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STOCK WATCH

  1. Stock market at a glance
  2. Finex week
  3. Stock Watch

By SHABBIR H. KAZMI
May 29 - June 04, 2000

This week witnessed massive selling pressure plunging the KSE-100 index. The downward movement is expected to continue in the near future as exposure limit for members will be followed more stringently. Tax survey or imposition of GST, as indicated by certain quarters, have no impact or relationship with the current selling spell. The KSE-100 index may hover around 1500 points for some time. However, one may see more of 'Amanullah Adam syndrome'. Though, the member was able to retain 'all his assets' more casualties cannot be ignored. The current selling pressure has been ostensibly triggered by 'short sellers' who are active once again. Short sellers mainly thrive taking the advantage of the mentality of local retail investors, buy when prices are going up and sell when prices plunge. At such times even the attitude of local institutional investors is deplorable because exactly the reversed is expected from them. There is a note of caution for small investors. The current selling pressure is the result of split of syndicate of speculators. Each of the newly formed group is trying to get the market driving control by eliminating others. Investors should not get panicky as the economic fundamentals for the active scrips have not changed.

HUBCO

All eyes were on May 20, high level meeting in Dubai which chairman WAPDA could not attend. HUBCO had submitted yet another proposal and now WAPDA has to come with a counter offer. A positive point is that WAPDA has to submit the proposal within a specified time limit. However, one should also keep in mind Chairman WAPDA's stance "We want reduction in bulk power purchase tariff as we do not intend to increase electricity tariff for consumers". Lately there has been significant reduction in trading volume of HUBCO at Karachi Stock Exchange — after its listing at Lahore Stock Exchange. The scrip is expected to move within a broad range of Rs 14 to Rs 20 per share in the following weeks. This offers an opportunity to small investors to take the advantage of price movement to recover their previous losses.

IBRAHIM FIBRES

Analysts have revised full year earnings forecast for the Company after the release of half yearly results. Therefore, there was some buying witnessed as the scrip is still selling at a discount to its fair market price. Profit after tax for the six months period was up 370 per cent to Rs 402 million. While the sales increased by 25 per cent the cost of sales increased by only 6.6 per cent — improving the gross margin. Lower financial charges have also improved the bottom line. The Company is operating at almost full capacity and revenues will be driven by higher PSF prices — registering nearly 20 per cent increase since July 1999. The full year earnings are expected to grow by over 30 per cent to Rs 750 million. This may translate in an EPS of Rs 3.7 as compared to that of Rs 2.78 for the previous years.

ICI PAKISTAN

Before examining the outlook for ICI Pakistan, it is important to review operations of its PTA plant and earnings of the division — the main source of losses for the Company. PTA demand is expected to grow around 7 per cent globally and may be at a higher rate in Pakistan. While the domestic consumption of PTA has been increasing, export prospects have also improved with higher than expected shipment of the commodity in the recent past. However, a point to watch will be global price movement of crude oil as signs of further reduction may not be there. In the PSF sector only Ibrahim Fibres does not buy PTA from ICI Pakistan and efforts are being made to bring it to the customers list. On the policy side one has to watch and see how the Company may respond to a possible buy out of its PTA plant. If the PTA operations are sold to some other group it would be good for the remaining divisions of the Company. The Company has already strengthen its Soda Ash business.

SSGC and SNGPL

The CE has unveiled the expansion plan for gas transmission and distribution network in the country. This programme, likely to be completed in next three years, is expected to start by December this year. Given the focus of the GoP on oil and gas sector as the driving force for the revival of the economy, the Sui twins are expected to improve their sales. Sui Southern and Sui Northern have been the victim of market sentiments which has caused massive reduction in the prices of their shares. Fundamentals for both the companies remain strong and the privatization of their non-core business, LPG, may write the preamble for the sale of other state-owned listed companies. Reportedly 10 companies have qualified for the bidding process of the LPG business of SSGC, SNGPL and Pakistan State Oil Company.

Scrip

High

Low

Turnover (Share Mn)

Closing Price

Ibrahim Fibre

17.50

15.35

34.82

15.35

ICI Pakistan

16.65

13.95

138.00

13.95

Hub Power Company

19.65

16.50

168.60

16.50

Sui Southern Gas

17.75

14.40

2.19

14.40

Sui Northern Gas

14.50

11.40

32.23

11.40