08 18.24
Opening of this week 2,615.9 2,193.4
Cement 12.4 11.2 10.96 10.34
Closing of this week 2,459.5 2,100.9
Ceramic 42.0 50.3 49.92 43.93
Change within a week (%) -6.0% -4.2%
Engineering 39.1 38.4 39.11 41.36
Change within a week (Point) -156.4 -92.5
Food & Allied 13.2 19.3 17.85 19.44
Fuel & Power 23.6 16.1 17.81 20.2
This Last % 26.9 22.8
Capitalization and turnover Insurance 23.17 24.77
Week Week Change
Investment 53.1 33.5 45.08 55.48
Number of Trading Days 5 5
IT 20.0 20.3 41.44 45.64
Market Capitalization (USD bn) 13.79 13.96 -1.19%
Jute 16.0 16.3 16.16 16.16
Total Turnover (USD mn) 164 137 19.5%
Miscellaneous 23.2 25.2 25.46 33.95
Daily Avg. Turnover (USD mn) 33 27 19.5%
Paper & Printing 9.2 7.9 8.36 8.08
Total Volume (mn) 74 73 0.9%
Pharmaceuticals 28.1 25.6 23.97 28.45
Daily Avg. Volume (mn) 15 15 0.9%
Service & Real Estate 20.8 20.5 20.57 22.87
Tannery 19.8 21.3 19.05 19.89
This Last Textiles 15.2 16.3 15.74 15.45
Weighted avg. P/E Ratio* Issues
Week Week
Source: Dhaka Stock Exchange
This Week 17.08 Advanced 18 34
Last Week 18.07 Declined 237 196
% Change -5.5% Unchanged 2 4
*Weighted on Market Cap. Not Traded 36 57

AT Capital Weekly Update 11
30 November 2008 AT CAPITAL RESEARCH
Weekly Stock Market Commentary

Last week DSE declined by a massive 6%. The fall on Thursday was the largest fall in absolute terms in 4 years, largest daily fall
this year, and the 4 largest fall in percentage terms since 2004. Turnover rose by 19.6% compared to the prior week. Out of a total
of 293 securities traded this week, 237 declined and 18 increased while 2 remained unchanged.

There seems to be three predominant themes that could well explain the fall:

1. While financial decoupling has explained the resilience of the Bangladesh stock market, concerns over economic coupling
rocks investor sentiment. The World Bank last week released a report forecasting that GDP growth could fall to 4.8% in
fiscal year 2008/09, highlighting concerns with export earnings and remittance revenues due to the fallout from the global
financial crisis. In contrast to Bangladesh Bank forecasts this is the first report that has forecast sub 6% growth. While both
the Finance Adviser, Dr. A. B. Mirza Azizul Islam and Bangladesh Bank Governor Dr. Salehuddin Ahmed publicly
challenged the World Bank forecasts this seemed to do little to alleviate concerns.

2. Seasonal Trade: Sell equities buy cows! Every year as Eid Ul Azha beckons, the market tends to fall as consumers turn
their attention to the annual Islamic religious festival which includes the ritual sacrifice of either a goat or a cow for those
who can afford it. Eid Ul Azha is expected to fall on the 9 December this year, with investors running out of time to hoard
enough cash for the season’s festivities. Additionally this is a well known phenomenon among some market participants,
so some investors tend to sell further exacerbating the market decline. The fall tends to occur in the a 10-15 day period
preceding Eid.

3. As the Election approaches and we move to a political government the market is braced for a flight of capital out of the
market. The 2007 bull run which saw the DSE rise 87% was believed to be in part due to the flight of ‘black money’ into the
market, as the caretaker embarked on its anti corruption drive. Investors do not need to show the sources of capital in the
stock market compared to other assets such as real estate. Market participants are expecting liquidations in holdings as
the business community turn their attention back to new investments. We expect any likely impact of such sentiment to
feed into the market over the coming month.

AT Capital Weekly Update 12
30 November 2008 AT CAPITAL RESEARCH
While the fall was alarming for investors, we believe that a gradual correction in pricing is not necessarily bad thing in stocks and
sectors with the most extreme valuations (>40x P/Es). While no sector remained immune, IT and Engineering stocks recorded the
largest falls both of which had been trading at 47.9x and 40.8x respectively in October 2008. Banks and Cement fell the least,
reflective of them trading at more reasonable levels at 15.6x and 10.3x respectively. Who said the Bangladesh market is not
fundamentally driven!

Source: AT Capital Research

Source: Dhaka Stock Exchange

Interestingly this week’s movement also reinforces the relative lack of correlation to other stock markets. Up till the previous week,
the DSE was down only 12% YTD while other markets had fallen between 40% to 70%. This week while the DSE fell 6%, the S&P
500 rose by 12%, FTSE was up 13%, the NIKKEI up 8% and the Sensex up 2%.

AT Capital Weekly Update 13
30 November 2008 AT CAPITAL RESEARCH
Stock Market News

DSE general
general index witnessed largest single-
single-day drop in four
The Financial Express, Friday, November 28, 2008

Dhaka stocks continued to decline on Thursday, recording

the largest single-day fall in absolute terms in four years. The
benchmark DSE General Index (DGEN) shed 100.38 points,
the biggest single-day drop since January 11, 2005, to close
at 2459.48, sinking below the 2500-mark for the first time in
15 months.

The market witnessed a panic sell-off on Thursday as the

World Bank stated that Gross Domestic Product (GDP) will
likely grow at 4.8% in FY 09, instead of 6.5% as projected by
the government earlier.

Two other market barometers – The All Shares Price Index

(DSI) and DSE-20 - fell 81.8 points and 73.3 points to end at
2035.4 and 2100.9, respectively.

The companies that gained on Thursday include Shinepukur

Ceramics Limited, Kohinoor Chemicals, Amam Sea Food,
Renwick Jajneswar and Northern General Insurance.


Book-building will be introduced in Feb
The Daily Star, Thursday, November 27, 2008

Book-building, a widely practiced price fixing mechanism for

IPOs, will be introduced in three months to encourage
private-sector entrepreneurs to list their companies on the
stock market. Before finalizing the book-building method, a
set of draft rules will be published in newspapers by the end
of next month.

Book-building is the process by which an underwriter

attempts to determine share prices based on demand from
institutional investors.

Finance Advisor, AB Mirza Azizul Islam, recommended some

changes to the draft rules proposed by the SEC. The
proposed draft states that the SEC will appoint auditors to
audit the issuing company's accounts. According to the
Finance Advisor, the two audits -- one by the company itself
and the other by the SEC -- will not only be time-consuming,
but may result in conflicting figures in the reports. Aziz
suggested that the SEC should form a standard panel of
auditors, so that the issuing company can select an auditor
from the panel to conduct its audits.


AT Capital Weekly Update 14
30 November 2008 AT CAPITAL RESEARCH
DGEN Performance LTM DGEN Performance YTD

Turnover leaders Best performers* Worst performers*

(All figures in mn) BDT USD % Change % Change
Uttara Bank 1,085 15.8 Zeal Bangla Sugar 25.5 National Tubes -43.7
Beximco Pharma 769 11.2 Shaympur Sugar 25.0 BEXIMCO -33.8
Titas Gas 551 8.0 Modern Dyeing 18.1 Shinepukur Ceramics Ltd. -31.0
BEXIMCO 510 7.4 Purabi Gen. Insurance 7.3 ACI Formulations Ltd -23.2
NBL 452 6.6 Renwick Jajneswar 7.0 ACI Limited -19.3
AB Bank 371 5.4 Stylecraft 6.8 Bangladesh Online -18.8
BRAC Bank 366 5.3 Reckitt Benckiser (BD) Ltd. 5.6 Beximco Pharma -18.8
Square Pharma 358 5.2 Pragati Life Insurance 3.0 Agni Systems Ltd -18.3
ACI Limited. 325 4.7 Apex Adelchi Footwear 2.7 Golden Son -18.0
Shinepukur Ceramics Ltd. 321 4.7 NBL 2.5 BDCOM Online Ltd -17.2
Source: Dhaka Stock Exchange
*By closing price
Source: Dhaka Stock Exchange
Market cap. by sector*
Banks 49.8%
Fuel & Power 14.5%
Correlation with other indices*
Pharmaceuticals 10.4%
Insurance 6.3% 500 Sensex 225 100 SSECI 100 HangSeng DSE
Cement 5.4% S&P500 1
Miscellaneous 3.4% Sensex 0.49 1
Engineering 2.6% NIKKEI225 0.40 0.50 1
Foods 2.3% KSE100 0.13 0.31 0.10 1
Textile 1.9% SSECI 0.28 0.41 0.22 0.04 1
Tannery 1.3% FTSE100 0.81 0.48 0.41 0.21 0.38 1
Service & Real Estate 1.3% Hangseng 0.65 0.58 0.46 0.09 0.50 0.73 1
IT 0.5% DSE 0.10 0.14 0.09 0.06 0.03 0.13 0.11 1
Ceramics 0.1% * Based on the last 80 months’ USD returns
Paper & Printing 0.1% Source: AT Capital Research

Jute 0.03%
Total 100%
*As of September 30, 2008

Research Team

Ifty Islam Syeed Khan

Managing Partner Partner
ifty.islam@at-capital.com syeed.khan@at-capital.com

Zia Shams Rashed Hasan

Senior Research Associate Research Associate
zia.shams@at-capital.com rashed.hasan@at-capital.com

AT Capital Weekly Update 15
30 November 2008 AT CAPITAL RESEARCH

Selected macroeconomic indicators Market news

Nov-07 30-
Oct-08 25-
Nov-08 • Inflation drops in October
Forex reserves (USD mn) 5,042.30 5,550.73 5,170.59
USD-BDT average rate 68.6091 68.6500 68.7936
Call money rate 7.28 7.08 8.31
• 40% of imported food items to be unloaded at Mongla Port
Oct-07 Oct-
Oct-08 2007-
Remittances (USD mn) 559.05 648.51 7,914.78
Annual percentage change 48.16 16.00 32.39 • GDP growth may dip to 4.8%, according to World Bank

Sep-07 Sep-
Sep-08 2007-
Imports (USD mn) 1,651.60 2,168.70 21,629.00 • Meltdown likely to affect remittances from abroad
Annual percentage change 29.54 31.31 26.07

Sep-07 Sep-
Sep-08 2007-
2007-08 Latest Bangladesh CPI and inflation rates (1995-
Exports (USD mn) 1,044.29 1,477.60 14,110.80
Annual percentage change 9.92 41.49 15.87
August September October
Aug-07 Sep-
Sep-08 2007-
2007-08 General 207.27 210.14 209.31
Current a/c balance (USD mn) 20.00 46.00 672.00
Inflation 10.11 10.19 7.26
Sep- Sep-08R
Sep- 2007-
2007-08 Food 223.77 227.66 226.88
Tax revenue (USD mn) 500.81 594.58 6,883.42
Inflation 12.36 12.07 8.08
Annual percentage change 31.38 18.72 27.06
Non-food 185.72 187.10 186.13
Source: Selected indicators by Bangladesh Bank, 26 Nov 08 Inflation 6.55 7.19 5.95

Monetary and credit developments Source: Bangladesh Bureau of Statistics

Recent Bangladesh inflationary trends (point-

Outstanding Stock (USD billions)
Jun-07 Jun-
Jun-08 Aug-
29.93 36.20 36.86
Broad money 30.78 36.20 37.09

Changes in outstanding stock (USD billions)

FY 2007-
2007-08 Jul-
over Aug-

Domestic 6.27 0.66 6.69

credit (+20.95) (+1.81) (+22.18)

5.43 0.88 6.07

Broad money
(+17.63) (+2.44) (+19.59)

Source: Bangladesh Bank

S Adeeb Shams
Research Associate

AT Capital Weekly Update 16
30 November 2008 AT CAPITAL RESEARCH
Economic News http://www.thedailystar.net/story.php?nid=65146

Inflation drops in October Meltdown likely to affect remittances

remittances from abroad
The Daily Star, Wednesday November 26, 2008 The Financial Express, Monday November 24, 2008

The overall inflation rate on a point-to-point basis dropped by The ongoing global economic crisis will likely adversely affect
2.93 percentage points to 7.26% in October, as prices of remittance inflow into Bangladesh. According to a report
both food and non-food items fell. In September, the inflation published by the World Bank, about 63% of total remittances
rate was 10.19%. come from the Middle East, where the construction and real
estate sectors are already being affected by the financial
The inflation rate of food items fell by 3.99 percentage points crisis.
to 8.1% in October, compared to 12.1% in the previous
month. The inflation rate of non-food items dropped by 1.24 According to another recently published World Bank report
percentage points to 5.95% in October, down from 7.19% in called "Poverty Assessment for Bangladesh: Creating
the previous month. Opportunities and Bridging the East-West Divide",
Bangladesh has progressed significantly in poverty
Planning Ministry sources said the inflation rate on food alleviation over the last ten years.
items has been decreasing gradually over the last few
months. It however fell drastically due to adequate supply of The report states that the western part of Bangladesh lags
boro and aus rice varieties in the market following a bumper behind the eastern part in poverty reduction. In 2005, the
harvest. poverty rate was 32% in Dhaka, and 34% in Chittagong and
Sylhet, and more than 45% in the western divisions of
In October, the inflation rate in rural areas was 7.31% Khulna, Barisal and Rajshahi. The rapid growth in remittance
compared to 10.62% in September. The rate in urban areas inflow helped in reducing poverty, but reinforced the regional
was 7.12% in October down from 9.12% in the previous inequality pattern. For example, 24% of households in
month. Chittagong and 16% in Sylhet received remittances,
compared to less than 5% in Rajshahi, Khulna, and Barisal
http://www.thedailystar.net/story.php?nid=64991 divisions.

40% imported food items to be unloaded

unloaded at Mongla Port http://www.thefinancialexpress-
The Daily Star, Tuesday November 25, 2008 bd.info/search_index.php?page=detail_news&news_id=51662

A bulk of the imported food items will be unloaded at Mongla

Port as part of the government's plan to activate the seaport,
in an effort to reduce regional disparity. Resuming activities
at the port will not only minimize the cost of food distribution
in the western region, but will also stimulate economic
activities in the region.

The government has asked automobile importers to unload a

portion of imported vehicles at Mongla Port.


GDP growth may dip to 4.8%, according to WB

The Daily Star, Thursday November 27, 2008

The World Bank (WB) has projected that Bangladesh GDP

will grow at 4.8% instead of 6.5% as forecast earlier by the
government, primarily due to the negative impact of the
global financial crisis on readymade garments exports and
remittance inflow. WB stated that the impact of the crisis will
become much clearer in the next three months. The Bank
added that contingency measures, such as providing
government assistance, need to be carefully planned out.

According to the lead economist at WB, Vinaya Swaroop,

there are two possible scenarios for GDP growth in FY 09 –
under the optimistic view GDP will grow at 5.4%, whereas
under the worst case scenario GDP will grow at only 4.8%.

Finance Advisor, AB Mirza Azizul Islam, rejected the WB

GDP projection, saying that growth might cross 6% in FY 09.
He also added that till now most of the major indicators, such
as exports, remittances, inflation, credit growth, have been

AT Capital Weekly Update 17
30 November 2008 AT CAPITAL RESEARCH
Sector News
Agriculture The airliner is also offering services to Chittagong, Sylhet,
Jessore, Barisal and Cox’s Bazar. Kolkata is presently its
Tea production drops this year sole international destination.
The Financial Express, Friday, November 28, 2008
Tea production has dropped this year primarily due to
unfavorable weather conditions and inadequate supply of Banking
fertilizers from April-May this year.
Banks should give indicative rates for DIBOR'
A total of 47.26mn kg tea was produced in the country's 163 The Financial Express, Sunday, November 30, 2008
tea gardens till October this year, compared to 47.31mn kg
produced during the same period in 2007. A committee of the Bangladesh Foreign Exchange Dealers'
Association (BAFEDA) has recommended that Banks should
Tea planters have predicted that this year total production introduce Dhaka Inter-bank Offered Rate (DIBOR) as the
will likely decline to 56mn kg from 58mn kg in 2007. country's benchmark interest rate.

http://www.thefinancialexpress- According to the recommendations, all member banks of

bd.info/search_index.php?page=detail_news&news_id=51971 BAFEDA should offer indicative rates for overnight, one-
week, two-week, one month, three-month, six-month and
Vegetable exporters facing difficulty due to fall in European one-year.
The Financial Express, Tuesday, November 25, 2008 In South Asia, India, Pakistan and Sri Lanka have already
introduced benchmark interest rates.
Around 500 vegetable exporters are facing difficulty in
exporting their products to Europe mainly due to sharp http://www.thefinancialexpress-
declines in the pound and Euro, and higher freight costs. bd.info/search_index.php?page=detail_news&news_id=52201
Vegetable exporters have suspended shipments to different
destinations in Europe since November 22nd. According to BB to modernize credit info bureau
exporters, they have been incurring losses worth BDT 20 The Daily Star, Thursday, November 27, 2008
(USD 0.29) for each kg of vegetable that is exported. The
value of the British pound against the Bangladesh Taka has The central bank has decided to appoint a foreign vendor to
fallen sharply to BDT 106 from BDT 142 earlier in the year. modernize its credit information bureau (CIB), which was set
The value of the EURO against the Bangladesh currency up in 1992 to collect credit–related information about
was BDT 105 several weeks back, but has now dropped to borrowers. Senior bankers have stated that they want the
BDT 87. project to be implemented as soon as possible so that
borrowers’ credit history can be checked faster and more
http://www.thefinancialexpress- efficiently. According to experts, credit information in
bd.info/search_index.php?page=detail_news&news_id=51762 Bangladesh is inadequate.

'Waterproof' rice may prevent crop loss in Bangladesh The British government's Department for International
The Financial Express, Monday, November 24, 2008 Development (DFID) has agreed to finance 3.12mn (USD
4.8mn) pounds to implement the project.
‘Waterproof’ versions of popular rice varieties can tolerate
two weeks of complete submergence, and can recover after CIB collects data from banks on a monthly basis and from
severe flooding. Several ‘waterproof’ rice varieties will soon financial institutions on a half-yearly basis.
be released by national and state seed certification agencies
in India and Bangladesh. Farmers face major crop losses, as The Investment Climate Assessment report published by the
high as 4mn tonnes of rice per year, due to severe flooding. World Bank last month states that, “A weak credit information
department reduces effectiveness of the system particularly
http://www.thefinancialexpress- hurting smaller firms who cannot build up reputation-based
bd.info/search_index.php?page=detail_news&news_id=51668 credit.”

Aviation http://www.thedailystar.net/story.php?nid=64652

United Airways to fly to Sayedpur thrice a week BB asks banks to recover overdue agri credit soon
The Daily Star, Thursday November 30, 2008 The Financial Express, Thursday, November 27, 2008

United Airways (Bangladesh) Ltd, a private sector airliner The central bank has asked eight state-owned commercial
founded by non-resident Bangladeshis, has recently banks and financial institutions to intensify its efforts for
introduced flights between Dhaka and the north western city recovering overdue agricultural loans.
of Saidpur. United will initially operate flights on the newly
inaugurated route on Saturdays, Mondays and Wednesdays. There has been a declining trend in the recovery of
agricultural credit during the first four months of the current

AT Capital Weekly Update 18
30 November 2008 AT CAPITAL RESEARCH
fiscal year, compared to the corresponding period of FY 08. 500mn (USD 7.3mn), respectively. Currently, five NBFIs
A total of BDT 16.97bn (USD 247mn) was recovered from have issued six zero-coupon bonds and one asset-backed
July-October in FY 09, compared to BDT 17.63bn (USD zero-coupon bond.
256.5mn) during the same period in FY 08.
However, the amount of overdue agricultural credit as a bd.info/search_index.php?page=detail_news&news_id=51759
percentage of total outstanding credit declined to 36.7% at
the end of October this year, compared to 41.2% at the end Infrastructure & Energy
of October 2007.
BERC decision on gas price hike to be announced on
State-owned banks, financial institutions and private November 30
commercial banks (PCBs) disbursed a total of BDT 25 bn The Daily Star, Sunday November 30. 2008
(USD 364mn) as agriculture credit from July-October this
year, compared to BDT 18.2bn (USD 264mn) disbursed The Bangladesh Energy Regulatory Commission (BERC) is
during the same period last year. expected to announce the change in prices of natural gas
this week; earlier the BERC stated that prices will increase
http://www.thefinancialexpress- by up to 15% maximum.
On September 24 , BERC held a public hearing on the issue
Plan to form venture capital co.
co. shelved of gas price, where Petrobangla proposed an average 65%
The Financial Express, Wednesday, November 26, 2008 hike in prices, while representatives from other stakeholders
opposed the proposition.
The caretaker government has decided to hold back on
forming a venture capital company, as it believes that it is not http://www.thedailystar.net/story.php?nid=65551
an appropriate time to form the company right before the
national elections. Dorin power plant opens in Tangail
The Daily Star, Friday November 28. 2008
An initiative to form a venture capital company in partnership
with the private sector was taken in August, in order to The 22MW power plant of Dorin Power Generation and
provide collateral-free loans to potential local companies. System Ltd was inaugurated in Tangail on November 27 .
The decision to form the company was made after a central NCC Bank and Bangladesh Bank provided loans to Dorin
bank study found that companies with potential did not have Power to implement the project. The electricity generated in
proper access to credit under the conventional banking the plant will be supplied to the Power Development Board
system. The study stated that limited bank finance is a major under a 15-year agreement.
constraint to growth of the country's small and medium
enterprises (SMEs), which account for almost 80% of total http://www.thedailystar.net/story.php?nid=65277
employment in the manufacturing sector.
Country facing severe power crisis
The proposed venture capital company would finance high- The Daily Star, Thursday November 27, 2008
tech, software, agro-based and engineering enterprises,
which have difficulties in raising capital from conventional The country has been undergoing a severe power crisis, as
banks. the power sector has not been able to implement power
projects efficiently. Currently, the power shortage is about
http://www.thefinancialexpress- 2,000MW.
7 An additional 6,336MW of electricity has been planned to be
added to the national grid by 2010, out of which half is to be
IIDFC, BRAC seek Bangladesh
Bangladesh Bank permission to issue added by December 2009. However, the achievement so far
bonds worth BDT 9bn (USD 131mn)
131mn) has been less than 10%.
The Financial Express, Tuesday, November 25, 2008
Experts in the sector have pointed out that the Power
A financial institution and a non-government organization Division has been focusing on setting up rental power plants,
(NGO) have sought permission from the central bank to float which are highly inefficient, costly in operation and consume
zero-coupon bonds and asset-backed securities worth BDT a large amount of gas. The power tariff of rental plants is
9.0bn (USD 131mn) to strengthen their financing capacity. relatively very high, up to BDT 15 (21.8 US Cents) per unit,
Industrial and Infrastructure Development Finance Company compared to the normal power tariff, which is about BDT 2
Limited (IIDFC), a leading non-banking financial institution (2.9 US Cents) per unit. Experts have also added that the
(NBFI), has submitted an application to the Bangladesh Bank Bangladesh Power Development Board (BPDB) is expected
(BB) seeking permission to issue zero-coupon bonds worth to incur losses of up to BDT 420mn (USD 6.11mn) per
BDT 4bn (USD 58.2mn). BRAC, a renowned NGO, has also month, for setting up rental power plants.
applied for floating asset-backed zero-coupon bonds worth
BDT 5bn (USD 72.8mn). http://www.thedailystar.net/story.php?nid=65128

BB has already given permission to Uttara Finance and

Investment Limited and United Leasing Company for floating
zero-coupon bonds worth BDT 2bn (USD 29.1mn) and BDT

AT Capital Weekly Update 19
30 November 2008 AT CAPITAL RESEARCH
Power Cell asked to review Bibiyana documents for re Emirates’ at USD 5.20 per barrel, and from Maldives National
tender Oil Company at USD 5.19.
New Age, Wednesday November 26, 2008
The Power Division has asked Power Cell to float a new
tender for the installation of a 450MW Bibiyana independent RPGCL posts 52% rise in net profit
power plant. The aim is to attract greater participation from The Daily Star, Tuesday November 25, 2008
bidders, as only one bidder had participated during the first
bidding round. Rupantarita Prakritik Gas Company Limited (RPGCL) has
earned BDT 1.67bn (USD 24.31mn) in revenue during fiscal
Although three bidders were pre-qualified for bidding early year 2008, an increase of 82.2% from the previous fiscal
this year, only one consortium took part in the final bidding. year. RPGCL earned the revenue from sales of compressed
natural gas (CNG), liquefied petroleum gas (LPG), petrol and
http://www.newagebd.com/2008/nov/26/front.html#19 diesel.

Government to allow private power plants Throughout the period, RPGCL converted 24,000 vehicles to
The Financial Express, Tuesday November 25, 2008 the CNG system. At present, 296 CNG stations and 130
conversion workshops are operating in the country.
A new policy has been approved by the government, Currently, there are a total of 146,235 CNG-run vehicles in
allowing private entrepreneurs to set up individual and joint the country. The government saves around BDT 72.5bn
venture power plants with the public sector, and rehabilitate (USD 1.05bn) a year in foreign exchange, using CNG as fuel,
existing old and inefficient ones. Hence, investors will be according to RPGCL.
able to establish and operate private power plants after
obtaining licenses from the Bangladesh Energy Regulatory http://www.thedailystar.net/story.php?nid=64820
Commission (BERC). These investors will have to find their
own clients who will buy electricity from their plants at a rate Insurance
that will be fixed through negotiation. The developers for
private power plants will also have to arrange the source of Separate company
company to launch crop insurance
energy to run their plants. The Financial Express, Sunday 30 November, 2008

Given that natural gas will start depleting soon, the new The commerce ministry has suggested forming a separate
power plants should preferably rely on coal, imported gas, company under the public sector to introduce crop insurance
liquid fuel, or renewable energy sources like solar, wind, in the country. Terming the introduction of the crop insurance
hydro, biomass, and municipal waste. policy as highly challenging, the ministry said in a 'position
paper' that only a dedicated and separate insurance
Local private investors will be able to develop new power company could successfully introduce such a policy by
plants as joint ventures with public sector power entities on a offering a portion of the premium as subsidy.
build, own and operate (BOO) basis. According to the policy,
a special project vehicle (SPV) with at least 51% shares In 2007 alone, local farmers lost rice worth USD 600mn due
owned by local private investors should be established to to consecutive floods from July-September and due to
implement and operate such projects. cyclone Sidr in November. Crop insurance is essential as
48.1% of the country's workforce is still dependent on the
http://www.thefinancialexpress- agriculture sector that accounted for more than 20% of gross
bd.info/search_index.php?page=detail_news&news_id=51745 domestic product (GDP) in FY 08.

BPC plans to import diesel from India at high premium Insurance sector experts said Bangladesh is among the first
New Age, Tuesday November 25, 2008 few countries in the region, which tried to introduce crop
insurance in the past without any significant achievement.
The Bangladesh Petroleum Corporation (BPC) has decided Sadharan Bima Corporation (SBC), a state-owned insurance
to import 90,000MT of diesel from Bharat Petroleum agency, was entrusted with the implementation of a pilot
Corporation Limited, at a high premium, despite the sharp fall project on crop insurance since 1979.
in oil prices in the international market.
BPC sent a proposal to the government for importing bd.info/search_index.php?page=detail_news&news_id=52191
13,000MT of diesel this year and 72,000MT in 2009, by a
river route from Assam in India, in order to meet the demand Real Estate
for diesel in the northern districts of Bangladesh.
BDT 33.
33.2bn (USD 483.7mn)
483.7mn) housing
housing plan gets govt. nod
After negotiations, it has been agreed that Bharat Petroleum Daily Star, Wednesday, November 26, 2008
will charge USD 6.55 per barrel for transporting the diesel
from the corporation’s refinery in Numaligarh in Assam to the The government will construct 4,256 flats in Dhaka under a
Baghabari oil depot in Bangladesh. joint venture with private developers, and will give 40% of the
apartments to its employees at a low price. The construction
At present, BPC imports diesel from Kuwait Petroleum work is expected to begin in January 2009 and end in
Corporation at USD 6.60 per barrel, from United Arab December 2011.

AT Capital Weekly Update 20
30 November 2008 AT CAPITAL RESEARCH
The flats will be built at Mohakhali and Mirpur at an estimated leading apparel export regulators, have taken contradictory
cost of BDT 33.2bn (USD 483.7mn). views on the proposed new rules of origin (ROO) by the EU,
in which the local value addition threshold will be lowered to
Government employees will buy 1,700 flats, and make the 30%.
payments in installments, while the rest of the flats will be
sold to private buyers at commercial rates. BKMEA officials have claimed that the knitwear sector, which
has sufficient backward linkages, will be adversely affected
The cost of land for the project has been estimated at BDT as the proposed ROO by the EU will encourage the import of
13bn (USD 189.8mn) and the construction cost is expected fabrics. A group of over 1300 knit factories are expected to
to be BDT 20bn (USD 293.9mn). lobby against the new proposal. However, BGMEA officials
stated that the new ROO will create opportunities that will
boost the country's export to EU markets.
According to the Public Works and Housing ministry, the
project area will include amenities such as a lake, swimming The Centre for Policy Dialogue (CPD) has stated that the
pool, health centre, shopping complex, schools, colleges and new ROO will be disadvantageous for industries which have
mosques. backward linkages. CPD added that local industries need to
enhance their efficiency in terms of lead time and compliance
http://www.thedailystar.net/story.php?nid=64833 issues in order to be competitive in the proposed system.
Telecoms http://www.thefinancialexpress-
BTRC taking steps to legalize ISPs
The New Nation, Wednesday, November 26 2008

The Bangladesh Telecommunication Regulatory

Commission (BTRC) has decided to give licenses to local
non-licensed Internet Service Providers (ISPs) at nominal
fees, in order to legalize over 1000 ISPs nationwide which do
not have ISP licenses.

According to the guideline, the license holders will have to

pay nominal annual fees. The license will allow ISPs to
provide internet services, and also operate Cyber Cafés. The
licensed ISPs will be able to buy bandwidth from national and
zonal ISPs and deliver internet services to the general public.
The BTRC Chairman warned that if ISPs continue indulging
in illegal activities, including VoIP operations, BTRC would
take punitive action against them. The BTRC recently shut
down ISPs who were illegally providing VoIP services in



Garment purchase orders pour in

The Daily Star, Tuesday, November 25, 2008

More international buyers are coming to Bangladesh despite

the global financial crisis, as China has becomes less
attractive to the foreign buyers due to higher prices of their
apparel items. Recently, a number of renowned international
retail stores, including Wal-Mart, JC Penny, Marks and
Spencer, H&M, Tesco, GAP, Li and Fung, Puma and G-Star,
have increased their volume of purchase from Bangladesh.


BGMEA, BKMEA take opposite views on ROO (Rules of

The Financial Express, Monday, November 24, 2008

BGMEA (Bangladesh Garment Manufacturers and Exporters

Association) and BKMEA (Bangladesh Knitwear
Manufacturers and Exporters Association), the country's two

AT Capital Weekly Update 21
30 November 2008 AT CAPITAL RESEARCH

AT Capital Team – Dhaka

Ifty Islam Managing Partner (880-2)-8155144, ext. 132 ifty.islam@at-capital.com
Syeed Khan Partner (880-2)-8155144, ext. 109 syeed.khan@at-capital.com
Akther Ahmed Senior Advisor (880-2)-8155144, ext. 108 akther.ahmed@at-capital.com
Masud Khan Senior Advisor (880-2)-8155144, ext. 113 masud.khan@at-capital.com

Shahed Farhan Investment Manager (880-2)-8155144, ext. 121 shahed.farhan@at-capital.com

Ziaush Shams Senior Research Associate (880-2)-8155144, ext. 120 zia.shams@at-capital.com
Jisha Sarwar Senior Research Associate (880-2)-8155144, ext. 119 jisha.sarwar@at-capital.com
Syeda Tasnuva Akhter Research Associate (880-2)-8155144, ext. 127 syeda.tasnuva@at-capital.com
S Adeeb Shams Research Associate (880-2)-8155144, ext. 128 adeeb.shams@at-capital.com
A. M. A. Bari Nahid Research Associate (880-2)-8155144, ext. 130 nahid.bari@at-capital.com
Mohammad Emran Hasan Research Associate (880-2)-8155144, ext. 131 emran.hasan@at-capital.com
Ahmad Sajid Research Associate (880-2)-8155144, ext. 135 ahmad.sajid@at-capital.com
S.M. Rashedul Hasan Research Associate (880-2)-8155144, ext. 137 rashed.hasan@at-capital.com
Tami Zakaria Research Analyst (880-2)-8155144, ext. 125 tami.zakaria@at-capital.com
Abdullah-Al-Farooq Research Analyst (880-2)-8155144, ext. 133 abdullah.farooq@at-capital.com
M. Emrul Hasan Research Analyst (880-2)-8155144, ext. 138 emrul.hasan@at-capital.com
Md. Zahidur Rahman IT Analyst (880-2)-8155144, ext. 140 zahidur.rahman@at-capital.com
Sohana Alam Seraj Office Manager (880-2)-8155144, ext. 132 sohana.alamseraj@at-capital.com

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 Tiger 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
expressed reflect the current views of the author, which do not necessarily correspond to the opinions of
Asian Tigers Capital Partners or its affiliates. Opinions expressed may change without notice. Opinions
expressed may differ from views set out in other documents, including research, published by Asian
Tigers Capital Partners Limited. The above information is provided for informational purposes only and
without any obligation, whether contractual or otherwise. No warranty or representation is made as to the
correctness, completeness and accuracy of the information given or the assessments made.

AT Capital Weekly Update 22