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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 bt Khadim Ali Shah Bukhari & Co.

Updated on Dec 11, 2000

In the previous weekly, we had indicated that the ground was ripening for a bear market rally. In the event, market did rebound from its lower and closed on Friday at 1320 up 3.4% over the week.

An interesting aspect of market behaviour was how volumes fluctuated and how the market jumped in the late trading hours, both on Thursday and Saturday. Daily volume on Monday was 127 million shares when the index jumped 20 points. Volume remained stable to firm for rest of the week rising to 156mn shares on Wednesday and slipping to 149mn shares on Thursday. During this period the index remained stuck between 1302-1305 levels. Then, just in the last hour before closing on Saturday, the index jumped up. However volume was the lowest for the week at 101 mn shares.

Throughout the week, the market opened weak, dipped into negative territory and just before closing time managed to recover and close on a positive note for the day. By itself, this behaviour may not be surprising, simply indicating the tussle between bulls and bears to provide near term direction to the market. However, when one factors in the fact that the badla rates in the PTCL and Hubco have effectively risen to more than 20%, the scenario changes some what. It reinforces our view that what one is witnessing is a bear market rally. Significant foreign selling has occurred over the past few weeks, particularly in PTCL, ICI and MCB and that has been picked up by weak holders. That's why badla rates have jumped up. We believe that efforts will be made by market bulls to push the index above the 1350 mark and entice back local investors to the "ring". The market, after crossing 1350 may over shoot on the upside temporarily, but is likely to slip back to below 1300 levels. We feel that once the market starts consolidating below 1300, around the 1250 levels for a few weeks, then the stock over hang can disappear and fresh liquidity come in.

At the same time, let us not forget that the new Pakistan Investment Bonds are being launched in the coming week. Banks which are primary dealers, have already begun active preplacement marketing. We feel that demand from domestic institutions is likely to be good for these bonds. The near term implication for local stock market is that institutional liquidity is likely to be limited. With foreign investors unlikely to return in a significant way before the New Year, the market appears to have an upside cap for the moment.

Further, with t+3 trading mechanism expected, badla volumes are likely to reduce substantially. While the new settlement system is good in the longer term for the market, in our opinion, in the immediate term volume are likely to be relatively lower than in the past.

Investment Perspective

We continue to recommend "gradual " accumulation for value investors with an investment horizon of 3 months plus. As highlighted in our economic review section, we are beginning to discover early signs of improvement in the core trade account balance. Newspaper reports indicate that textile sector may be using up to 500,000 more bales of cotton this year compared to FY 99-00. With domestic demand still depressed, this indicates strong exports orders. Along with the IMF funding, we are also expecting some fresh foreign exchange via Asian Development Bank, energy and financial sector loans as well as new trade enhancement facility from the Islamic Development Bank. Given the above, the rupee exchange rate is likely to remain relatively stable over the next few months.

We have estimated that if the distorting effects of Hubco's large losses are excluded, the earnings growth for KSE-100 is forecast to be around 20% in FY00 and over 30% in FY01. Gross margin for the KSE-100 is expected to fall to 29% in FY00 due to the large dip in PTCL's earnings, before rising to 31% in FY01. But ROE should improve in FY00 to 17% verses 14% last year and rise further to 19% in FY01.

Based on the above fundamentals, we believe that market weakness should be treated as an opportunity to accumulate.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

5.93

6.09

2.70

KSE 100 Index

1280.08

1338.71

4.58

Total Turnover (mn shares)

546.56

703.11

28.64

Value Traded (US$ mn.)

178.27

257.05

44.19

No. of Trading Sessions

5

5

 

Avg. DlyT/O (mn shares)

109.31

140.62

28.64

Avg. Dly T/O (US$ mn)

35.65

51.41

44.19

MSCI Pakistan Index:

     

Pak Rs

84.56

88.49

4.64

US $

37.69

39.46

4.70

.Source: KSE, MSCI, KASB



ASIA PACIFIC & AUSTRALIA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Bombay

BSE

4156.08

+31.17

0.76%

Hong Kong

Hang Seng

15189.33

+177.81

1.18%

Singapore

Straits Times

1960.16

+1.43

0.07%

Sydney

S&P ASX 200

3287.6

-21.40

-0.65%

Tokyo

Nikkei

14696.51

-23.85

-0.16%

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EUROPE & UNITED STATE OF AMERICA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Frankfurt

DAX

6691.25

+125.17

1.91%

London

FTSE

6288.3

+56.90

0.91 %

Paris

CAC

5939.32

-45.37

-0.76%

Dow Jones

Industrial

10712.91

95.55

 

NASDAQ

Composite

2917.43

164.77