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

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STOCK WATCH

By SHABBIR H. KAZMI
Updated Oct 06, 2001

Despite the fact scrips offer incredibly attractive dividend yields, investors are not willing to take long positions. While the overwhelming perception is that Pakistan has been placed at a precarious situation, earnings potential of most of the volume leaders and blue chips remain immune to external factors. However, textile sectors seems to be the worst hit. Though, there are promises by the US and the European Union to ease quota restrictions and to reduce duties on made in Pakistan textile products, the delay in export shipments is bound to affect not only earning of textile companies but also to have spill-over effect on other industries.

To provide a little consolation to the retail investors it is necessary to examine the level of adversity for various key sectors. Banking companies face two potential threats: 1) reduction in foreign trade based fee income and 2) hike in provisions against non performing loans. Since the financial year for banks ends in December, the adverse impact is expected to be marginal only.

Fuel and energy sector is also more or less immune to the external factors. While crude oil price is experiencing a downward trend, the hike in insurance and war risk charges will largely erode the benefit of reduction in oil price.

PSF sector which has been very vibrant in the recent past is expected to face a reduction in offtake. This apprehension is based on the fact that spinning units are also experiencing lower offtake of yarn. PSF units are expected to face two possible scenario: 1) higher inventory levels or 2) lower capacity utilization. However, the ultimate fate of PSF units is largely dependent on performance of spinning units.

The impact of external factors on fertilizer companies seems more or less neutral. With the prospects for higher output of major food and cash crops the purchasing power of farmers is expected to improve. However, lower cotton prices in the domestic market, due to over supply, is an issue which the GoP plans to handle efficiently.

ADAMJEE INSURANCE COMPANY

The Company has posted net loss of Rs 211 million for the first half of year 2001, a first in its 40-years history. According to a report by Global Securities, the main reason for this huge loss was heavy losses in the overseas motor insurance business. The management's decision to curtail overseas motor insurance may help in reducing claims ratio but the recent trends in insurance are likely to dampen earnings growth going forward. On top of this bearish sentiments in equities market and lower interest rates are also likely to put pressure on income from investment. Keeping in view the high volatility of company's earnings and weak industry fundamentals investors may not find an immediate interest in the scrip.

PAKISTAN TELECOMMUNICATION COMPANY

The fundamentals for the Company have not changed to a large extend. The reduction in share price is due to a number of other factors. However, the low price of scrip offer an opportunity to accumulate and reap benefit of attractive dividend yield. Privatization of the Company is expected to be delayed. However, analysts believe that any investor who has serious intentions to buy controlling shares of PTCL has the potential to accumulate as much as possible at current prices.

HUBCO

Delay in lenders' approval for the interim dividend has been a major reason for the continued selling. The news of yet another petition against HUBCO has been termed a cruel joke by some analysts. They say that it is disgusting that whoever wish to disrupt the process of restoring the confidence between HUBCO and the GoP often succeeds at the cost of national interest. The three-year tariff dispute between HUBCO and its only customer WAPDA was often termed the key reason for low inflow of foreign direct investment in Pakistan. Some analysts say, "It may be a bargain but once the GoP had committed it cannot backout". The GoP must ensure that all such petitions are handled swiftly and efficiently to avoid further embarrassment. This is necessary because HUBCO has played a pivotal role in averting recent crisis caused due to a drought like situation when hydel power generation was at the lowest.

SUI SOUTHERN GAS COMPANY

Analysts believe that economic fundaments for SSGC seem positive in the near and medium term. The recently initiated Rs 4 billion 'gas infrastructure rehabilitation and expansion programme is expected to lead to an increase in net operating assets which through the guaranteed return formula will drive operating profits. The revenue for the full year is expected to improve due to increase in gas price and volume handled. Profit after tax for the year ended June is expected to be very high due to an extraordinary income realized through sale of the LPG business and substantial reduction in financial charges. The delay in privatization of SSGC is expected due to the present situation.

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE MN)

PTCL

14.25

12.65

14.20

81,856,000

Hubco

13.65

12.10

13.65

59,412.500

Ibrahim

11.35

10.50

11.35

8,668,000

Fauji Fertilizer

34.95

30.95

34.95

6,804,300

Engro

46.80

42.10

46.80

5,832,500

MCB

20.80

19.25

20.55

4,576,500

Dewan Salman

12.40

10.60

12.30

2,983,000

ICI

33.45

27.40

30.75

1,170,400