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

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THE KASB REVIEW

STOCK MARKET AT A GLANCE

Updated on July 06, 2002

THE KSE OVERVIEW: OUT OF THE BLUES

Bloomberg has ranked Pakistan Stock Market 3rd in the top 10 best performing Indices out of a total of 72 Indices. The report reveals that the Pakistan stock market has yielded a return of 41% over a period of Dec 01 to July 02.

The 2% growth in the KSE-100 Index that climbed 30 points from the last week's 1770 level managed to breach the 1800 level this week. Rising market momentum coupled with relative political stability caused enthusiasm amongst the investors leading to an impressive 83% increase in the Average Daily Volume (ADV) to 103mn shares this week as against 56mn shares last week.

The market activity remained bullish throughout the week reaching a KSE-100 Index high of 1805 level and a low of 1785 level.

Monday being July 1st was a bank holiday and hence individual investors were the only players in the trading domain; the KSE-100 Index notched up 15 points to close at 1785 level. Last week the management of the Karachi Stock Exchange had decided to raise the lower-limit of the circuit breaker to 5% from 2.5% from July 1, 2002. The market players especially the smaller investors welcomed this decision as it provided more room for short term trading.

On Tuesday the GoP announced the withdrawal of 10% withholding tax exemption on all National Saving Instruments and reduced the returns on the schemes from 0.8% to 2.5%. Since Badla rates were already yielding around 6% the investors turned their attention to high yielding stocks. This spate resulted in the KSE-100 Index level to reach an all week high of 1805 level and an average daily turnover of 191mn shares. Institutional buying was felt in the favourite scrip Hubco followed by PTCL and Fauji fertilizer. Similarly on Wednesday the news about the 24 hours clearance facility allotted to the cement manufactures effective from July 1 (to help manufacturers in supplying cement at the construction sites in Afghanistan) led an upward rally in the top cement stocks led by DGK and Attock cement. This development coupled by the expected TFC issue of DGK cement led DGK to be one of the top 5 active issues of the week. The scrip gained 9% in five days to close at PkR9.95 with a weekly turnover of 21mn shares. However, the over all market maintained a sell side momentum as the institutional investors adhered to 'profit-taking' and the KSE-100 Index closed 5 points down at 1800 level as against 1805 level a day earlier.

Thursday, the sell side sentiment continued and the market shed another 8 points to close at 1792 level as against 1800 level a day earlier. However, the only scrip that was out performed the market was National Bank that also ranked amongst the top 5 active issues during the week with a weekly turnover of 26mn shares. NBP's (AGM on July 11th) FY01 results expectation has been doing the rounds in the market and the investors seem to have priced in the upside potential in the scrip resulting in an intra day high of PkR22.5 to close at PkR21.75 and an ADV of 7mn shares for the day.

On Friday following the usual trend investors kept themselves liquid at the end of the trading week and the KSE-100 Index remained flat to close at 1800 level. Major gainers during the week were Attock Refinery that rose up by PkR11 to close at PkR70.00, similarly, Pakistan Oil Fields rose by PkR5 to close at PkR131.05 and Fauji Fertilizer by PkR3 to close at PkR48.55. Major losers over the week were Lever Brothers that lost PkR11 to close at PkR903.00, followed by Shell Pakistan that lost PkR4.25 to close at PkR216.00 and Packages that lost PkR3.45 to close at PkR74.55.

FERTILIZER SECTOR

The fertilizer sector in Pakistan currently comprises of 10 companies 4 of which are in the public sector (Hazara Phosphate Fertilizer (Pvt) Limited, Lyallpur Chemical & Fertilizer Limited, Pak Arab Fertilizer Limited, and Pak American Fertilizers Limited) while 6 are in the private sector (Engro Chemicals Pakistan Limited, Dawood Hercules Chemicals Limited, Fauji Fertilizer Company Limited and FFC-Jordan Fertilizer Company Limited, Pak China Fertilizer and Pak Saudi Fertilizer Company Limited now owned by FFC).

Fauji Fertilizer Company Limited (FFC) is the largest fertilizer manufacturer in the country with a designed production capacity of 1,887 thousand tonnes of urea (including the production capacity of Pak Saudi Fertilizer).

Fertilizer production is concentrated in nitrogenous fertilizers, which comprise 85% of all fertilizers produced in the country. Although other types of fertilizers are also produced in Pakistan, the bulk of whose demand is imported. The main reason for this concentration on nitrogenous fertilizers is that its main raw materials i.e. natural gas, is cheaply available in the country. The raw material for other fertilizers such as potassium and phosphate has to be imported and thus local manufacturing is not economically viable as demonstrated by Fauji Jordan's problems.

THE FERTILIZER SECTOR BEFORE PRIVATIZATION

At the time of independence there were no fertilizer plants in Pakistan in spite of the fact that this country was largely agrarian. Recognizing the importance of proper use of fertilizer on agricultural production various governments in the past have made conscious efforts to attract foreign investment in this sector.

CHRONOLOGICAL HISTORY OF THE FERTILIZER SECTOR IN PAKISTAN

1952

Pakistan Industrial Development Corporation (PIDC) is established

1957

Lyallpur Chemicals and Fertilizers Limited (LCFL) is set up and designed to produce Single SuperPhosphate (SSP)

1958

Pak American Fertilizer Limited (PAFL) is commissioned and designed to produce ammonium sulphate

1962

National Gas Fertilizer Factory is set up producing Urea, Ammonium Nitrate, and Nitric Acid

1965

Esso Pakistan Fertilizer Company Limited (EPFC) is incorporated and designed to produce urea 1968 Designed Capacity of PAFL is increased

1973

National Fertilizer Development Corporation (NFDC) is established with an authorized share capital of 1000m. It's mandate is to manage the existing fertilizer factories and to establish additional factories.

1976

Capacity of LCFL is doubled

1978

NGFF is renamed Pak Arab Fertilizers after 48% stake is acquired by Government of Abu Dhabi

1980

Pak Saudi Fertilizer Company is established designed to produce urea

1982

Pak China Fertilizers Limited (PCFL) goes into commercial production. It is designed to produce urea

1982

Fauji Fertilizer is established

1985

Hazara Phosphate Fertilizer Limited is incorporated and is designed to produce Granulated Single Super Phosphate Fertilizer.

1986

Government deregulates prices of nitrogenous fertilizers

1989

Fertilizer Policy is announced providing incentives for fresh investment in the sector

1991

Esso (Exxon) announces its intentions to sell 75% of its holdings in EPFC. Engro Chemicals Pakistan Limited is formed

1998

FFC Jordan is established. It is the first company to locally manufacture Diammonium phosphate (DAP) in the country

The deregulation of the fertilizer sector began in 1986 and slowly the government has removed fertilizer price controls and subsidies, liberalized fertilizer imports and distribution and privatized fertilizer plants.

FERTILIZER SECTOR IN THE 1990'S

The deregulation of the fertilizer sector attracted considerable additional investment in the sector as a result of which the production capacity of the sector doubled from 2.95m tonnes in FY 1990.

1990's also saw the privatization phenomena with the fertilizer plants owned by the government and managed by NFC being sold to private parities. The first plant to be privatized was Pak-China Fertilizer, which was bought by the Schon Group in 1992. After this the process of privatization became very slow largely due to the political instability, which plagued the 1990s.

Pak Saudi Fertilizer was purchased by FFC in FY 2001 for a purchase price of PkR7.3bn rupees. This was the second fertilizer plant to be privatized. The government is in the process of privatizing Pak Arab Fertilizer, Lyallpur Chemicals and Fertilizers Limited (whose EoIs have been invited) and Pak American Fertilizer Company. However, no deadlines have been set for these privatizations.

Another factor that affected the fertilizer sector in the 1990's was the shift of the GoP's emphasis towards the energy sector. It started with the Fertilizer Policy of 1989, which fixed prices for new plants for 10 years and subjected old plants to rising feed stock prices. Also the 1990's saw the gradual decrease in the fuel gas subsidy provided to the sector.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

6.85

6.99

2.04

Total Turnover (mn shares)

281.51

515.67

83.18

Value Traded (US$ mn.)

156.83

244.42

55.85

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. Shares)

56.30

103.13

83.18

Avg. Dly T/O (US$ mn)

31.37

48.88

55.85

KSE 100 Index

1770.12

1800.48

1.72

KSE All Shares Index

1118.76

1138.89

1.79

.Source: KSE, MSCI, KASB