THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated Oct 05, 2002

 

MARKET REVIEW: KSE CONTINUES ITS UPWARD DRIVE

The week started off on an exciting note as the much-awaited PTCL's results were announced on Monday. However, lack of surprise element

 

contained the response from the investors. News flow on privatization continued to be a major factor in play as the market continued its seesaw like upward journey. Quarterly results expectations also added some spice in to the market activity.

THIS WEEK'S PERFORMANCE

The market swung wildly during the week as the tussle between bulls and bears continued this week. On a weekly basis however, the KSE100 index managed to register a modest rise of 0.5% to close at 2028 level.

PSO continued to remain active on the back of privatization news flow. The scrip attracted a total turnover of 128mn shares for the week, slightly lower than last week's total volume of 130mn shares. Hubco and PTCL were the other two most active scrips in the market. While PTCL's attracted attention as a result of the result announcement at the beginning of the week, activity in Hubco can be largely attributable to the quarterly results announcement expected within this month.

Average daily volume during the week registered a decline of 12% to 120mn shares this week, largely because of the mixed sentiments prevailing in the market.

OUTLOOK FOR THE COMING WEEK

With the elections coming up next week, we do not expect much activity in the market. Investors are expected to remain on the sidelines and wait for the election results. Although the market appears attractive, we expect both bull and bears to be active, and advise a cautious approach.

THE DAILY DRAMA

The week was expected to start off on an exciting note as PTCL was to announce its result on Monday. However, PTCL's results failed to excite the market as the index registered a marginal decline and closed at 2018.75 on Monday, down 0.29 points. Although PTCL's profit numbers were slightly above market expectations, the surprise element was missing as far as the dividend was concerned. Coupled with the dividend announcement, the late book closure date led to selling from all counters as the investors booked profits. The change of mood in PTCL also trickled down to other stocks as investors booked profits on all major scrips. Market activity was thus high as the total traded volumes rose by 30% to 149mn shares.

The decline in the index continued on Tuesday as well as the Index fell by 13 points to close at 2005.45. PTCL and PSO led the decline in the market. While PTCL's decline was attributable to profit booking by investors after result announcement, PSO and other market heavy weights also came under pressure as negative news on Kashmir elections depressed the market sentiment. The volumes however declined by 39% to 91mn shares.

Market took a U-turn on Wednesday as the Index rose by staggering 24 points to close the day at 2030 level. Statements on the privatization of PSO generated substantial interest in the stock while Shell drew investors' attention on the back of expectation of interim results. However, Fauji Fertilizer stole the show as the scrip rose by PkR2.50. Heavy institutional support was seen in the market as they were unable to resist the temptation to invest with attractive levels of market heavy weights. Market volumes also gained strength, rising by 21% to 110mn shares.

Thursday saw majority of the last day's gains fade away as the Index fell by 16 points to close the day at 2013 level. The day started off with a positive note, gaining 12 points and was almost close to breaking the 29-month high of 2043 when profit booking by investors changed the market sentiment. News on possible delays in some high-profile transactions attracted selling from all major counters, which engulfed the market as a whole. The market activity also rose to 152mn shares, up 38% from last trading day.

The Index regained Thursday's loss and gained 15 points to close the day at 2028 level. Although the market opened on a weak note, positive news over possible increase in OMC's margins resulted in heavy buying in Shell, which rose by almost 5% to close the day at PkR313.50/share. Buying was also seen in other major scrips on the back of positive expectations on quarterly result announcements.

SECTOR REVIEW: NATIONAL BANK OF PAKISTAN

National Bank of Pakistan (NBP) is offering 5% shares to the public with a green shoe option of 5%, the subscription for which will start on October 5, 2002 to October 9, 2002. This is NBP's second public offer, the first being in November 2001. The price fixed for the second public offering b PkR21 per share, reflecting a 7% discount from its share price of PkR22.65 on October 3, 2002. NBP is currently trading at 0.5x its book value and with the expectation of significant improvement in profits going forward, we recommend subscription of the public offering.

Details of the Second Public issue

Opening and closing date: Commencing at the start of banking hours of October 5, 2002 and will close at the end of banking hours on October 9, 2002;
Price: At PkR21 per ordinary share of par value of PkR10 per share;
Purpose of the issue: Privatization and broadening the ownership of the bank.

COMPARISON AND RECOMMENDATION

For the purpose of analysis, we have compared NBP with Muslim Commercial Bank the only other bank in the Big 5, which is publicly traded.

NBP is currently trading at 0.5x its book value while MCB is trading at par to its book value. This valuation alone makes a considerably strong case for our Buy recommendation. Furthermore, we believe that the Pre Provision Profits (PPP) of NBP will increase in the future as the bank has already amortized most of the costs associated with the VHS scheme. Consequently, we believe that both P/PPP and P/E ratios of NBP are likely to improve in the future.

With the stock currently trading at a discount of approximately 7% from its market value, we believe that the subscribers to the public offering will be able to earn higher returns from the future developments in NBP.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

7.83

7.87

0.51

Total Turnover (mn shares)

684.89

600.29

-12.35

Value Traded (US$ mn.)

668.68

648.03

-3.09

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. Shares)

136.98

120.06

-12.35

Avg. Dly T/O (US$ mn)

133.74

129.61

-3.09

KSE 100 Index

2019.04

2028.39

0.46

KSE All Shares Index

1259.71

1264.51

0.38

Source: KSE, MSCI, KASB