By SHABBIR H. KAZMI
Updated June 30, 2001

Despite a 13 points gain in KSE-100 index during the week, there are concerns about weakening of the market in the immediate term. This is partly due to financial year ending on June 30, and more importantly, due to liquidity crunch. At the same time further increase in investment portfolio held by institutional investors may not be there during next week. They also fear large scale profit taking by some institutional investors.

Analysts say that some large scale buying is necessary to push the index higher, but the hike in interest rates has shifted the preference away from the equities market. Therefore, daily trading volume is expected to remain low in the following weeks.

Analysts are still busy in studying the impact of Federal Budget 2001-2002 on various sectors. As such it may take 6 to 12 weeks to see the real impact of budget on the key sectors. The impact of budget on most of the volume leaders is either neutral or marginally positive, at the best.

Theoretically, the reduction in corporate tax on commercial banks should have triggered buying of their scrips. However, this interest is still not visible. Many analysts attribute this to the fact that the market float of most of the commercial banks, excluding a few, is very limited.

MARI GAS COMPANY

The GoP has decided to reduce the income tax rate for various exploration companies in order to attract investment in oil and gas exploration sector. The GoP has changed the return on equity for Mari Gas Company from 21.5 per cent to 30 per cent. The Petroleum Ministry has also recommended to the Cabinet Economic Coordination Committee to supply gas from Mari field to fertilizer plants. The government agrees to this plan then the main obstacle in bringing the gas price at par with international gas prices would be removed.

SUI TWINS

The availability of gas is on a constant increase due to discovery of new fields and the GoP is also reducing subsidy on gas. Availability of larger volume and sale at better price is expected to improve cashflow as well as profit margin of Sui Twins. According to a KASB report, the current formula of return on assets for gas distribution companies limits their ability to improve profitability when gas development surcharge becomes negative due to higher international oil prices. The eventual removal of subsidies is likely to improve cashflow of these companies. A change in return on assets is more likely to improve their bottom lines. The change in return formula is expected to attract foreign investment in the sector.

ENGRO CHEMICAL PAKISTAN

With the introduction of NPK type fertilizer, the Company has been able to expand its product mix which now comprise of urea, DAP and NPK. Commencement of monsoon and improved water availability is expected to improve fertilizer offtake. More importantly, it seems more probable that the GoP will agree to the fertilizer sector's demand of feedstock price comparable with gas price in the Middle East. Engro has the potential to add 100,000 tonnes urea production without additional gas supply and another 100,000 tonnes with extra gas supply at the lowest cost. Therefore, the Company will be the largest beneficiary of new fertilizer policy.

ADOS PAKISTAN

The Company was incorporated in March 1986 as a private limited company and was converted into a public limited company in April 1989. The principal activity of the Company is manufacturing, fabricating and refurbishing of equipment and parts used in the oil and gas process industry. The Board of Directors have decided to issue Right Shares. Since the share is being traded much below the par value and probability of subscription is very low, it is expected that the directors who have underwritten the Right Issue, will take up the entire issue. Directors have already provided interest free loan amounting to Rs 26 million and shares will be mostly issued against this loan. This loan has been mainly utilized in paying loans, amounting to Rs 21 million, acquired from Bankers Equity. The Right Issue will help in curtailing financial charges.

UNIVERSAL LEATHER & FOOTWEAR

The Company has approached Karachi Stock Exchange for buy-back of shares and voluntary delisting. As the sponsors are not happy at the price recommended by the stock exchange, they have approached the Securities and Exchange Commission of Pakistan to allow them to buy-back shares at a price which is lower than the price suggested by the exchange.

A large number of companies are now exercising buy-back of shares and voluntary delisting. A number of these companies have been posting profit but their shares are mostly held by sponsors, leading to a dividend payout which is just sufficient to avoid transfer of their name to defaulters list. This trend has to be checked by the stock exchanges to protect the interest of small shareholders who have been a looser over the years.

MOVEMENT AT A GLANCE
SCRIP	HIGH (Rs.)	LOW (Rs.)	CLOSING  PRICE	TURNOVER  (SHARE MN)
PSO	133.75	125.20	132.50	73,294,800
PTCL	18.25	17.80	17.95	38,155,000
Hubco	19.50	19.00	19.15	22,825,000
Fauji Fertilizer	36.40	34.80	35.60	19,864,300
FFC Jordan	6.10	5.60	5.65	11,011,500
Engro	58.10	56.60	57.05	10,364,500
MCB	24.85	24.00	24.35	6,595,00
Nishat Mills	18.05	17.25	17.30	2,331,000