THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated Mar 15, 2003

 

MARKET THIS WEEK

The short trading week witnessed the market firming up a little bit on the back of possible delay in any military action against Iraq. The average daily volumes declined marginally by 5% to 120mn shares for the week. The KSE-100 index gained 52 points during the week to close at 2540. 

 

 

 

 

While Hubco remained the most active scrip throughout the week, PSO also attracted considerable investor attention to second the list with cumulative volumes of 69mn shares during the past week.

OUTLOOK FOR THE FOLLOWING WEEK

Stiff resistance to the US is building up and is likely to result in delay in any military action in Iraq. This is likely to be taken positively by the market, which we believe has over-discounted the fear of military action in Iraq. While we do believe that the market is likely to remain firm, however, we expect the Index to remain range bound between 2400-2600 during the coming week. Strength in volumes will be required to maintain this positive momentum.

FUNDAMENTAL CHANGES

The major fundamental factors affecting the market this week were:

•Fertilizer manufacturers have given an indication to reduce urea prices by PkR1015/kg to provide relief to farmers. This reduction in price however is not fundamentally driven and is likely to hit the bottom line of urea manufacturers.

•In its latest tryst with the IMF, the government has reaffirmed its commitment to the privatization program of the state-owned entities. While KESC has been pushed down on the priority list, the IMF continues to stress upon the government to privatize PSO and HBL by June 30, 2003.

•IMF has also asked the government to gradually phase out subsidies, and one of the key agenda forwarded by the IMF is to eliminate the exemption on withholding tax by June 30, 2003.

TECHNICAL OUTLOOK

Developing a short-term base around 2400-2500, the index is poised to retest levels around 2610/20 for this week. Sustained growth in price and volumes would be supportive factors to continue the up-trend in the coming weeks towards 2800. Constant violation of 2500 and moving below 2440 continues to define risk in the market.

THIS WEEK'S TOP STORIES

PRIVATIZATION — NEW IDEAS AND INITIATIVES

We like PC's new stance over the selling of some its stake in the public sector enterprises up for privatization into the stock market. Given the uncertainties in the regional politics as well as Pakistan's fragile political situation, we believe that it would be extremely difficult for the international strategic investors to look at Pakistan with some interest. In such a scenario, PC can move forward and exploit the easy domestic liquidity situation. Another step, which we can suggest to the government, is to induct private sector professionals so as to remove the inherent inefficiencies from these companies. In our opinion, given the healthy foreign exchange situation at present, improvement in the performance of these public sector enterprises should be high on the government's priority list.

POL CONSUMPTION — 6-MONTH DEMAND STATISTICS!

The six-month POL demand figures, although not spectacular, give a hint that the sector is likely to bounce back after going through a tough phase last year. The 1% YoY growth in Mogas demand is probably the most surprising element, as it was being generally anticipated that Mogas would register negative growth. In addition, strong growth in HSD has been more or less anticipated as the agriculture sector of the country has been performing well. The decline in fuel oil consumption was in line with general market expectations, as better water availability and low reliance on IPPs by WAPDA has affected FO consumption in the country. We are of the opinion that the POL industry is likely to maintain its historical linkage with the economic growth of the country. We maintain our positive stance on the Oil Market Companies.

 

 

PM SPEECH — MERE RHETORIC!

Jamali's last night speech was nothing but a rhetoric; however, four messages can easily be withdrawn by his speech: (I) Jamali wants to continue with the economic reforms pushed by President Musharraf and successfully executed by Shaukat Aziz; (II) the political government also wants to continue with the foreign policy initiatives opted by Musharraf; (III) PM is seeking general public support after having an extremely tough time in the assembly, and (IV) PM Jamali also seems to be pushing the idea of not supporting the US in its war against Iraq through an endorsement by the cabinet. First three factors are very much in line with the expectations of the market forces, while the fourth factor can send negative signals to the market as this can irk the US, which will result in rolling back of some concessional loans and official assistance. We maintain our defensive stance on the market.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

9.64

10.00

3.73

Total Turnover (mn shares)

633.34

362.00

-42.84

Value Traded (US$ mn.)

628.80

402.55

-35.98

No. of Trading Sessions

5

3

 

Avg. Dly T/O (mn. Shares)

126.67

120.67

-4.74

Avg. Dly T/O (US$ mn)

125.76

134.18

6.70

KSE 100 Index

2448.66

2540.25

3.74

KSE All Shares Index

1524.91

1576.49

3.38

 

 

Source: KSE, MSCI, KASB