THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated Jan 25, 2003

 

MARKET THIS WEEK

The KSE-100 index spiraled downwards this week declining by a phenomenal 11.68% (345 points) from 2,955 points last week to close this week at 2,610 points. The week started with a bearish trend

 

 

 

and the Index declined by nearly 30 points. On the following three days the Index declined by over 300 points. We believe that this decline was caused by the SECP instructing brokers to correct their exposure limits, which resulted in them offloading parts of their portfolio, which later caused panic among investors. Badla providers also played their typical part in bringing the Index down.

Most stocks performed poorly with all key stocks losing value. Volumes remained as investors offloaded their investments to cut losses. Average Daily Turnover was 385mn shares as compared to 469mn shares.

OUTLOOK FOR THE FOLLOWING WEEK

We believe that the market will consolidate during the following week and do not expect any significant decline largely due to two reasons i) bearish pressure eased somewhat on Friday as the Index declined marginally by 0.31%; and ii) a number of companies results are expected and on the back of dividend declaration and all in all good expected results, investor interest should be restored. However, if panic continues some marginal decline cannot be ruled out. Based on fundamentals a number of stocks are beginning to look very attractive and one of our analysts says "this is the time to say BUY not BYE", however we advise our investors to be cautious and not get carried away by a wave.

FUNDAMENTAL CHANGES

The major fundamental factors affecting the market this week were:

•A reduction of 74bps and 49bps on the 12-month and 3-month T-bill rates respectively. Further continuing the downward trend in the interest rates in the economy rates on T-bills were slashed during the last OMO. In-spite of extremely low rates bids offered exceeded the SBP target by almost 3x. Although the stocks did not respond to this latest reduction, yield based stocks are likely to become more attractive going forward.

•PSO's 1H02, NPAT amounted to PkR12.07 per share and it declared a dividend of PkR6 per share. The 357% NPAT growth HoH was largely because of a 1.5% increase in margins for the OMCs.

•Attacks on SNGPL pipelines and subsequent fires have placed gas supply in Punjab and NWFP under immense pressure and consequently, the company stopped supply to industrial units in the region. We do not expect SNGPL to face any major loss as the assets are covered by insurance and returns are determined by an asset-based formula.

 

 

TECHNICAL OUTLOOK

The market has corrected 23.6% of its gains at 2538 for the total bull run from 1070 to 2991. Expect this level to remain a short-term support as the index regains to test the next two big figures of 2700 & 2800. Current gains would strongly be based on all core stocks while second and third tier stocks would follow in sympathy. To continue the primary bull trend levels should overcome the 3000 barrier within the next couple of weeks with volume flows expanding over the broad market and not just restricted to a set of shares. Risk re-enters as 2500 fails to hold.

COMMENT: STOCK PERFORMANCE - WHAT'S NEXT

Well, a recovery in the index is extremely likely after a 345 points fall in the market. Probably the most appropriate question would be, which stocks will run faster than others. Our simple answer to this tough puzzle is that stocks that have lost more value during the recent fall, as compared to other stocks should be the first ones to start regaining. Thus, our very dear investors are advised to look at the same old relative performance tables to find the short-term winners. Moreover, we also advise our investors stock make sure that they have learned a few good tips from the current fall. For God sake, do not follow blindly the brokers' advice and try to determine for yourselves the underlying fundamentals of the stocks. Dividend yields may be the right technique for a liquidity driven rally, but one should also ask his dealer about the management credentials of the companies. We wish you all plenty of good luck. Here is the table for the top relative performers and bottom performers. Enjoy your weekend.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

11.15

9.89

-11.30

Total Turnover (mn shares)

2345.00

1926.00

-17.87

Value Traded (US$ mn.)

1964.00

1423.00

-27.55

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. Shares)

469.00

385.20

-17.87

Avg. Dly T/O (US$ mn)

392.00

284.60

-27.55

KSE 100 Index

2954.63

2609.45

-11.68

KSE All Shares Index

1814.88

1614.52

-11.03

 

 

Source: KSE, MSCI, KASB