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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 25, 2000

The Pakistan market closed its final full-week of the year with a bang. The KSE-100 Index was up almost 121 points or 8.5%, closing at 1537.58 for the week and building on a already solid gain of 5.8% in the pervious week. In December alone, the index is up 20%. For the year as a whole so far, the Pakistan market has risen 9%.

Thus, for CY2000, Pakistan will have the distinction of being the only market in entire Asia to have provided a positive return in local currency terms. This honor is not without a few blemishes however. This market has also experienced the highest volatility amongst regional markets.

Starting the year at 1409 on Dec 31, 1999, the market rose steadily in anticipation of more consistent policies by the new economic managers, strong GDP growth forecasts driven by robust agricultural growth and strong earnings expectations from key sectors, including textile, banking, telecom and energy. Soon however, speculative fever built up driving the market to 4-year highs of 2000 levels by April. As with all speculation, the bubble had to burst and it did, driving down the KSE-I00 Index to 1600 levels. From there on the market continued to lose momentum and essentially vegetated the entire summer in a tight trading range of 1400 - 1500. In September, fears of delay in IMF's approval of Standby Credit and false starts in WAPDA-Hubco issue led to a second wave of selling, with foreign also joining in later. This drove the market down to its year low of 1276 on November 30.

While technicals were pointing towards continued weakness, we felt that bottoming out had occurred and began recommending gradual accumulation from low 1300 levels. The market has risen about 16% since our "Buy" call.

Several factors have come together to put the fire back in to the market, including the Hubco resolution and increased probability of an earlier than originally expected return to a civilian government. With the IMF standby facility in place, Pakistan is likely to receive over US$ 1.0 billion during CY2000 in fresh external funding from the World Bank, The Asian Development Bank, The Islamic Development Bank, and commercial banks. These flows should help keep foreign exchange reserves and the rupee fairly stable in the short to intermediate terms. If Pakistan succeeds in containing the federal budget deficit at the agreed limit of 5.2%, the possibilities of achieving a debt rescheduling with the Paris Club will become distinctly better. Additionally, there is likelihood that Pakistan might sign the CTBT in FYO1-02. This would open up the Japanese funding door, which has been shut since the Nuclear Tests of 1998 and has ranged from US$600-800 millions p.a. in the past. With signs that the Kashmir issue might start moving towards some resolution, the tension with neighboring India should also begin reducing. All these events are likely to act as triggers for continental stock market re-rating in CY2001 as the country risk perception for Pakistan improves.

Risk Factors

While the above presents a fairly rosy picture for the market in FY01, there are several key risk factors investors need to keep in mind. First is the Afghanistan standoff between the US and Russia on one side, and the Talibaan on the other side. This has put Pakistan between a rock and a hard place. Very deft and delicate foreign policy balancing act will be required by Pakistan to keep the situation from spiraling out of control.

Another risk factor is related to economic policy and reform implementation. If the direction of major economic policy initiatives under taken over the last 8-12 months is changed for any reason, the implementation of the economic restructuring could be dented, jeopardizing the expected time frame for achieving economic stability.

Market Outlook

We were hoping the market would take a breather after its strong recent bull run and consolidate at 1450-1500 levels before moving on, thus allowing investors to reliquify their portfolios. In the event, the market has simply rushed pass its resistance levels and is testing new short-term highs. Such a strong close of 2000 should position the market for continued good performance going into I Q 2001.

At the same time, we would caution investors that a correction is becoming over due. Fresh money buys in the new year should, in our view, stagger stock purchases rather that taking big positions at one go. This will help investors keep liquidity available for bargain hunting during technical corrections. With the market currently trading at 7X FY01 PER and forecast earnings growth of 33% plus, our current fair value of the KSE - 100 Index is 1750 over a twelve-month horizon. However, due to the volatile characteristic of this market there will be ample opportunities for trading and investors should focus on active portfolio management strategies rather than simply use a buy and hold strategy.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

6.09

6.31

3.61%

KSE 100 Index

1338.71

1416.61

5.82%

Total Turnover (mn shares)

703.10

845.43

20.24%

Value Traded (US$ mn.)

257.05

390.89

52.07%

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. shares)

140.62

169.09

20.24%

Avg. Dly T/O (US$ mn.)

51.41

78.18

52.07%

MSCI Pakistan Index

     

Pak Rs.

88.49

92.71

4.77%

US $

39.46

40.97

3.81%

.Source: KSE, MSCI, KASB



ASIA PACIFIC & AUSTRALIA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Bombay

BSE

3905.9

-128.33

-3.18%

Hong Kong

Hang Seng

14738.21

+78.89

0.54%

Singapore

Straits Times

1902.86

+4.02

0.21 %

Sydney

S&P ASX 200

3196

+10.20

0.32%

Tokyo

Nikkei

13427.08

+3.87

0.03%

.



EUROPE & UNITED STATE OF AMERICA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Frankfurt

DAX

6251.4

+50.69

0.82%

London

FTSE

6097.5

-18.00

-0.29%

Paris

CAC

5783.73

+24.81

0.43%

Dow Jones

Industrial

10635.56

148.27

 

NASDAQ

Composite

2517.02

176.90