By SHABBIR H. KAZMI
Updated July 21, 2001

During the week large scale selling in textile scrips was a major reason for erratic movement of KSE-100 index. However, analysts cannot find a plausible reason for the erosion in value. The basic raw materials, raw cotton and PSF, are still available at attractive prices. The perception of deteriorating fundamentals is not based on realities. The inconclusive talks with the European Union and the slow down of the US economy are not the real threats. The point of concern is that unit price realization has gone down significantly, indicating that local manufacturers have not been able to improve quality of the products being exported. Analysts say that unless Pakistani exporters improve quality standards, they will not be able to improve unit price realization.

The GoP has taken a major policy decision to reduce income tax on commercial banks from 58 per cent to 50 per cent while announcing the budget for 2001-2002. The new rate will become applicable for the assessment year 2002-2003 (ending June 30, 2003), which lags the calendar year-end. Since domestic banks follow December-end, FY2001 earnings would benefit from the new lower tax rate only in their second half reporting period. As the GoP's own finances begin to improve, as a result of the economic restructuring, analysts expect further cuts over the next two years, as the standard corporate tax rate in Pakistan is 35 per cent for the public and 45 per cent for private limited companies. Analysts has a initial forecast for sector earnings growth at 19 per cent. With the reduction in tax rate, it is estimated that commercial banks might be able to show at least a 25 per cent rise in profit after tax in FY 2001.

DADABHOY CEMENT INDUSTRIES

Dadabhoy cement unit is the first unit which is gradually shifting to use of coal to optimize its cost of production. To fully implement this plan, the Company has decided to issue right shares. The amount raised from this will be used for pre-heater optimization at an estimated cost of Rs 60 million. At the same time coal processing, storage and transportation and firing system has to be installed at an estimated cost of Rs 45 million. The total cost to be incurred for the optimization and coal firing system is estimated around Rs 150 million. Many sector analysts say that the pay back period for coal firing system can range from two to three years depending on level of efficiency and capacity utilization of a cement manufacturing unit. The main concern is that southern part of the country suffer from glut of supply and if the cartel does not allow Dadabhoy to cut price, the Company may not succeed in increasing sales volume. However, some other analysts strongly believe, that the sponsors of the Company have great influence on the cartel and reducing price should not pose too many problems.

HUBCO

The market as well as minority shareholders of HUBCO are desperately waiting for the consent of lenders for the payment of dividend announced in March this year. On July 19, the Company has informed Karachi Stock Exchange regarding on going discussions with the lenders and their decision was expected within one week. It must have brought the hope for the shareholders who have not received any return on their investment for years. This announcement is expected to create some buying spell and move price of the scrip upwards. Some analysts forecast for major gain in value and also warn about profit taking as and when possible.

GRINDLAYS MODARABA

First Grindlays Modaraba was the first modaraba floated in Pakistan. Over the years, it has been declaring substantial return to its certificate holders. It has released unaudited profit and loss account for the quarter ended June 30, 2001. The Modaraba has posted over Rs 36 million profit for the quarter. Analysts, forecast for a year-end profit better than last year's at the back of improved economic activities in the country. As the appetite for funds is growing, borrowers' reliance on medium term fund providers, leasing companies, is increasing. The core activity of Grindlays Modaraba, is leasing business. Therefore, it is expected to benefit more due to enhanced demand for funds.

ADAMJEE INSURANCE

According to a KASB report, market report indicate that the controlling group of Muslim Commercial Bank (MCB), led by Mian Mansha, has acquired up to 38 per cent of the outstanding equity of Adamjee Insurance Company. While apparently the Mansha Group has given assurance to Adamjee's existing management regarding non-interference, it is believed that it is only a matter of time before Mian Mansha begins to manifest his influence on the company. Analysts strongly believe that while the Company has always been a pick of market manipulators, the need for greater scrutiny on the way the Company is managed is increasing.

MOVEMENT AT A GLANCE
SCRIP	HIGH (Rs.)	LOW (Rs.)	CLOSING  PRICE	TURNOVER  (SHARE MN)

PTCL	17.05	15.6	15.70	83,749,500
Hubco	17.80	17.15	16.90	51,183,000
PSO	132.70	123.75	125.50	34,746,200
Fauji Fertilizer	36.30	34.80	35.15	10,796,700
MCB	23.85	22.40	22.70	6,749,000
Adamjee	49.10	45.70	46.60	4,794,000
Nishat Mills	16.50	15.25	15.35	1,167,000
Shell Pakistan	231.00	219.00	223.20	325,100