Daily News Recap
Wednesday
November 19, 2014
Analyst:
Salma Yeasmin Xinat
salma@lbsbd.com
Industry
Bangladesh is emerging as a leading supplier of nonleather footwear for low prices and good quality, according to industry people.The country is now supplying sports shoes, sandals, flip-flops and boots to a
number of leading global retailers including H&M, Decathlon, Kappa, Skechers, Fila and Puma.Non-leather
footwear exports stood at $171.57 million last fiscal
year, which was 13.3 percent of the leather industry's
total exports that year, according to Export Promotion
Bureau.
Non-leather footwear: new export
hope
During the July-October period this year, exports of
such footwear rose 11.47 percent year-on-year to
$58.40 million. An increased number of global retailers are sourcing artificial leather items from Bangladesh due to a rise in production costs in China, said M
Abu Taher, chairman of Fortuna Leather Craft Ltd, a
noted supplier of such products.
Fortuna, which has already set up a separate unit to
produce polyurethane (PU) leather, has so far exported seven lakh pairs of such shoes to H&M,
he said, adding that another eight lakh pairs are scheduled for shipment in March next year.
PU leather is a man-made material that replicates the look and feel of genuine leather. The material is extremely pliable and stretches like a spandex. It has a shinier appearance and generally is far less thick than real leather.The price of synthetic or polysynthetic leather footwear is
three times cheaper than the genuine leather ones, according to Taher.A pair of non-leather
shoes costs $3.2, whereas leather ones cost around $9. Similarly, a pair of non-leather boots
cost around $10 against $30 for the pure leather ones, he said.
Also the chairman of Bangladesh Finished Leather, Leathergoods and Footwear Exporters'
Association, Taher said he is now planning to introduce night shifts at his factory to meet the
huge demand for such non-traditional footwear.Another reason for the fast rise in demand for
synthetic footwear is that the non-compliance issues surrounding the leather industry, especially
the relocation of tanneries to Savar, he said. Karnaphuli Shoe Industries Ltd, a company of the
Korea-based Youngone Group that makes fashionable canvas and athletic shoes, is also witnessing high export growth of such items.The company exports 60,000-70,000 pairs of such
footwear each week to Decathlon, The North Face (TNF) and Puma, among others, said a senior official of the company wishing not to be named as he is not authorised to speak to the media.
Maf Shoes, another leading producer of non-traditional footwear that has a capacity to produce
5,000 pairs of shoes daily, is also witnessing impressive export growth, said Md Mostafizur
Rahman, the company's product development executive.The company's orders for such products have doubled since last year, he said, adding that Decathlon and H&M are the company's
running buyers, but it has supplied to other leading retailers such as Kappa, Skechers and Fila.
Considering the huge growth potential, EPB has also started to calculate such exports separately from this fiscal year.The leather industry exported a record $1.29 billion last fiscal year,
up 32.12 percent year-on-year, according to EPB.Of the total exports from the leather industry,
60 percent go to the European Union, 30 percent to Japan and 10 percent to the rest of the
world, according to industry insiders.
Source: h p://www.thedailystar.net/business/non-leather-footwear-new-export-hope-50990
1
Daily News Recap
Tourism adds Tk
16,409cr to GDP:
study
The country's tourism sector directly accounts for 1.56 percent or Tk 16,409 crore of economic
output, said a new study, highlighting the enormous potential the sector holds in accelerating
development and social prosperity. As a direct contribution, the sector makes up 1.64 percent of
total gross value added (GVA), according to the study commissioned by the Bangladesh Bureau of Statistics.
However, the sector would account for 6.25 percent of GDP and 6.57 percent of the GVA if the
contribution of the whole sector is taken into consideration, said the survey report. GVA is a
measure in economics of the value of goods and services produced in an area, industry or sector of an economy.The sector employs 815,385 people or 1.41 percent of the total labour force,
according to the findings.
"The key message is that there is enormous potential for the tourism sector to strengthen, invigorate, and accelerate economic development and social prosperity of Bangladesh," the report
said. The survey was conducted between May and June last year at both household and establishment levels, which include surveys at airports, land ports and households, travel agents,
hajj agents, tour operators, liquor houses and resorts.
On domestic tourism, the survey showed about 26 percent of urban households and 13 percent
of rural households travelled in the last one year. Of them, 17 percent tourists travelled for business purpose, 16 percent for recreation, 14 percent for health, 10 percent for tourism, 10 percent for education and about 9 percent for shopping. On an average, a tourist spent two nights
during their tour and spent Tk 9,652 for the whole tour. The number of domestic tourists was
42.31 lakh in fiscal 2011-12, according to the study.
Inbound tourists, or travellers coming from outside, spent a total of Tk 3,977 crore in the country. Of the sum, Tk 2,252 crore was spent on accommodation, Tk 1,040 crore on food and beverage, Tk 451 crore on transport and Tk 230 crore on entertainment.Inbound tourists totalled
8.92 lakh in 2011-12, the study said.The average expenditure per trip by an inbound tourist was
Tk 25,131 when entering the country through land ports, and Tk 121,754 when arriving through
airports.Non-resident Bangladeshis who accounted for 36 percent of the total inbound tourists
spend Tk 40,379 per trip when entering the country through land ports and Tk 98,251 when
entering through airports.
Meanwhile, outbound tourists spent Tk 39,579 per trip upon exiting the country through land
ports and Tk 183,124 when going abroad by air routes, according to the study.The number of
outbound tourists was 14.58 lakh in 2011-12. The survey report said although Bangladesh is a
new tourist destination on the world map, it has enormous potential to develop the sector as it is
endowed with so many natural beauties, historic places and a rich cultural heritage.Londonbased World Travel and Tourism Council estimated that direct contribution of the travel and
tourism sector to GDP would be Tk 33,920 crore by 2021.
Source: h p://www.thedailystar.net/business/tourism-adds-tk-16-409cr-to-gdp-study-50991
2
Daily News Recap
Real estate sector
makes Tk 15,608cr
income in FY11:
BBS survey
The income of the country’s real estate sector rose by 13 per cent to Tk 15,608 crore in the
financial year 2010-2011 from that of Tk 13,820 crore a year ago, according to a survey of the
Bangladesh Bureau of Statistics. The main source of income of the companies was construction
of buildings and flats followed by land and flat improvement, the survey showed. In the FY11,
the highest 77.7 per cent of their income came from construction of buildings and flats and 18.3
per cent from land and flat improvement. Total value addition of the companies to the country’s
economy was Tk 3,284 crore in the FY11, a little bit higher than the previous year when the
value addition was Tk 3,020 crore, the data showed.
The BBS on Monday released the survey report on ‘Real Estate Activities’, first of its kind in the
country that was conducted in between March 2013 and May 2013. Private research organisation Integrated Development and Research Foundation conducted the survey on behalf of the
BBS. According to the survey, the value of fixed assets that include land, building, transport,
furniture etc rose to Tk 884 crore in the FY11 from Tk 750 crore in the previous year. Land
alone contributed 31.2 per cent of the total fixed assets of the companies. They spent Tk 13,159
crore for construction and Tk 1,225 crore for employment in the FY11. The sector in the FY11
generated 72,055 employments including 2,997 for females. In the previous year, the number of
employees including owner and partners was 70,785. Of which, 67,928 were male. In the FY11
6,041 owners or partners were involved to run 2,222 real estate companies.
Out of 2,222 companies, 1,261 were members of the Real Estate and Housing Association of
Bangladesh. Female employees in officer and staff category in the sector are highly paid compared with their counterparts. A female officer or staff on an average earned Tk 2.76 lakh and
Tk 2.39 lakh respectively in the FY11 compared to Tk 2.59 lakh and Tk 1.29 lakh respectively
by a male staff, the survey said. There is also some confusing data on income of temporary
workers as it showed that annual income of temporary female workers became doubled in the
FY11 compared with that in the FY10 while the income of temporary male workers declined.
According to the survey, a temporary female worker on an average got Tk 68,000 in the FY10
that rose to Tk 1.68 lakh in the next year. Earnings of temporary male worker reduced to Tk
87,000 in the FY11 from that of Tk 90,000 in the FY10.
Source: http://newagebd.net/67970/real-estate-sector-makes-tk-15608cr-income-in-fy11-bbssurvey/#sthash.Mip2R0Vt.dpuf
BB reduces provisioning rate against
unclassified farm
loans, microcredits
Bangladesh Bank on Tuesday reduced the rate of provisioning against unclassified agriculture
loan and micro-credit to 2.50 per cent from existing 5 per cent for scheduled banks to encourage banks’ participation in disbursing more agriculture loans and micro-credits. The BB issued a
circular to managing director and chief executive officer of all banks in this regard. The BB,
however, kept unchanged the provisioning rate for three types of classified farm loans and micro-credits. The banks have to keep 5 per cent provision against sub-standard and doubtful
farm loans and micro-credits and 100 per cent against bad loans. The banks have to keep provision on mandatory basis against all types of classified and unclassified loans to absorb unexpected shocks, the BB official said. Under the micro-credit, the marginal people in rural areas
can receive a maximum Tk 50,000 from banks to boost up their productive activities, a BB official told New Age on Tuesday.
Source: http://newagebd.net/67935/bb-reduces-provisioning-rate-against-unclassified-farmloans-micro-credits/#sthash.NsY5XraM.dpuf
3
Daily News Recap
The policy about management of capital market-related
trust funds, in the nature of Mutual Funds (MFs) and unit
funds, is spelt out under securities rules. But this, according to some market-analysts, is not being properly adhered to, in the case of unit certificates of the government-owned Investment Corporation of Bangladesh
(ICB) while fixing the surrender value. Such analysts
largely share the concern of many certificates-holders
over the prevailing state of affairs about ICB Unit Fund
(IUF). Meanwhile, an open-ended fund, under the provisions of Section 51 (2) of Mutual Fund (MF) Rules, 2001,
is to be wound up if more than 75 per cent of related
holders surrender their units. Besides, the securities market regulator or the trustees can take the decision about
winding up of any such trust fund, if it becomes necessary, for the sake of upholding unit holders' interest.
Is the schemes continuation in perpetuity justified or not?
According to some forward-looking market observers, the
Bangladesh Securities & Exchange Commission (BSEC),
the regulatory body for the country's capital market, can
set a time-limit for winding up the long-running IUF of a
hybrid type for ensuring consistency, uniformity and
transparency of such a kind of MF. The existing holders
of ICB unit certificates should not also be deprived of
their legitimate claims, they noted. By setting a timeframe for winding up the IUF, the BSEC can consider
giving the ICB a choice between letting their existing unit
certificate-holders either to opt for any other new product
or investment or encashing their existing units, both at
actual NAV, they suggested. Such a move, according to such observers, will help further deepen and widen they base of the country's capital market on some innovative lines. No investors'
trust fund, whatever may be its kind, should be allowed to continue in perpetuity, they added.
The securities market watchdog, as competent sources and concerned quarters including the
investors do strongly feel, can not keep its eyes shut to the operations of an unlisted security
like that of IUF unit certificates that have some strong traits of being considered as a MF. The
existing holders of the certificates of the IUF should, on no logical ground, be deprived of the
benefits of market-gains that belong to them, according to them. However, the watchdog cannot
also ignore the possible impact, positive or negative, of this security on the market, in the event
of its unbundling or fixing a tenure for folding up of its operations, they added. "The IUF is beyond our overall supervision. However, we will send a letter to the ICB for submitting the copy of
the agreement under which the IUF was floated," one competent source within BSEC told this
correspondent.
The BSEC source preferred not saying anything about the operation of the IUF or commenting
on the ICB's policy about fixation of the 'surrender value' of the IUF's units. The officials of the
BSEC's concerned department said the ICB do not give annual fees for the IUF. For the ICB,
the hard matters of consequence, according to relevant sources, remain to be: ensuring dividend -- either in cash or in the form of new 'unlisted' units or certificates -- at a higher rate, however modest it may be -- in every successive year to their existing holders, avoiding thereby a
'too heavy' one-time load on its financial operations. A strong fear, meanwhile, persists among
the concerned ICB personnel about market destability, in the event of any large scale
'surrender' of its only 'flagship security' by its holders for reaping 'market' or 'capital' gains.
On its part, the ICB has otherwise an impressive track-record, largely through its subsidiaries, of
being quite proactive, some close observers of the market noted. It has been playing a 'allweather' supportive role for ensuring both stability and liquidity, particularly in times of adversities of the market, they added. A member of the relevant committee of the ICB, meant to set the
NAV and fix surrender value of the units of the IUF, claimed that the surrender value or repurchase rate of its unit certificates is fixed by evaluating the NAV, period of holding units and
some other circumstances as well. Asked, whether the unit holders who are willing to surrender
units are being deprived of 'due' benefits, the member said this issue is a matter of perception.
4
Daily News Recap
"However, the surrender value is periodically fixed to encourage long-term investment and to
ensure higher rate of dividend on a steady and sustained basis," he told the FE, asking not to
be named. ICB managing director Md. Fayekuzzaman said they manage the IUF in a balanced way. "Tendency of surrendering units may be triggered if the re-purchase rate is fixed
in an imbalanced way. This will also have adverse knock-on effects on the capital market," Mr.
Fayekuzzaman observed. The IUF, he said, plays an important role in promoting industrialisation and also developing the capital market, while providing a reasonable rate of return to the
unit-holders on a sustainable basis.
Meanwhile, the job of the auditors -- K. M. Alam & Co and Rahman Mostafa Alam & Co -- that
have been appointed to audit the financial statements of the IUF, is mainly to examine statements of its assets, liabilities and profits while authenticating the financial statements, according to sources. "I think the ICB fixes the surrender value or repurchase rate, as per the conditions set under an earlier agreement," said an auditor requesting for anonymity.
The ICB charges Tk 1.25 per unit (net outstanding) as management fees. It is also the custodian of all assets of the fund. The ICB realised about Tk 91.42 million and Tk 149.98 million as
management fees for the year that ended on June 30, 2013 and on June 30, 2014, respectively. It also received custodial fees worth above Tk 16.73 million for the year that ended on
June 30, 2014. The dividend rate on every unit of the IUF was Tk 22.00 in the financial year
(FY), 2008-09, Tk 26.00 in FY 2009-10, Tk 30 in FY 2010-11, Tk 32.00 in FY 2011-12, Tk
36.50 in FY 2012-13 and Tk 40 in FY 2013-14. In FY 2012-13 and FY 2013-14, fresh units
under the CIP that were issued stood, in value terms, at Tk 799.9 million and above Tk 1.01
billion respectively.
Two years back, the ICB introduced 'nominee system' among family members, only to avoid
difficulties, consequent upon the death of any or of the unit-certificate holders. Asked, whether
the IUF is an open-ended trust fund or not, ICB managing director Mr. Fayekuzzaman said in
the sense of a MF, the IUF cannot be called an open-ended one as only the existing unitholders are allowed to receive new units or sell their existing ones.
News source: http://www.thefinancialexpress-bd.com/2014/11/19/66761
Economy
High-voltage grid
line approved for
smooth power supply to Dhaka
The government Tuesday approved a high-voltage power grid line project, to be installed between Ashuganj and Bhulta, at a cost of Tk 8.53 billion to facilitate smooth and quality power
supply to the capital city, officials said. Presided over by Prime Minister Sheikh Hasina, the
Executive Committee of the National Economic Council (ECNEC) endorsed seven projects
including the power grid line at a combined cost of Tk 13.53 billion. Under the 'AshuganjBhulta 400-kilovolt transmission line project', the Power Grid Company of Bangladesh (PGCB)
will install the 70-kilometre transmission line to upgrade the country's power supply system,
officials said. Bangladesh's almost all the transmission grids are 230kv or below capacity ones
for supplying electricity across the country. Transmission lines of the PGCB up to July last
stood at 3,066 circuit km of 230kv lines, 6,125 circuit km of 132kv lines and one number 400kv
substation, 18 numbers of 230/132 kv substation and 88 nos of 132/33 kv substations.
The PGCB for the first time installed a 400 kv high-voltage line from Bheramara in Bangladesh
to Baharampur in the Indian border for importing electricity from India. The grid is now transmitting power. The company recently completed installation of a 53km-long 400kv line from
Meghnaghat to Aminbazar aimed at supplying uninterrupted power to the capital city. Another
170km high-voltage 400kv line from Bibiyana to Kaliakor is under installation by the PGCB.
Officials said the proposed Ashuganj-Bhulta power grid will be installed by June, 2017. After
the meeting, Planning Minister AHM Mustafa Kamal said the ECNEC Tuesday revised and
approved the seven projects at a combined cost of Tk 13.53 billion where entire funds will be
provided by the government and the implementing agencies from their own resources.
5
Daily News Recap
Among the six other approved projects, the ECNEC revised the setting up of fashion, training
institute and basic centre project at Tk 34 million, project for building of 60 investigation centres of police across the country at Tk 1.74 billion, project for setting up of hostel for the blind
children at Tk 549.3 million, projects for modernisation and strengthening of the Department of
Inspection for Factories and establishment of nine district offices at a cost of Tk 725 million.
Besides, it approved the Madan-Khaliajhuri submergible road and bridge project at Tk 1.04
billion, and project for setting up of the Institute of Marine Technology (2nd phase) at a cost of
Tk 554.8 million. ECNEC members, high officials of the government and the Planning Commission were present at the meeting.
News source: http://www.thefinancialexpress-bd.com/2014/11/19/66759
Dhaka, Ottawa bilateral trade reaches CAD 1.8b
Bilateral trade between Bangladesh and Canada amounted to more than Canadian dollar
(CAD) 1.8 billion in 2013, with agricultural commodities representing 68 per cent of Canadian
exports, reports UNB.Bangladesh imported CAD 528 million worth of Canadian agricultural
products, including wheat and lentils, in 2013, an increase of 54 per cent over the previous
year, according to Canadian High Commission in Dhaka. Canada remains the world’s sixth
largest exporter of wheat and it exports 2.7 per cent of the total value of the world’s agriculture and agri-food exports. Bangladesh’s exports to Canada reached CAD 1.12 billion in 2013
-- 95 per cent was readymade garments. The Canadian High Commission arranged a seminar
on ‘Bangladesh-An Emerging Market for Alberta’s Agriculture and Agri Food Products’ in the
city yesterday.
A delegation from the Alberta Agriculture and Rural Development Department, government of
Alberta took part in the seminar making a technical presentation. Canadian High Commissioner Heather Cruden said canola oil is considered the heart healthiest oil in the world as certified
by the US Food and Drug Administration and Health Canada. It is also a source of high-quality
feed and bio fuel feedstock. Bangladesh can import Canadian canola seed to produce the oil
locally, she said.The diplomat also said besides canola, Canada is one of the top three wheat
exporters on the planet, and the world’s largest producer of high-protein milling wheat.
Canada is a leader in innovation in agricultural commodities which is also of benefit to Bangladesh, said the envoy. Grant Winton, senior director, government of Alberta, stressed that the
province of Alberta is proud of its production of premium food products and looks forward to
meeting and developing business links with the key players in Bangladesh’s agri-food industry.Masudur Rahmen, president of CanCham Bangladesh, and Mohammad Shahjahan Khan,
president of the Dhaka Chamber of Commerce and Industry were present as special guests.
Asia Agro International, a local canola oil importer, sponsored the initiative.
Source: http://www.theindependentbd.com/index.php?
option=com_content&view=article&id=237638:dhaka-ottawa-bilateral-trade-reaches-cad18b&catid=108:business-finance&Itemid=152
6
Daily News Recap
Capital market
Shahjibazar goes to
spot market
Shahjibazar Power's share trade will be relegated to the spot market from the public market
today.This means that investors will now have to pay cash for the company's share transactions and have a settlement period of just one day.Bangladesh Securities and Exchange Commission (BSEC) took the decision yesterday, after looking into the unusual price hike of
Shahjibazar shares recently.
The power company's share prices rose 828 percent to Tk 338.8 since its listing on the stockmarket on July 15.The BSEC also marked Shahjibazar Power stocks as non-marginable,
meaning, investors cannot buy those on credit.Additionally, all stockbrokers will have to submit daily details on the sell and buy of each Shahjibazar share to the stock exchanges, which
will send the report to the regulator the following day.
On November 9, BSEC had tasked a two-member committee to report on the unusual price
hike of Shahjibazar Power within 15 working days.The BSEC had earlier found anomalies in
the company's accounts and spent Tk 1.72 lakh for a new audit by A Qasem and Company
Chartered Accountants.The company had inflated net profits by Tk 11.68 crore in its financial
reports, according to BSEC-appointed auditors, for which the regulator fined five directors of
the company Tk 10 lakh each, and the managing director Tk 5 lakh.Shahjibazar Power shares
also faced a trade bar from August 11 to October 20 for the same reason.The audit firm found
that the power company's real net profit was Tk 16.87 crore, with real earnings per share of Tk
1.48, instead of the published numbers. Shahjibazar raised Tk 31.7 crore from an initial public
offer to pay off bank loans.
Meanwhile, stocks continued to fall for the fourth day as investors remained cautious amid
corporate declarations, leading to Tk 628 crore in turnover yesterday, a 9 percent decline from
the previous day.DSEX, the benchmark general index of the DSE, closed at 4,898, after shedding 18 points or 0.37 percent.DSES, the shariah index of the premier bourse, lost 6 points or
0.53 percent, to finish the day at 1,150 points. Losers beat gainers 147 to 125 and 33 remained unchanged out of the 305 issues that traded on the Dhaka bourse.A total of 1.32 lakh
trades with 12.26 crore shares and mutual fund units took place on the DSE.Chittagong Stock
Exchange also declined yesterday with its selective categories index, CSCX, shedding 46
points to close at 9,243.
Source: h p://www.thedailystar.net/business/shahjibazar-goes-to-spot-market-50993
7
Daily News Recap
LBSL’s research reports are also available on
Bloomberg LANB <GO>
http://lankabangla.duinvest.com
Disclaimer
This document (“the Report”) is published by LankaBangla Securities Ltd (“LBSL”) for information only of its clients. All information and analysis in
this Report have been compiled from and analyzed on the basis of LBSL’s own research of publicly available documentation and information.
LBSL has prepared the Report solely for informational purposes and consistent with Rules and regulations of SEC. The information provided in the
Report is not intended to, and does not encompass all the factors to be considered in a best execution analysis and related order routing determinations. LBSL does not represent, warrant, or guarantee that the Report is accurate. LBSL disclaims liability for any direct, indirect, punitive, special, consequential, or incidental damages related to the Reports or the use of the Report. The information and analysis provided in the Report may
be impacted by market data system outages or errors, both internal and external, and affected by frequent movement of market and events. Certain assumptions have been made in preparing the Report, and changes to the assumptions may have a material impact on results. The Report
does not endorse or recommend any particular security or market participant. LBSL, its analysts and officers confirm that they have not received
and will not receive any direct or indirect compensation in exchange for expressing any specific recommendation, opinion or views in its Report.
The information and data provided herein is the exclusive property of LBSL and cannot be redistributed in any form or manner without the prior
written consent of LBSL. This disclaimer applies to the Report in their entirety, irrespective of whether the Report is used or viewed in whole or in
part.
LBSL Capital Market Research Department
Md. Mahfuzur Rahman
Research In-Charge
mrahman@lbsbd.com
Analyst
Designation
E-mail
Qazi Musaddeq Ahmed
Senior Research Analyst
qazi.musaddeq.ahmed@lbsbd.com
Maksudul Haque Chowdhury
Research Analyst
maksudul.haque@lbsbd.com
Nazmul Ehsan Omiya
Research Associate
nazmul.ehsan@lbsbd.com
Nazib Haider Chowdhury
Research Associate
nazib.haider@lbsbd.com
Salma Yeasmin Xinat
Research Associate
salma@lbsbd.com
Md. Mahfujur Rahman
Research Associate
mahfujur.rahman@lbsbd.com
Pritam Saha
Research Associate
pritam@lbsbd.com
Institutional & Foreign Trade Department
Rehan Muhammad
Manager
rehan@lbsbd.com/rmuhammad1@bloomberg .net
LankaBangla Securities Limited
Research & Analysis Department
Corporate Office
A.A. Bhaban (Level-5)
23 Motijheel C/A
Dhaka-1000, Bangladesh
Phone: +880-2-9513794 (Ext-118)
Fax: +880-2-9563902
Website: www.lbsbd.com
8