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THE KASB REVIEW
STOCK MARKET AT A GLANCE

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

The KSE Overview: Market fumbling to find a bottom

Updated on Nov 13, 2000

The snap rally late in the previous week quickly matured on the first trading day of last week. As noted in our weekly, the trigger for the rally was targeted buying in few index heavy weights which forced short sellers to rush into covering their positions, thus pushing up the market.

Having achieved their aim, the targeted buyers used the faux rally to take profit and the market quickly lost momentum. With this turn of events coincided news reports that Hubco resolution was not a conditionality of IMF funding decision and there were conflicting reports whether the Letter of Intent with the IMF had been signed or not. The technical and sentiment factors were enough to reverse earlier gains and the market lost direction mid week from where it returned to its downward trajectory.

Once the 1500 support was broken, a sharp pull back ensued pushing down the KSE 100 Index to close at 1462.33, down 3.77% for the week. We continue to maintain downside risk up to 1450. Any consolidation near this level would be an opportunity to accumulate value stocks.

Trading for the week started on a strong note and the Index posted straight gains of 18 points but peaked at intra day highs of 1537.47 levels, which proved to be top for the week on a volume of 134.54 million shares. Failure to break through the vital technical barrier of 1540 and exhaustion of the rally negated the momentum as on advance reaction, the immediate support of 1500 was breached. The decline of the Index was complemented with decay in volume. ADV was recorded at 108.31 million shares against 93.90 million shares last week.

Institutions were once again active in the market. They did not wait for the snap rally to extend but took advantage of the additional strength as it approached technical barrier of 1540 to reduce exposure. Jobbers accentuated the profit taking by hammering through the support of 1500. Retailers moved along with the swings in the market. Activity of foreign investors remained on the sell side, which extended the market's negative tone.

The Blue Chips were totally technical driven and demonstrated volatility. Once again this week the price behavior of PSO provided lead to the direction of the market. The stock surged up to 170.70 on the first day itself and with it the Index and other heavy weight components of the Index peaked. The sell off on the scrip was extensive and it traded to lows of 158. Hub Power and PTCL, despite initial strengths, failed to reach and sustain over the technical levels of 19 and 25.50, respectively. Ibrahim Fibre once again failed at 19.75 and in the process formed triple top. Draft policy on the fertilizer sector did provide momentary strength but negative outlook on the sector prevailed and strong liquidation in Engro and Fauji around 62 and 41 levels reduced their gains. Price behavior of MCB was violent with an opening of 34. For the week it traded to highs of 36.10 and eventually tumbled to test the low of 32.40 before closing for the week at 32.95 levels.

We still continue to maintain the risk at 1450 levels and would recommend accumulation in values. The near term trading range is expected to be in the band of 1450-1500.

Oil Marketing Sector: Depressed Demand Dents Benefits Of Deregulation - PSO Particularly Vulnerable

When furnace oil was deregulated in early 2H00, there were great expectations that the oil marketing companies would enter into a period of strong earnings growth.

Unfortunately, the timing of deregulation was such that these hopes have been considerable dampened. Energy consumption and GDP growth are naturally closely linked and more importantly it is industrial growth, which is the bedrock of demand push for energy consumption. With industrial growth having come out at below 2% in the last fiscal year, the spillover effect into fuel consumption was bound to manifest itself- and so it has.

Couple with the above almost 100% rise in international crude oil prices YoY has led to the decline in volume for key categories of POL products. Clear indication came through in mid October, when PSO delayed the import by two shipments of furnace oil, each being 55,000 tonnes. At the times the company cited "lower than normal sales of furnace oil" as the reason for its decision.

There are three fundamental planks that drive corporate profitability:

1 . Ability to grow sales a direct result of demand growth, capacity & market share.

2. Ability to have pricing power & thus manage margins a function of the regulatory structure and brand management skills.

3. To do the above efficiently i.e. comparative productivity and organizational effectiveness.

The oil marketing companies (OMC's) have been hit for a six as far as the first plank is concerned and we do not foresee a change in poor demand conditions at least in FY01. This also affects the second plank that of margin management. However partial deregulation (in F.O. and Lubes) has allowed the OMC's to dent the shock of declining volumes. At the same time, we believe that the benefits have been spread unevenly amongst the industry players.

F.O. deregulation has clearly been a boon to PSO at it is by far the largest player in this business segment and has astutely managed its purchasing & pricing to obtain benefits of inventory gains and enhanced may in management opportunities.

On the other hand, Shell is the clear winner in most other major segments primarily due to its outstanding superiority in planks two and three. As a result, over the last twelve months, PSO's market share has continually been eaten away in several product segments but most dramatically in the high margin lubricants business.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

7.01

6.84

-2.43

KSE 100 Index

1519.59

1462.33

-3.77

Total Turnover (mn shares)

469.52

433.24

-7.73

Value Traded (US$ mn.)

457.46

474.97

3.83

No. of Trading Sessions

5

4

 

Avg. Dly T/O (mn. shares)

93.90

108.31

15.34

Avg. Dly T/O (US$ mn)

91.49

118.74

29.78

MSCI Pakistan Index:

     

Pak Rs.

105.30

103.43

-1.77

US $

47.59

47.54

-0.11

.Source: KSE, MSCI, KASB



ASIA PACIFIC & AUSTRALIA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Bombay

BSE

3941.13

-81.37

-2.02%

Hong Kong

Hang Seng

15389.39

-115.41

-0.74%

Singapore

Straits Times

1986.2

-17.59

-0.88%

Sydney

S&P ASX 200

3300.9

-32.60

-0.98%

Tokyo

Nikkei

14988.54

-71.51

-0.47%

.



EUROPE & UNITED STATE OF AMERICA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Frankfurt

DAX

6851.69

-107.81

-1.55%

London

FTSE

6400.2

-42.00

-0.65%

Paris

CAC

6147.49

-123.66

-1.97%

Dow Jones

Industrial

10602.95

-231.30

 

NASDAQ

Composite

3028.99

-171.36