At Capital Weekly July 07

Weekly News Update

AT Capital Research

AT Capital Weekly Update 07 July 2008 Welcome to the first issue of the AT Capital Weekly. Our objective is to discuss key issues and trends in the Bangladesh economy and capital markets. We will also focus on developments in Global Markets that are likely to impact Bangladesh. We hope our readers find this publication useful and we appreciate any feedback.

Asian Tiger Capital Partners

Key themes in this issue are:


The escalating cost of fuel subsidies has forced sharp rises in petrol prices




Bangladeshi corporate margins to be pressured by rising energy prices




DSE outperformance of other Asian markets looks unsustainable




Why Bangladesh may benefit from rising Indian economic/market turmoil




Lessons from the 2008 Vietnamese stock market melt-down




Need to develop a domestic institutional client base for DSE




AKTEL-NTT Docomo deal a positive sign for BD private equity

EDITORS




Remittances continue to rise to a new high of $ 8 bn

Ifty Islam




DSE market cap crosses BDT 900 billion mark




Bangladesh pharmaceutical sector offers significant growth potential

Managing Partner +880 171 584 0112 [email protected] Syeed Khan Partner +880 173 005 8921 [email protected] Professor Jahangir Sultan Senior Advisor +17818912518 [email protected]

Asian Tiger Capital Partners UTC Building, Level 16 8 Panthapath, Dhaka-1215 Bangladesh www.at-capital.com

AT Capital Research Bangladesh Markets Energy price hikes pose major policy challenges A major challenge for Bangladesh policymakers remains managing and mitigating the impact of the sharp increases in energy and food inflation. Although this has been a global phenomenon, in the context of many Asian economies, including Bangladesh, energy policy has had major fiscal implications given the scale of government subsidies. Asian governments are falling behind in their battle against record oil prices, risking public protests, higher interest rates and slower growth. Indian Prime Minister Manmohan Singh and his Malaysian counterpart, Abdullah Ahmad Badawi, relaxed fuel price controls, joining Indonesia, Taiwan, Pakistan and Sri Lanka in boosting costs for business and consumers. The moves will drive India’s inflation to a 13-year high. Malaysia’s consumer-price growth may double to more than 7% this month. There are growing concerns that Asian central banks in the region may also follow Pakistan in raising rates, as policy makers lose bets that a global slowdown would temper price increases. There are also likely to be major political ramifications for governments in the region. Notwithstanding the unfortunate effects on poor families in Bangladesh who were already struggling to cope, it was clear that the authorities here had little option but to reduce the scale of subsidy given few signs of any reversal in fuel prices and the prospects for an escalation in the budget deficit that would be unsustainable. In the event, the government increased domestic fuel prices by 33 to 37 percent with effect from July 1. The new price of diesel and kerosene is BDT 55 (USD 0.8) a litre, petrol is now BDT 87 (USD 1.2) a litre, the price of octane is BDT 90 (USD 1.31) a litre and a cylinder of liquid petroleum gas (LPG) is now BDT 1,000 (USD 14.60). The Chief Adviser's Special Assistant for Power and Energy, Dr M Tamim also said on July 1, that there is a proposal pending with Bangladesh Energy Regulatory Commission (BERC) on a 42 percent raise in electricity tariffs. It was noteworthy that the rise in petrol prices was much larger than the approximately 10% increase in Indian fuel prices that triggered significant street protests. So far the relatively calm public response in Bangladesh to the energy price risks underlines the relative resilience of the public to adverse shocks. Nonetheless, the sharp increase in costs for companies in Bangladesh in an environment of weakening pricing power in the face of the US recession and slowing economies in Asia will be a major challenge. The BGMEA chief said that the apparel factory owners will have to incur on average an additional cost of BDT 0.5 bn (USD7.3mn) a month due to this price hike. The prospective squeeze on company profit margins for Bangladeshi corporates suggests the strong outperformance of the Bangladesh equities versus a majority of other Asian markets (see table below) is unlikely to be sustained.

Ifty Islam Managing Partner +880 171 584 0112 [email protected]

Bangladesh outperforms other equity markets 2005 2006

2007

Bangladesh (DSE) USA (S&P 500) China (Shanghai Composite) Japan (NIKKEI 225) India (SENSEX) Pakistan (KSE 100) Vietnam (VN-Index)

87% 4% 97% -11% 47% 40% 23%

-15% -4% 3% 14% -8% 130% 40% 7% 42% 47% 54% 5% 29% 144%

2008 (YTD) 0% -14% -49% -14% -34% -16% -53%

Source: Bloomberg

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AT Capital Research Worsening crisis in India and Vietnam Vietnam equity markets an opportunity for Bangladesh In our special focus article this week on page 7 on managing capital flows we discuss the lessons from the 60% decline in the Vietnamese stock market for Bangladesh. But the problems in India have also been intensifying in the past month. In the recent report Business Week noted that: “Just six months ago, India was looking good. Annual growth was 9%, corporate profits were surging 20%, the stock market had risen 50% in 2007, consumer demand was huge, local companies were making ambitious international acquisitions, and foreign investment was growing. Nothing, it seemed, could stop the forward march of this Asian nation. But stop it has. In the past month, India has joined the list of the wounded. The country is reeling from 11.4% inflation, large government deficits, and rising interest rates. Foreign investment in India's stock market is fleeing, the rupee is falling, and the stock market is down over 40% from the year's highs. Most economic forecasts expect growth to slow to 7%—a big drop for a country that needs to accelerate growth, not reduce it. Many in India worry that the country's hard-earned investment-grade rating will soon be lost and that the gilded growth story has come to an end….The gravest danger is that India's messy coalition politics will bring into power another indecisive alliance that will keep the country in policy limbo for another five years. If so, says S&P's Gokarn, it's a meltdown scenario: growth slipping below 6.5%, accelerating the chances of India reverting to its 1991 status when it was plunged into a balance-of-payments crisis.” (July 1, 2008 edition of Business Week) The article goes on to note that oil price subsidies (of up to 60% on diesel), plus an additional $25 billion on upcoming fertilizer subsidies, is adding $100 billion a year—or 10% of India's gross domestic product, or equivalent to the country's entire collection of income taxes—to the national bill. This at a time when India needs urgently to spend $500 billion on new infrastructure and more on upgrading education and health-care facilities. The government's official debt, which dropped below 6% of gross domestic product last year, will now be closer to 10% this year. India’s rupee completed its biggest quarterly loss in a decade as the slide in local stocks prompted overseas investors to reduce equity holdings and record oil prices spurred demand for dollars. The rupee is the second worst performer of the 11 most- actively traded Asian currencies this quarter as global funds sold shares on concern accelerating inflation will slow economic growth. The currency fell to the lowest level since April 2007 as a doubling in oil over the past 12 months widened the current- account deficit, a broad measure of trade and investment flows. India’s exports grew at the slowest pace in 14 months in May as weakening global expansion hurt exports of clothes, steel and electronic goods, widening the trade deficit to a record $10.76 billion. We believe that while the problems from South Asia’s dominant economic player is a warning sign for the potential risks for the Bangladesh economy, we also firmly believe now is the time that global investors will be looking for opportunities to diversify away from Indian exposure. Bangladesh should position itself to benefit from this potential new source of investor interest. Forward looking economic policies and political stability should be a winwin strategy for Bangladesh to attract foreign investment. AKTELAKTEL-NTT Docomo deal a positive positive sign for the prospects for private equity We think the deal by NTT Docomo to buy AK Khan's 30 % stake in AKTEL for $ 350mn is an important positive, and possibly seminal, event for the Bangladesh economy and capital markets on a number of fronts: 1)

It shows a vote of confidence by one of Japan's largest companies in the future of the Bangladesh economy. The premium paid by NTT underlines their expectations for rapid growth of the domestic market of 150 mn people.

2)

It illustrates the effective exit of a major business group of their minority stake at a substantial profit - a key strategy for private equity investors. It answers one of the major issues prospective foreign private equity investors have when considering a frontier market like Bangladesh – namely can family-owned companies be persuaded of the merits of working with foreign companies even as minority stakeholders in joint ventures.

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AT Capital Research 3)

It is the beginning of hopefully a series of such deals that will be part of BD's FDI rising at the same pace as Vietnam's over the next 7-10 years. We see the significant increase in foreign interest in Telecoms in Bangladesh spreading to other sectors such as Pharmaceuticals, Agribusiness, Light Engineering and Infrastructure. The benefits of FDI go beyond access to global capital to include both global best practice, market access and management thinking.

LR Global awarded local asset management license – a positive positive sign for the capital markets We also believe the decision last week by LR Global, a large global EM money manager with $ 400mn+ of assets funds under management, to establish a domestic asset management operation in Bangladesh is a very encouraging sign for the future prospects for the evolution of Bangladesh’s capital markets. The efforts of the Bangladeshi regulatory authorities to attract a broader range of globally credible financial players to come to the Bangladesh market is, we believe, an important step towards attracting greater foreign portfolio flows to the market, bring greater finance expertise and increase the credibility of Bangladesh as a lucrative investment destination. Bangladesh pharmaceutical sector offers significant growth potential Four pharmaceutical companies out of the top ten Bangladeshi companies achieved doubledigit growth in sales during the January-March period of this year, said global pharmaceutical market intelligence agency IMS, the global provider of pharmaceutical market intelligence, in its first quarter report. The report, published recently, noted that the fifth largest pharmaceutical company in the country Eskayef posted the best 21.1% growth, followed by Renata 16.2%, ACI 16.2%, and Drug International 13.8%. At present, Bangladesh has the strongest pharmaceutical base among all the emerging economies as the local production caters to almost 97% of the total domestic demand; only some life saving drugs and vaccines (especially, injectables) are imported. The industry, which is currently valued at slightly more than USD 590 million in 2007, grew at an average annual growth rate of almost 12% during the last five years. When compared regionally, the current growth rate of over 15% during the first half of 2008 puts Bangladesh ahead among India, Vietnam, Pakistan and Sri Lanka. We believe there is significant potential for Bangladesh in the contract manufacturing/export market regardless of the 2016 agenda, as the developed nations are driven by patented drugs and the manufacturers do not want to make investments for production of generics. Thus, Bangladesh can be a very attractive destination for outsourcing as the costs are much lower and many firms have started to achieve international certifications for quality assurances.

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AT Capital Research Global Markets Oil price surge and stagflationary fears fuel US bear market

“It is quite possible that we are now at the most dangerous moment since the American financial crisis began last August. Staggering increases in the prices of oil and other commodities have brought American consumer confidence to new lows and raised serious concerns about inflation, thereby limiting the capacity of monetary policy to respond to a financial sector which – judging by equity values – is at its weakest point since the crisis began. With housing values still falling and growing evidence that problems are spreading to the construction and consumer credit sectors, there is a possibility that a faltering economy damages the financial system, which weakens the economy further.” - Lawrence Summers, Financial Times, June 29, 2008 There was little respite for global equities with market historians dusting off their bear record books – it was the worst June month US stock market performance for 78 years and worst first half since 1970. The momentum in negative sentiment was underlined by the sharp sell off in commodity/energy stocks which, up until now, have been the lone beacon of hope amidst the carnage. Concerns about US automakers re-surfaced with fears about a GM or Chrysler bankruptcy. Compared to the global equity market, the DSE20 had performed quite well in the last four years. For example, the return on the DSE20 index in 2003 was 129%. In 2004, it went up by a whopping 104%. For the next two years, the market turned bearish: -15% in 2005 and 4% in 2006. But the year 2007 was another spectacular year for the Dhaka Stock Exchange. The DSE20 went up by 87%. As of today, the DSE20 index return was less than .5% and holding. Compared to the DSE20, the performance of global markets since the beginning of this year has been quite disappointing. The DOW has fallen by 20% from its peak in October last year and the S&P500 and the NASDAQ fell by as much as 19.4% and 30%, respectively, during the same period. In terms of returns measured in US dollar, Bangladesh currently has a low correlation (-.26 (US) and -.40 (UK)) with the rest of the world. That is good news for anyone interested in getting an exposure to the Bangladesh market for diversifying risk. So, measured in US dollar terms, a foreign investor would have come out as a winner by investing in Bangladesh.

Ifty Islam

Source: The Wall Street Journal

Managing Partner +880 171 584 0112 [email protected]

Further USD weakness likely as US downturn intensifies and sovereign wealth nerves increase In a recent report, the Bank for International Settlements warned that “A disorderly decline in the dollar remains a possibility as losses on U.S. assets pile up and the current-account deficit triggers…a sudden rush for the exits… A plunge in the currency may happen even after

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AT Capital Research its ‘remarkably orderly’ 14% slide against the euro in the past year…Foreign investors in U.S. dollar assets have seen big losses measured in dollars, and still bigger ones measured in their own currency…While unlikely, indeed highly improbable for public-sector investors, a sudden rush for the exits cannot be ruled out completely.’” Looking at evidence from NYMEX spot oil options, the number of financial market bets on crude oil prices hitting $200 a barrel before the end of this year has almost doubled in the past month, a further sign of growing concern that oil prices will continue to rise sharply in the near term. The strong buying of these call options… comes as spot oil prices in London yesterday hit a record high around the $146 a barrel level.”

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AT Capital Research The Challenges Challenges of Managing Capital Flows in EM – Lessons for Bangladesh While Asian economies had, at least until relatively recently, been relatively resilient to the US slowdown, EM equity markets have been far less decoupled. Indeed, a number of Asian stock markets, most notably Vietnam, India and China, have actually significantly underperformed the S&P 500 in 2008. The causes of this divergence between economic and financial market decoupling have centred on both the effects of rapid growth in FDI, in the case of Vietnam, FX reserves in the case of China and foreign investor participation with respect to India. Somewhat paradoxically, Bangladesh’s relatively low levels of FDI and foreign participation in the stock market has seen it emerge as one of Asia’s best stock market performers. Bangladesh has not had to face the challenges seen in many other countries in Asia in managing the consequences of capital flows. Nonetheless, given our expectations for both a rapid increase in both FDI and foreign portfolio investment, we believe there are lessons for Bangladesh policymakers from the challenges faced in 2008 by other economies in the region. The ADB Research Institute have just published a thought provoking analysis of some of some of the key issues (see “Managing Capital Flows in Asia: Some Challenges and Policy Issues”, Kagai and Lamberte, June 2008). In the report, they note that large capital inflows, if not managed properly, can expose capital-recipient countries to at least three types of risks: 1)

Macroeconomic risk. Capital inflows could accelerate the growth of domestic credit, create economic overheating including inflation, and cause the real exchange rate to appreciate, thus affecting macroeconomic performance in a way not consistent or compatible with domestic policy objectives such as sustainable economic growth with price stability.

2)

Financial instability. Capital inflows could create maturity and currency mismatches in the balance sheets of private sector debtors (particularly banks and corporations), push up equity and other asset prices, and potentially reduce the quality of assets, thereby contributing to greater financial fragility.

3)

Risk of capital flow reversal. Capital inflows could stop suddenly or even reverse themselves within a short period, resulting in depleted reserves or sharp currency depreciation.

Potential Tools to manage Capital Flows Sterilized intervention. As the ADB notes, sterilization has been the favorite tool applied by many emerging Asian economies to prevent nominal and real exchange rate appreciation and economic overheating. Because net foreign exchange inflows from the current and capital accounts have been sustained for quite some time now, intervention in the foreign exchange market has been unidirectional, making sterilization an increasingly costly method of preventing overheating of the economy. The need to allow greater exchange rate flexibility is thus becoming more compelling.

Ifty Islam Managing Partner +880 171 584 0112 [email protected]

As of end-2007, total foreign exchange reserves in the world were more than USD 5 trillion with the emerging Asian economies accounting for half of it. However, as the ADB report emphasizes, there is a growing consensus based on standard measures of reserve adequacy, e.g. in terms of months of imports of goods and services, and in terms of ratios (of reserves) relative to external debt, to GDP, or to domestic money supply—that these foreign exchange reserves are excessive. Even though it is difficult to come up with a reliable estimate of the optimal level of reserves, the current total foreign reserves in Asia exceed the level that is needed for mitigating abrupt capital reversals or external financing in crisis. The countries’ apparent desire for large reserves may be reduced if there is a credible reserve-sharing arrangement at least at the regional level.

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AT Capital Research Financial Sector Reforms Another important issue highlighted by the ADB report and relevant for Bangladesh was the need to strengthen local financial markets. They noted that efforts must be intensified to (i) improve prudential regulations such as limiting the practice of concentrating lending to a few individuals or business entities and moving towards Basel 2 capital adequacy standards, (ii) ensure stronger governance and risk management of financial institutions through greater transparency and better disclosure, and (iii) enhance the capacities of regulatory bodies. At the same time, reforms to accelerate the development and deepening of domestic capital markets and to put in place efficient market infrastructure must be pursued to enhance the absorptive capacity of domestic financial markets to match large capital inflows.

Vietnam 2008: A salutary reminder on the challenges of managing capital flows Early last year, a spate of stories appeared in the international press proclaiming Vietnam as "the New Asian Miracle" and "the Next Asian Tiger." The country joined the World Trade Organization in January 2007, prompting a surge in annual foreign direct investment approvals to more than USD20 billion or around 30% of GDP. The Ho Chi Minh City Stock market (which was a similar size to the DSE at around USD 11bn) was Asia’s stellar performer, with the index reaching a peak of 1,170 in March 2007, up 140% year on year. Rising global commodity prices drove export revenue to nearly USD50 billion, an increase of more than 20% over 2006. For the year as a whole, the economy grew by an impressive 8.5%, the fastest pace since 1996. Cut to 2008. While the pace of FDI commitments in Jan-May 2008 remained strong at USD 15 bn the Vietnamese equity market has fallen 60 % with volumes down more than 90%. The extent of the Vietnamese authorities’ shellshock was their decision in March to cancel a major investors' conference -- marketed under the title "Sustaining Growth and Reform in Asia's Next Tiger" -- owing to "pressing macro- and microeconomic concerns." The government later claimed that the organizer's permits were not in order. The May inflation rate has jumped to 25.4%; the trade gap in the first five months of 2008 was USD 14.4 bn versus USD 4.25bn a year earlier; credit growth was running at 50% annual while the budget deficit was 7% of GDP. The government has also just banned the import of Gold with hoarding by locals to hedge against inflation risks adding to the trade problems. The causes of the Vietnamese 2008 stock market crash was that while the authorities were the champions of attracting FDI, they were ill prepared to receive the flood of foreign capital when it arrived. The failure to sterilize the inflow by offsetting withdrawal of liquidity by the central bank saw huge growth in bank lending which primarily found itself fuelling both equity and property price bubbles. In an effort to slow the market's decline, daily trading-band limits of 1% were imposed on all stocks in March of this year. This was the wrong step by a government that knows little about markets. Those limits were raised to 2% in April. But what has been happening? The market opens and the price of virtually every security traded on the exchange opens down the daily 2% limit. Trading essentially stops at that level, and the next day the market opens limit-down again in a perfect lock-step fashion, that was repeated for 23 days in a row. The volatility in the stock market and domestic macro environment also threatens to end the FDI fairytale. The head of Vietnam Amcham and Ford Vietnam, noted that while “Vietnam’s success in attracting foreign investment has largely been built on the expectation of economic and political stability,” Hanoi now needs to take “urgent and decisive action” to curb a speculative real estate bubble that “not only threatens the financial sector, but is also undermining Vietnam’s long-term competitiveness as it is challenged for foreign investment by neighbouring countries”. Rising labour costs are also “a significant concern to US business operating in Vietnam” and labour unrest is directly related to the macro-economic problems. The policy response by the Vietnamese authorities has been confused at best and reflects the complex allocation of economic policymaking responsibilities with the central bank responsible for monetary policy but the finance ministry for inflation. The Planning Ministry is responsible for investment spending and several State Owned Enterprises report directly to the PM’s office. There are concerns about whether further policy confusion and missteps might see a repeat

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AT Capital Research of the 85% decline in Thai stocks Jan 1996-Aug1998. Or indeed the collapse in the Bangladesh stock market in Nov 1996-Dec1997 from 3649 to 711.

Vietnam – Lessons for Bangladesh Bangladesh and Vietnam’s stock markets differs in terms of the level of foreign participation with 25% for the latter. By contrast in 2007 foreign portfolio flows were USD 200mn in Bangladesh versus a market cap of USD 10bn. This explains why the DSE has been less sensitive to moves in global markets than Vietnamese, Indian or indeed Chinese equities. However, both Bangladesh and Vietnam have a relatively large retail investor base and an underdeveloped domestic institutional sector. This may explain the extreme moves in the market as household investors in a news-driven rather than fundamentally driven market are more likely to adopt a “herd mentality” and hence Bangladesh equities might be vulnerable to extreme moves unless the authorities can help build an institutional client base with insurance and pension fund reforms. The Vietnamese experience also underlines the fact that foreign investment is not a panacea for all Bangladesh’s economic problems. But I would still maintain that in a growth capital constrained economy like Bangladesh, FDI holds the key to a lift off in growth from 6% to 8%+. But the process needs to be managed carefully with sufficient attention spent not only on developing a fundamentally driven professional investor base but also more effective monetary policy tools. The ineffectiveness of curbs on trading in Vietnam and/or government offers to buy in the market directly underlines the unsustainability of market manipulation by the authorities. However, the 2008 Vietnamese market meltdown will likely act as a catalyst for global corporates and investors to seek an alternative Asian investment destination. We believe the prospects for a move to an elected democracy in 2009 coupled with an effective Brand Bangladesh campaign and focused “India plus one” economic vision will leave us well positioned to benefit from the problems elsewhere in the region.

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S tock Market Weekly Weekl y DSE market cap crosses BDT 900 billion mark

80

14

70

13

60

12

50

11

40

10

30

9

Return of regional indices over this week

13.5 13.0 12.5 1-Jul-08

24-Jun-08

17-Jun-08

10-Jun-08

3-Jun-08

27-May-08

20-May-08

12.0

Turnover in USD Mln

90 80 70 60 50 40 30 20 10 0

14.0

Turnover

Valuation Snapshot

Market Summary Opening of this week Closing of this week Change within a week (%) Change within a week (Point) Capitalization and Turnover Number of Trading Days Market Capitalization (USD bn) Total Turnover (USD mn) Daily avg. Turnover (USD mn) Total Volume (mn) Daily avg. Volume (mn) Weighted Avg. P/E Ratio* This Week 23.75 Last Week 23.83 % Change -0.34 *Weighted on Market Cap.



Government offloads 25% of its stake in Titas Gas through direct listing DSE market cap crosses BDT 900 billion mark SEC increases the limits of brokers’ margin with the exchanges Stock trading outside Dhaka and Chittagong expands Some investors oppose recent SEC moves to stop mutual funds issuing bonus and right shares New fund management company starts operation, plans to float a mutual fund

Turnover

14.5

Index Performance





DSE Performance: Performance: 30 Days

Market Cap.





19/06/08

15/5/08

6/3/08

10/4/08

31/1/08

27/12/07

22/11/07

0

13/9/07

6

18/10/07

10

9/8/07

20

7

5/7/07

8

 Turnover in USD Mln

15

Market Cap.

Market Cap. in USD Bln

Asian Tiger Capital Partners

Market News

DSE Performance: Performance: 52 Weeks Market Cap. in USD Bln

Weekly News Update

AT Capital Research

DSE General Index 3,024.5 3,019.1 -0.18% -5.4 This Week 4 13.97 164 41 76 19 Issues Advanced Declined Unchanged Not Traded

DSE 20

Last Week 5 13.53 155 31 60 12 This Week 53 184 5 45

2,517.6 2,564.4 1.86% 46.8 % Change 3.2% 5.7% 32.2% 27.3% 59.1% Last Week 88 160 4 34

Bank Cement Ceramic Engineering Food & Allied Fuel & Power Insurance Investment IT Jute Miscellaneous Paper & Printing Pharmaceuticals Service & Real estate Tannery Textiles Market P/E

Sector P/E Feb-08 Mar-08 24.8 21.9 12.8 14.7 28.1 43.2 30.2 33.7 22.0 24.5 28.1 28.3 22.1 23.0 22.4 40.5 16.6 18.3 8.8 18.6 20.1 22.3 6.9 11.0 20.2 25.0 8.8 10.8 15.3 19.9 11.8 14.6 23.5 23.1

Apr-08 22.2 14.7 43.7 38.9 28.2 25.8 28.1 64.9 18.4 16.4 23.0 9.2 26.7 20.5 25.1 14.9 23.9

May-08 22.6 17.6 42.7 41.4 28.5 26.2 32.4 65.2 17.6 16.0 25.9 9.5 29.8 19.5 23.1 14.4 22.4

Source: Dhaka Stock Exchange

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AT Capital Research Stock Market News Government offloads 25% of its stake in Titas Titas Gas through direct listing The Daily Star, Friday 04 July, 2008

In one of the largest public issues in the country, the government offloads 25% of its stake in Titas Gas Transmission and Distribution Company Limited, book value BDT 2.15 billion. However, due to a wide bid-ask spread of BDT 250, no transactions took place on July 2, the first day of listing. Trading started on July 3 with an opening price of BDT 257.50 as the government reduced its asking price. http://www.thedailystar.net/story.php?nid=44133

DSE market cap cap crosses BDT 900 billion mark The New Age, Sunday, 29 June, 2008

The market capitalization at the Dhaka Stock Exchange crossed BDT 900 billion mark recently for the first time. The exchange also witnessed a resumption of share trading of ICB Islamic Bank. The trading of the shares of the company (previously known as Oriental Bank Bangladesh Limited) was suspended due to its restructuring by Bangladesh Bank. http://www.newagebd.com/2008/jun/29/busi.html#1

SEC increases the limits of brokers’ brokers’ margin with the exchanges The Daily Star, Wednesday, 2 July, 2008

The indices and daily turnover volume of the exchanges fell in the recent weeks. Apparently, to bolster the trading volume, Securities and Exchange Commission (SEC) raised the brokers’ limit of trade without depositing margins with exchanges. Previously, the brokers needed to put margin with the DSE if the transaction volumes exceeded BDT 10 million. The limit has been raised to BDT 50 million. http://www.thedailystar.net/story.php?nid=43775

Stock trading outside outside Dhaka and Chittagong expands The Financial Express, Wednesday, 2 July, 2008

Until recently, volume of stock trading outside of Dhaka and Chittagong has been very thin. Some of the brokers have recently opened their offices in other major cities and district level towns. Rajshahi, a divisional headquarter, has witnessed an increase in stock trading activities recently. State owned Investment Corporation of Bangladesh and some other brokers have opened offices and set up trading platform in the city recently. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38353

Some investors oppose recent SEC moves to stop mutual funds issuing bonus and right shares The Daily Star, Sunday, 30 June, 2008

The SEC has decided that closed-end mutual funds in Bangladesh will not be allowed to issue right shares and bonus shares in their effort to increase the fund size. The shares prices of mutual funds surged far beyond their net asset value recently, i.e trading at premium. The SEC decision has prompted large decline in mutual fund share prices. http://www.thedailystar.net/story.php?nid=43466

New fund management company starts operation, operation, plans to float a mutual fund The Financial Express, Wednesday, 2 July, 2008

A new asset management company called LR Global Bangladesh Asset Management Company Limited has started operation recently. The parent company named LR Global is based in the US. They have received SEC license as an asset management company. The company plans to launch a BDT 1 billion mutual fund soon. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38245

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AT Capital Research Turnover Leaders (All fig. in mn) BDT Square Pharma 923 Lanka Bangla Finance 624 Aims 1st M.F. 597 Fareast Islami Life 526 ACI Ltd 465 Grameen Mtutual One 395 Uttara Bank 330 Beximco Pharma 282 APEX Footwear 273 AB BANK 242

Best Performers* USD 13.4 9.0 8.7 7.6 6.7 5.7 4.8 4.1 4.1 3.5

Prime Islami Life Insurance Tripti Industries Popular Life ACI Limited Prime Finance National Bank Ltd Sonali Paper Maq Paper Fareast Islami Life Phoenix Finance

Worst Performers* % Change 19.9 15.0 13.6 11.5 10.3 9.9 9.7 9.2 8.2 7.9

Aims 1st Mutual Fund 3rd ICB Mutual Fund 2nd ICB Mutual Fund 7th ICB Mutual Fund ICB AMCL 1st NRB MF 1st BSRS Rupali Insurance 1st ICB Mutual Fund 8th ICB Mutual Fund 5th ICB Mutual Fund

% Change -28.2 -24.8 -22.8 -21.7 -20.3 -19.5 -18.6 -17.6 -17.1 -16.9 *By closing price

Market Cap. by Sector* Banks Pharmaceuticals Fuel & Power Insurance Cement Engineering Miscellaneous Foods Textile Tannery Service & Real Estate IT Ceramics Paper & Printing Jute Total

55.1% 10.9% 10.4% 5.9% 5.6% 2.7% 2.7% 1.9% 1.8% 1.5% 0.9% 0.4% 0.1% 0.07% 0.03% 100%

S&P 500 DJIA FTSE 100 SENSEX NIKKEI 225 KSE 100 DSE

S&P 500 1.00 0.94 0.65 -0.09 -0.13 0.02 -0.14

Correlation matrix with other indices* FTSE NIKKEI DJIA 100 SENSEX 225 1.00 0.63 -0.13 -0.12 0.03 -0.22

1.00 -0.07 0.07 0.07 -0.12

1.00 0.53 0.24 0.17

1.00 0.29 0.12

KSE 100

DSE

1.00 0.16

1.00

* Based on the last 65 monthly returns

*As of May 31, 2008

Research Team Professor Jahangir Sultan Senior Advisor [email protected] Shahidul Islam Investment Manager [email protected] Rashed Hasan Research Associate [email protected] Syed Najibullah Research Assistant [email protected]

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Asian Tiger Capital Partners

Weekly News Update

AT Capital Research Economics Remittances hit record USD 8 billion Economic Economic News

Key macroeconomic indicators Key indicators

‘07

‘08

‘09

‘10

‘11

‘12



Remittance close to record USD 8 billion



Octane now BDT 90, diesel BDT 55



Forex reserve hits all-time high



Trade deficit jumps by 59pc on surging import costs



Both local, foreign investment dips New Bangladesh Bank monetary policy next week

Real GDP growth

6.5

5.7

6.0

6.2

6.3

6.3

Inflation

9.1

8.6

7.4

6.1

6.6

5.7

Budget bal. (% of GDP)

-4.4

-5.0

-4.9

-4.7

-4.7

-4.5



Cur. a/c bal. (% of GDP)

1.2

-0.3

-0.3

-0.6

-0.7

-0.7

Remittance in the last 5 years

USD-BDT (avg.)

68.87

68.73

69.14

70.72

72.25

74.92

EUR-BDT (avg.)

94.27

106.35

103.71

99.53

96.45

98.14

Source: Economist Intelligence Unit

Monetary and Credit Developments Domestic credit Broad money

Domestic credit Broad money

Outstanding Stock June-06 June-07 April-08 25.39 29.18 33.76 25.88 30.28 33.68 Changes in outstanding stock July-April April 2008 FY2006-07 2007-08 over April 2007 3.79 4.58 5.62 (+14.92) (+15.71) (+19.95) 4.40 3.40 4.71 (+17.02) (+11.23) (+16.27)

Source: Bangladesh Bank

Crude Oil (Nymex)

Latest Treasury Yields Tenor and Security Type

Weighted Average Yield

28-day T-bill

7.50

91-day T-bill

7.74

182-day T-bill

7.97

364-day T-bill

8.47

5-year T-bond

10.60

10-year T-bond

11.72

15-year T-bond

12.22

20-year T-bond

13.08 Source: Bangladesh Bank

13 Source: The Wall Street Journal

Source: Bangladesh Bank

AT Capital Research Economic News 

Remittance close to record USD 8 billion: Remittances have grown by an extraordinary 33 per cent in the last fiscal year taking the total amount to almost USD 8 billion. Rising overseas employment and the extra money sent home by expatriates to their relatives, as a means to cope with soaring prices of essentials have helped remittances reach this new record. The figure of USD 7.94 billion is a significant rise over that of USD 5.98 billion achieved in the previous fiscal. The foreign exchange reserves also reached USD 6.2 billion on Sunday as a result of the strong remittance growth. http://www.thedailystar.net/story.php?nid=44521



Octane now BDT 90, diesel BDT 55: The caretaker Government has increased prices of petroleum products for the second time during its tenure within fifteen months into the last hike. The prices went up by 33 to 37 per cent compared to the previous hike of 13 to 21 per cent in April 2007. The new price of diesel and kerosene is BDT 55 per litre, which is about 37.5 per cent higher than the previous price of BDT 40 a litre. The price of octane has increased by 34 per cent to BDT 90 from BDT 67 per litre, whereas petrol is up by 34 per cent to BDT 87 a litre. A cylinder of liquid petroleum gas is now BDT 1,000, up from BDT 600, while a litre of furnace oil is now BDT 30, up from BDT 20. Professor M Tamim, Special Assistant to the Chief Adviser on Energy Ministry Affairs, announced that the Government was left with little choice but to increase the price of petroleum products, considering the recent surge in commodity prices world-wide that has been putting severe inflationary pressures on different economies across the globe. http://www.thedailystar.net/story.php?nid=43652



Forex reserve hits allall-time high: Foreign exchange reserves of Bangladesh reached an all-time of USD 6.16 billion last Monday – a result of constant remittance inflows and recent disbursement of soft loans from multilateral donor agencies. Bangladesh received remittances worth USD 7.16 billion in the July–May period of the recently concluded fiscal year, which is a significant 31.14 per cent increase from the corresponding period in the previous year, as surging remittance numbers continue to be one of the key drivers of economic growth. The reserves went up as a result of soft loans worth USD 315 million from The World Bank and USD 32 million from the Asian Development Bank, in addition to USD 50 million received from the United Nations for participating in peacekeeping missions. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38308



Trade deficit jumps by 59pc on surging import costs: Bangladesh’s trade deficit increased by a staggering 59 per cent to USD 4.6 billion in the July – April period, in comparison to USD 2.9 billion in the same period earlier. According to Bangladesh Bank, imports have risen by 24 per cent to USD 15.9 billion, while exports have grown by 14.5 per cent to USD 11.24 billion. Import bills on consumer goods were USD 2.28 billion, compared to USD 1.1 billion in the same period last fiscal. Rice and wheat accounted for USD 1.32 billion, compared to USD 399 million. The import of capital machinery fell to USD 1.17 billion from USD 1.29 billion. Petroleum and oil-related products increased marginally to USD 1.74 billion. Bangladesh’s trade deficit has increased substantially in a time of growing fear and apprehension in global markets. The only consolation from this relatively significant deficit is a combination of soaring remittances and growing foreign exchange reserves. http://www.newagebd.com/2008/jul/01/busi.html#3



Both local, foreign investment dips – quality of investment also slides: Both local and foreign investment took a slide in last fiscal year, despite the Government having set a target of creating about 10 million jobs in the next three years. A recent analysis of Government data reveals that the downtrend in local investment has continued from the 2006-07 fiscal, as a result of the failure to properly implement the Annual Development Program. Besides the downtrend in investment, quality of investment also took a downward dive and it is reflected in the incremental capital-output ratio (ICOR). Total investment in the last fiscal year was 24.2 per cent of GDP, slightly lower than the figure of 24.5 per cent in the preceding fiscal. http://www.thedailystar.net/story.php?nid=43972



New Bangladesh Bank monetary policy next week: The Governor of Bangladesh Bank, Dr. Salehuddin Ahmed mentioned Sunday that the central bank said that a new monetary policy for the July – December period of 2008 is scheduled to be announced on July 15. He also mentioned that the new policy would provide incentives to sectors having better growth and few emerging sectors such as ship-buiding. http://www.thedailystar.net

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Weekly News Update

AT Capital Research Sector News 

The assets and liabilities of the now dissolved Bangladesh Telegraph and Telephone Board (BTTB) were officially transferred to the newly formed Bangladesh Telecom Company Limited (BTCL) last week. BTCL is planning to enter the capital market by offloading its shares in phases.



A South Korean bag manufacturing company will invest BDT3.15bn (USD 46mn) to produce carrying cases, bags and packs. Pungkook Chittagong (Pvt) Co. Limited (PCCL), a subsidiary of Pungkook Corporation, will set up its plant at the Karnaphuli Export Processing Zone (EPZ) in Chittagong.

Asian Tiger Capital Partners



The Chittagong Power Development Board (PDB) will install 350km of new power distribution lines and renovate 153km old electricity lines in Chittagong division this year. The BDT 1.18bn (USD 17.22mn) project will provide new power connections to remote areas in the Chittagong division and reduce the frequency of load shedding in the port city.



Denmark will provide USD 100mn for a new 3-year project to improve water supply in Dhaka city. The project will assist in the design and construction of a new large water

EDITORS

treatment plant at Saidabad with capacity of 225,000 cubic meters of water per day. Ifty Islam Managing Partner +880 171 584 0112



The ministries of energy and law are at loggerheads over the adoption of the national coal policy that would determine the fate of foreign investment proposals worth around

[email protected]

USD 5.0bn. The law ministry has advised against the clearance for the draft national coal Syeed Khan

policy, prepared by the energy ministry.

Partner +880 173 005 8921 [email protected]



After nearly 20 years of experimentation, the government’s donor driven reforms in the state power sector may take shape next year with the creation of three distribution and

Saif Noman

several power generation companies. The new companies will be formed by demerging

Investment Advisor

the Power Development Board (PDB).

+880 173 005 8924 [email protected]



A Japanese engineering company has shown keen interest in investing BDT 200bn BDT

Asian Tiger Capital

1.18bn (USD 3bn) to construct a marine drive and a riverside road in Chittagong. Nippon

Partners

Engineering Consultants of Japan will conduct the overall survey of the project.

UTC Building, Level 16 8 Panthapath, Dhaka-1215



Bangladesh

wireless access services as the Bangladesh Telecommunication Regulatory Commission

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EDITOR

Internet Service Providers (ISPs) are queuing up to win licenses for providing broadband (BTRC) initiated the process for awarding licenses last week.



Bangladesh Medical Services and Technology (BMST) in collaboration with the UK based Dominion Financials Limited will establish a 500-bed hospital at a cost of USD

Saif Noman Saif NomanAdvisor Investment Investment Advisor +880 173 005 8924

38mn in Dhaka to provide advanced tertiary care at international standards. *

USD 1 = BDT 68.50

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15

AT Capital Research Telecommunications Telecommunications

BTCL spins off from BTTB The Daily Independent, Wednesday 02 July, 2008

The assets and liabilities of the now dissolved Bangladesh Telegraph and Telephone Board (BTTB) were officially transferred to the newly-formed Bangladesh Telecom Company Limited (BTCL). BTCL and Bangladesh Submarine Cable Company were both incorporated as public limited companies, on Tuesday 1 July, in preparation for future listing. BTCL announced that it would offload shares in the market in phases. The government now holds 100 percent of the company. BTCL’s net assets are valued at BDT 15bn (USD 0.22bn), said the Telecoms Secretary. http://www.independent-bangladesh.com/200807027055/country/btcl-spins-off-from-bttb.html

Textiles

ROK firm to invest BDT 3.15bn (USD 46mn) The Daily Star, Friday June 27, 2008

A South Korean bag manufacturing company will invest USD 46mn to produce carrying cases, bags and packs. Pungkook Chittagong (Pvt) Co. Limited (PCCL), a subsidiary of Pungkook Corporation, will set up its plant at the Karnaphuli Export Processing Zone (EPZ) in Chittagong. An agreement was signed yesterday between Bangladesh Export Processing Authority (BEPZA) and PCCL. http://thedailystar.net/story.php?nid=43024

Foreign RMG buyers urged to follow ethical practices The Daily Star, Sunday June 29, 2008

Local ready-made garment (RMG) exporters yesterday urged foreign buyers to follow ethical buying practices. The RMG manufacturers and exporters made the plea to the buyers at a two-day Multi-Stakeholders Forum-Bangladesh (MFB). At a press conference after the first day's session, the President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Fazlul Hoque, who is also the chair of the MFB, said the continuing cuts in selling prices is hitting profitability of entrepreneurs. “We want increased prices from the buyers' end, not only for our profit, but also for the workers. If we can make profit the wages of the workers will also increase to an extent,” Hoque said. Despite the increase in production costs of around 15 percent in the last year intense competition in the sector meant producers had been unable to pass the higher costs on to buyers, Hoque said. Mentioning the export data of Export Promotion Bureau (EPB) Hoque said in fact unit garment prices have fallen by 1.5 percent in the past 12 months. http://www.thedailystar.net/story.php?nid=43306

RMG production costs to go up 15pc on fuel price hike The Daily Star, Thursday July 3, 2008

The country's garment manufacturers yesterday expressed concern that the production costs of their exportable apparel items will go up by at least 15 percent due to the latest fuel price adjustment. The garment manufacturing units are largely dependent on petroleum products due to erratic gas and power supplies to their units, said the leaders of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) at a hurriedly called press conference to react to the government's decision to increase fuel prices. The government has increased domestic fuel prices by 33 to 37 percent with effect from July 1 to adjust prices with those in the international market. The new price of diesel and kerosene is BDT 55 (USD 0.8) a litre, petrol is now BDT 87 (USD 1.2) a litre, the price of octane is BDT 90 (USD 1.31) a litre and a cylinder of liquid petroleum gas (LPG) is now BDT 1,000 (USD 14.60). The BGMEA acting chief said that the apparel factory owners will have to incur on average an additional cost of BDT 0.5 bn (USD7.3mn) a month due to this price hike,. The factory owners also complained they are not getting gas and power in Savar, Mirpur, Ashulia, Gazipur and Narayanganj

16

AT Capital Research areas to run their plants properly. http://www.thedailystar.net/story.php?nid=43928

Infrastructure & Power

Project to ease ease power crisis in Chit Chitt hittagong The Daily Star, Thursday July 3, 2008

Chittagong Power Development Board (PDB) will install 350 km of power distribution lines and renovate 153 km old electricity lines in the Chittagong division this year. Once the BDT 1.18bn (USD 17.22mn) project is implemented, remote areas in the Chittagong division will get new power connections and the frequency of load shedding in the port city will decline. The Greater Chittagong Power Distribution Project (third phase), at a cost of BDT 8.7bn (USD 127mn) has almost been completed. Under the project, three new 132/33 KV substations at Julda and Shahmirpur on the south bank of the river at Karnaphuli and Bakalia were installed and two 33/11 KV substations at Rampur and Muradpur in the Dhaka were installed. http://www.thedailystar.net/story.php?nid=43865

5 rental plants fail to add power The Daily Star, Wednesday July 2, 2008

Five rental power contracts awarded to different power companies by Power Cell, of the Power Ministry, in January 2008, have failed to add power to the national grid 46 days after they were due to. Of the five, four are operated by Energy Prima, a shell company of the Hosaf Group. As per the contract, PDB would penalize each of the defaulting power companies with a USD 500 fine against each MW of power the contractors failed to produce. http://www.thedailystar.net/story.php?nid=43782

42 perc ercent raise in power tariff proposed The Daily Star, Wednesday July 2, 2008

The Chief Adviser's Special Assistant for Power and Energy, Dr M Tamim said on 1July, there is a proposal pending with Bangladesh Energy Regulatory Commission (BERC) on a 42 percent raise in electricity tariffs. After a public hearing, BERC will take the decision about increasing the electricity tariffs. http://www.thedailystar.net/story.php?nid=43798

Octane Octane now BDT 90 (USD 1.31), 1.31), diesel BDT 55 (USD 0.8) 0.8) The Daily Star, Tuesday July 1, 2008

The caretaker government increased prices of petroleum products for the second time during its tenure15 months after the last increase. In the latetest hike the prices were increased by 33 to 37 percent compared to the previous price hikes of 13 to 21 percent in April, 2007. The price of diesel and kerosene increased 38% to BDT 55 (USD 0.8)/litre, octane rose by 34% to BDT 90 (USD 1.31)/litre, petrol by 34% to BDT 87 (USD 1.27), furnace oil by 50% to BDT 50 (USD 0.73)/litre; and a cylinder of liquid pertroleum gas (LPG) 67% to BDT 1,000 (USD 14.60). The price of a barrel of crude oil has risen dramatically to a current high of USD 143 from USD 60, 12 months ago.. Professor M Tamim, special assistant to the chief adviser of Energy Ministry Affairs said, "We would have to spend BDT 17bn in subsidies if we did not adjust the petroleum prices for the new fiscal. The government will still have to spend BDT10bn in oil subsidies despite the latest price hike in the prices of petroleum products.” http://www.thedailystar.net/story.php?nid=43652

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AT Capital Research Rahimafrooz launches 24 hour our CNG stations The Financial Express, Tuesday July 1, 2008

Rahimafrooz Group, an automotive and industrial battery manufacturing company, has launched uninterrupted refill services for CNG run vehicles. The company is offering 24hour service and electronic billing in stations under its 'Quick fill' logo. Four refueling stations - at Tongi, Tejgaon, Biswaroad and Manikganj - have initially been opened under the Quick fill logo. The group will set up 11 more stations across the country within one year. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38242

Kumargaon 50 MW rental plant starts supplying electricity The Financial Express, Monday June 30, 2008

The Energy Prima consortium has started supplying electricity from its Kumargaon 50 MW rental power plant from 29th June, five months after signing a power purchase agreement (PPA) with the Bangladesh Power Development Board (BPDB). The plant has started supplying 15 to 20MW of electricity. The Energy Prima consortium, consisting of local Energy Prima and Hosaf Meter, claimed that the sixty days delay in installing the plant was caused by delay in handover of the land by the BPDB. The plant site earmarked by the BPDB, had four warehouses and 5,000 tonnes of scrap, which had to be removed before initiating work. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38201

Law ministry says 'no' to draft coal policy The Financial Express, Sunday June 29, 2008

The ministries of energy and law are at loggerheads over adoption of the national coal policy that would determine the fate of foreign investment proposals worth around USD 5.0 billion. The law ministry has advised against the clearance for the draft national coal policy, prepared by the energy ministry. "The law ministry has advised the energy ministry not to adopt any policy but to draft an act to help the process of coal extraction," energy secretary Mohammad Mohsin said. The energy ministry spent several years preparing the national coal policy and kept investment proposals worth several billion of dollars on hold. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38009

Oil hits record highs The Daily Star, Sunday June 29, 2008

Oil prices hit record highs reaching USD 142 this week as a high-level energy summit between consumers and producers in Jeddah, Saudi Arabia, failed to dampen the redhot market. Prices moved higher as traders concentrated on fresh violence in Nigeria, the weak dollar, tight energy supplies and extremely volatile world financial markets. http://www.thedailystar.net/story.php?nid=43308

More power companie companies mpanies in the pipeline The Daily Star, Saturday June 28, 2008

After nearly 20 years of experimentation, the government’s vaguely perceived donordriven reforms in the power sector might take final shape next year with the creation of three distribution and several power generation companies. The new companies will be formed by demerging the Power Development Board (PDB). The three distribution companies to be formed are the South Zone Power Distribution Company, Central Zone Power Distribution Company, and Northwest Zone Power Company, while the power generation companies will be based in each of PDB's power plant zones. http://www.thedailystar.net/story.php?nid=43192

18

AT Capital Research Japanese co to build BDT 200bn 200bn (USD 3bn) marine drive, river side road in Ctg The Financial Express, June 27, 2008

A Japanese engineering company has shown keen interest in investing BDT 200bn (USD 3bn) to construct a marine drive and a riverside road in Chittagong. The company will construct a 12.5-kilometre long marine drive road comprising four lanes from Fouzdarhat to Patenga area and a 12-kilometre long river sideroad from Shah Amanat bridge to Kalurghat bridge. Nippon Engineering Consultants of Japan will conduct the overall survey of the project to be financed by the Japan Bank of International Co-operation (JBIC). The survey work is expected to commence in January 2009, with the report submission scheduled for November 2009, after which it is anticipated that agreements for the project can be signed by the end of 2009. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=37886

Denmark to provide USD 100mn 100mn for water supply project in city Financial Express, July 01, 2008

Denmark will provide USD 100mn for a new 3-year project taken to ensure improved water supply in Dhaka city, reported UNB. The project is providing help in designing and constructing a new large water treatment plant at Saidabad with a capacity of 225,000 cubic metres of water a day, said a press release. The project Saidabad Water Treatment Plant Project, Phase II (2008-2011), will be implemented by the Dhaka Water Supply and Sewerage Authority (DWASA). Interestfree loans with be provided and grants will are available for monitoring the process and supervision during implementation of the project. The project is to be financed by mixed credits from Denmark and is part of a partnership agreement between the government of Bangladesh and five main development partners, which provide assistance to urban water supply and sanitation projects in Bangladesh. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38282

USD 5mn 5mn Danish help for rural water schemes The Daily Star, July 03, 2008

Denmark will provide USD 4.8 million for a new two-and-half-year project for the improvement of rural water supply in the three northwestern districts; Rajshahi, Chapainawabganj and Naogaon. The project will assist in designing and constructing 200 piped rural water supply schemes for around 400,000 people in the region. The Denmark embassy and the government of Bangladesh have agreed to extend assistance to the Barind Multi-purpose Development Authority (BMDA) to launch the project. The overall objective of the support to the BMDA is to contribute to the provision of safe rural water supply combined with environmental sanitation and hygiene in the three districts. The project will be financed through the HYSAWA Fund, which is an autonomous company established by the government under the Companies Act 1994. The fund has been established to provide financial support to decentralized rural water supply and sanitation projects in direct cooperation with the union parishads (UPs) and local partner organisations. http://www.thedailystar.net/story.php?nid=44001

19

AT Capital Research Technology

HP joins hand with CSL Bangladesh The Daily Star, June 27, 2008

Hewlett Packard (HP) has appointed Computer Source Limited (CSL), the largest technology distributor in Bangladesh, as its authorised distributor in the country for HP Server & Storage products. CSL with its extensive network of resellers in Dhaka, Chittagong, Kushtia and Rajshahi will extend HP's geographical reach across the country. http://thedailystar.net/story.php?nid=42998

ISPs queuing up to bag broadband licenses Financial Express, June 30, 2008

Internet Service Providers (ISPs) are queuing up to win licenses for providing broadband wireless access services as the Bangladesh Telecommunication Regulatory Commission (BTRC) initiated the process for awarding these last week, officials said. The BTRC has already prepared the draft regulatory and licensing guidelines and sought comments from stakeholders. Under the BTRC guidelines the ISPs are allowed to compete for these licenses while the mobile phone operators are barred from taking part in the competition. Existing ISPs will be allowed to provide wireless internet services for next five years from the day of awarding broadband wireless access service licenses. ISPs, however, will be allowed to provide wired broadband internet services beyond the five-year's timeframe, the BTRC official said. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38199

Pharmaceuticals

4 pharma firms' doubledouble-digit sales growth The Daily Star, Sunday June 29, 2008

Four pharmaceutical companies out of the top ten Bangladeshi companies achieved double-digit growth in sales during the January-March period of this year, said global pharmaceutical market intelligence agency IMS, the global provider of pharmaceutical market intelligence, in its first quarter report. The report, published recently, said the fifth largest pharmaceutical company in the country Eskayef posted the best 21.1% growth followed by Renata 16.2%, ACI 16.2% and Drug International 13.8%. Other key players Incepta Pharma achieved 6.8% growth while Square Pharma only 2.3%.Two other top ten companies' , Beximco experienced a 42.0% fall , while Acme faced a 4.9% fall during the period. According to the IMS report, Square continued as the top player of the market with 18.8% share and BDT 1.81bn (USD 26.4mn) sales in the first quarter. http://thedailystar.net/story.php?nid=43304

Reckitt Benckiser declares 220pc dividend The Daily Star, Sunday June 29, 2008

Reckitt Benckiser (Bangladesh) Ltd has declared a 220 percent dividend for its shareholders. The dividend was announced at the 47th annual general meeting (AGM) of the company on Thursday in Dhaka, The company had turnover of BDT 1.53bn (USD 22.34mn) in 2007 representing growth of 28 percent over the previous year. http://thedailystar.net/story.php?nid=43309

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AT Capital Research Healthcare Healthcare

500500-bed hospital to be set up in city at USD38m USD38m The Financial Express, 30 June 2008

Bangladesh Medical Services and Technology (BMST) in collaboration with UK based Dominion Financials Limited will establish a 500-bed hospital at a cost of USD 38mn in Dhaka, to provide advanced tertiary care at international standards at reasonable costs. Officials said that the investment with the financial support of the UK based global moneylender is the single largest of its kind in the country's health sector that aims to serve patients who would normally go abroad for treatment. The Government's Board of Investment (BoI) has already allowed BMST to tie up with the UK based money lender for establishing the hospital. The local company will borrow USD 23mn from Dominion Financials Ltd to establish the hospital. Officials of BMST said it plans to establish the hospital by 2009. The proposed hospital will be the third largest of its kind after the United and Apollo hospitals. The hospital is expected to provide a complete range of the latest diagnostic, medical and surgical facilities for the care of its patients. http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38202

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AT Capital Research

AT Capital Team – Dhaka Ifty Islam Syeed Khan Masud Khan Akther Ahmed

Managing Partner Partner Senior Advisor Senior Advisor

(880)-1730058920 (880)-1730058921 (880)-1920804522

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Mir Firoz Ahmad, Ph.D. Junaid Khan Shahidul Islam, CFA Taufique Hasan Saif Noman Khan Mohammad Emran Hasan Syeda Tasnuva Akhter Ahmad Sajid Abdullah Ibneyy Shahid S Adeeb Shams A. M. A. Bari Nahid SM Rashedul Hasan

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Abdullah-Al-Farooq Masum Abdullah Rahman Tami Zakaria Sanwar Ahmed Md. Zahidur Rahman

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© Copyright 2008. Asian Tigers Capital Partners Limited, Level 16, UTC Tower, Panthapath, Dhaka – 1215, Dhaka, Bangladesh. All rights reserved. When quoting please cite “AT Capital Research”. The above information does not constitute the provision of investment, legal or tax advice. Any views 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.

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