. .



THE KASB REVIEW
STOCK MARKET AT A GLANCE

  1. FINEX WEEK
  2. STOCK WATCH
  3. STOCK MARKET AT A GLANCE

An exclusive weekly Stock Market report by Khadim Ali Shah Bukhari & Co.

Updated on Sep 25, 2000

After a highly volatile trading week, the market switched back to a very modest mode, registering low turnover in its latest session. The KSE 100 Index opened at 1575.07 and closed for the week at 1552 levels down 0.24% WoW.

Trading commenced on a negative note and the Index faltered through the immediate support of 1550 to test intra week lows of 1527.52 on the second day. The concern of a 100bps hike in the discount rate to 12% and the collapse of Pak Rupee that reached lows of 58 and 60, against the US dollar, on the inter bank and the kerb market respectively dampened sentiment considerably. Low volumes of 100 mn shares, however, restricted panic selling. Positive rumours about heavy weight market cap scrips like progress in PTCL's privatization process, optimism about the settlement of the Hubco issue, and the oil price rise in PSO held up the scrips' prices.

A sudden burst of activity materialized on the third day but a high of 175 mn stalled additional gains and the Index needed readjustment. Institutions continue to be beneficiaries of the volatility in the market, trading in the band of 1500-1600. Jobbers and retailers remain restricted.

Further decline in forex reserves by $10 mn to $1.01 bn, would have impacted the market more adversely, but for positive news regarding ADB offering $800 mn to Pakistan for several projects, and that of the IMF review mission agreeing to provide $650 mn standby arrangement facility to Pakistan managed to neutralize sentiment.

Our thrust for the coming week will remain on values and we will recommend taking advantage of the trading band of 1500-1600.

Sector Outlook

Impact of oil price increase

The government announced an increase in fuel prices on Friday. With the Brent crude touching $36/barrel in the London commodity market, speculation was that domestic price revision was imminent.

The price increase was much lower than what we had expected. On a weighted average basis, the increase comes to 13%, assuming last year's volume. While on the international market, Brent crude has been trading this fiscal year at $30/barrel compared to last year's average price of US$ 24 /barrel FY01, an increase of 24%. The impact on our fuel import bill, in our view, will be relatively lower, as the commencement of operations of PARCO refinery will decrease the import of the more expensive refined petroleum products.

A disparity in price increase amongst various POL products was expected as the government had earlier stated that it intended to reduce the price disparity between various POL products, specially between diesel and petrol. Of the major products, by consumption volume, the highest price increase came in HSD (High Speed Diesel), which was increased by 24.4 %, in sharp contrast to Motor Spirit, whose price was increased nominally by 1.69%.

We believe that another reason behind bringing a greater price increase in diesel is that its consumption is approximately 6 times more than that of gasoline, making it price increase a more attractive option. Already, the FY2001 budget tariff from fuel (Development Surcharge) was lowered to Rs 23 bn, compared to last year's actual collection of Rs 37 bn, representing a decrease of 37%.

Our calculation show that, based on the target of Rs 23bn Development Surcharge (DS) collection, the domestic POL prices will have to be increased by approximately 34% for the current fiscal year, figuring that the crude oil price will hover above $30/barrel level. This implies that any further delay in further upward revisions of domestic petroleum price will erode government's revenue from POL. The current price increase, according to our calculations, will only allow the government to collect Rs 17bn from DS in the current fiscal year.

Implications for OMC's

In our opinion, the supply-demand imbalances in oil appear to be the tightest in 30 years. Eight out of 10 OPEC countries are apparently at or near capacity limits, and inventory levels are exceptionally low going into the northern winters. We believe that the high oil prices are not likely to come down in the near future.

The continued strengthening of international oil prices combined with the simultaneous weakening of the rupee is likely to boost the earnings of OMCs. Deregulation of downstream oil sector could not have come at a better time. In the case of FO, which was deregulated this June, the continual upward price revision has made inventory gains a weekly affair. With more sector liberalization in the pipeline, that old argument of OMCs being a dollar hedge stock is gaining relevance. As we find that the market has not yet factored in the potential earnings growth from these revisions, we maintain our overweight stance on OMCs.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

7.41

7.40

-0.13

KSE 100 Index

1555.70

1552.00

-0.24

Total Turnover (mn shares)

664.95

577.66

-13.13

Value Traded (US$ mn.)

439.00

447.46

1.93

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. shares)

132.99

115.53

-13.13

Avg. DlyT/O (US$ mn)

87.80

89.49

1.93

MSCI Pakistan Index:

     

Pak Rs.

107.91

108.49

0.53

US $

50.77

48.29

-4.885

.Source: KSE, MSCI, KASB


.
ASIA PACIFIC & AUSTRALIA
EXCHANGE INDEX lEVEL CHANGE EXCHANGE

Bombay

BSE

4032.37

-224.83

-5.28%

Hong Kong

Hang Seng

14612.88

-551.57

-3.64%

Singapore

Straits Times

1932.99

-55.82

-2.81 %

Sydney

S&P ASX 200

3188.6

-64.20

-1.97%

Tokyo

Nikkei

15818.25

-492.80

-3.02%

.


.
EUROPE & UNITED STATE OF AMERICA
EXCHANGE IINDEX LEVEL CHANGE EXCHANGE

Frankfurt

DAX

6740.25

+57.33

0.86%

London

FTSE

6205.9

+6.70

0.11%

Paris

CAC

6258.58

+3.81

0.06%

Dow Jones

Industrial

10847.37

81.85

 

NASDAQ

Composite

3803.76

-25.11