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THE KASB REVIEW
STOCK MARKET AT A GLANCE

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

Updated on Apr 07, 2001

The KSE Overview: Major Support at 1319-1305

The market in our opinion has reached its first major testing point in the past week, as the KSE Index tested the strong support range of 1319-1305, which according to our technical analysis is a very strong support level. Overall the market declined from the opening level of 1324.41 to 1322.81, depicting a decline of 0.12%. We believe that the market is unlikely to breach the technically strong barrier outlined above, unless some very negative news hits the market.

In our view the factors that could lead the market to breach this technical support level would be: •Strong indications that Benazir Bhutto may return to Pakistan since her conviction in the bribery case was overruled, and the accountability court is required to retry the case. But the GoP has been quick to point out that while she is free to return to the country whenever she wishes, there are non-bailable warrants out for her arrests under several other cases. This would make it unlikely that she will risk returning. •Jaswant Singh's visit to the US will lead in the near future to the Bush Administration formulating and making public its policy towards the South Asian region. While the US foreign policy tends to be rather static even between administrations, the Clinton administration had changed the status quo in terms of the South Asia region, and the new administration may wish to readdress the balance. Though the fact that the Jaswant Singh has met both with the US President and Secretary of State on his trip clearly defines the US intention to continue the recent trend of aiming to improve relations with India. On the other hand, the Republican administrations of the past have been more ' lenient' (for want of a better word) towards Pakistan. If the policy towards South Asia remains the same, then this will definitely affect the market negatively.

PTCL continues to decline with a 2.79% fall seen in the last trading week to PkR17.45. The scrip, in our opinion, is clearly in oversold territory feeling the aftermath of the massive foreign sell-off in recent weeks. We feel the scrip is now attractive both from a trading perspective as well as from an investment perspective for genuine investors with an extended investment horizon.

Gains in HubCo, PSO and MCB, of 1.47%, 2.79% and 5.12% respectively, have mitigated some of the impact of the PTCL decline. Meanwhile investors are trying to price in the expected fall in profitability of Nishat Mills and Telecard, making them the largest decliners in our core stock universe in the past trading week. Our top picks remain: PTCL, IFL, MCB, NML and Tripack.

Our resistance levels for the coming trading week are 1350-1355.

Union Bank: Continuing to disappoint

When Union Bank was first formed and in its initial years, it was considered the brightest star in the private commercial banks. The management was proactive, and it had developed one of the finest cadres of middle management employees in the sector. Hence it was the leader in developing new product lines and creating a definitive market niche for itself faced with competition from the Big 5 banks. And then everything went horribly wrong.

Recently the bank under new management has tried to revitalize itself, and has adopted a new strategy "think big," exemplified by hiring Shaukat Tarin who displayed the same attitude while heading Habib Bank and further exemplified by the purchase of Bank of America's operations in Pakistan.

The bank's NPAT declined by 99% to PkRl.3mn against PkR71 .6mn in the previous year, translating into an EPS of PkR0.02/share. The reasons for the decline in profitability are as follows:

- Administration Expenses rose by 75% in FY00. It is not possible to define a specific reason for the increase in expenditures as the increase has been across the board, including a rise of 51% in salaries & allowances, against an increase of 26 employees. Management in its annual report attributes this to the hiring of better qualified professionals to staff the bank, and promises visible returns on this in the coming years. There has also been an increase in other expenses as the bank has visibly deployed from emphasis towards a larger marketing effort.

- Other Charges rose 69% on account of renovation of branches, an extension of the larger marketing effort as the bank tries to realign itself towards a consumer banking emphasis.

On the income side, things progressed quite satisfactorily as net interest income increased by 25% on the back of an 77.5% rise in the bank's loan portfolio to PkR13.346bn. There has also been an appreciable increase in the bank's investment income and its income on foreign exchange dealing of 409% and 54% respectively.

We are however concerned about the state of Non-Performing assets which grew by 49% to PkR2.265bn, while the bank's provisioning against these NPLs declined by 41%, at the same time as an 77.5% increase in its loan book.

Union Bank is currently trading at an FY01E PER of 4.9x and a P/B of 0.4x, which in our opinion is overvalued compared to the rest of the banking sector. We continue to prefer MCB, Faysal and ACBL in the banking sector.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

5.43

5.40

-0.55

Total Turnover (mn shares)

523.82

252.00

-51.89

Value Traded (US$ mn.)

350.33

147.23

-57.97

No. of Trading Sessions

5

3

 

Avg. Dly T/O (mn. shares)

104.76

84.00

-19.82

Avg. DlyT/O (US$ mn)

70.07

49.08

-29.96

KSE 100 Index

1324.41

1322.81

-0.12

KSE All Share Index

840.07

-

-

.Source: KSE, MSCI, KASB



ASIA PACIFIC & AUSTRALIA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Bombay

BSE

3576

+10.35

0.29%

Hong Kong

Hang Seng

12386.90

+322.90

2.68%

Singapore

Strait Times

1670.18

-6.70

-0.04%

Sydney

S&P ASX 200

3233.2

12.70

0.39%

Tokyo

Nikkei

13383.76

+2.38

0.02%

.



EUROPE & UNITED STATE OF AMERICA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Frankfurt

DXA

5698.88

-74.46

-1.29%

London

FTSE

5601.5

-20.30

-0.36%

Paris

CAC

5139.71

-18.85

-0.37%

Dow Jones

Industrial

9791.09

-126.96

 

NASDAQ

Composite

1720.36

-64.64