THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated April 05, 2003

 

MARKET THIS WEEK

Despite of all the negative political developments, market continued its upward thrust for most of the week, where Hubco took the lead, while PSO, NBP and Adamjee followed the suit. The benchmark KSE 100 Index raised by 1.5% from 2,738 points last week to close at 2,778.6 points, for this week. The trend in volumes remained very interesting, where on each positive day the average volume was higher than the average volume on negative sessions. This clearly shows that generally investors were having positive frame of mind, where they were willing to participate in the market, while on negative days the majority of the investors were sitting on sidelines. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On the whole, average daily volumes increased by 8.69% to 176mn shares this week from 162mn shares last week.

Among the investors, institutions were the most active as further rate cuts in 6-month government paper has forced them to find gems at the KSE. Retailers' focus remained on the speculation in PSO and FJFC, where the former got attention owing to its expected bidding on April 26th, while latter remained in limelight on the basis that a few influential investors were talking about a mega news hitting on the next Monday. Interestingly, one could also smell foreign investors this week after looking at the marvelous performance by the stock and "ruthless" execution style.

The stock of the week was definitely Hubco, up 2.77% to PkR35.55/share. After adjusting for dividend, the stock covered most of its payout dilution. What else can one expect from a quasi-equity stock in the current era of below 2% rate for 12 months paper.

OUTLOOK FOR THE FOLLOWING WEEK

The entire market outlook depends on just one single event, i.e., PSO's privatization. We are of opinion, that any news can change the market direction on either way.

Though, the government as well as the Privatization Commission look very comfortable and confident on materializing PSO's bidding on April 26th, we have our reservations.

Our view has its logic based on the fact that the most serious party in the privatization is none other than Kuwait Petroleum and logically speaking they are likely to wait for the dust of Iraq war to settle down. However, we keep our fingers cross and wait for the future. Another development relating PSO's privatization is the resolution of all the pending issues regarding receivables. The informed sources are hinting that this will come next week. We believe that if this happens, market belief on PSO's privatization will get further credibility and thus, one can see market-crossing 2800 again.

Our strategy for next week would be to sell on the day when PSO related settlement news hit the market. Since, we firmly believe on the delay in PSO's privatization, we feel that market will peak this week for its short-term horizon

FUNDAMENTAL CHANGES

Short term yields decline this week with SBP slashed down another 38bps rate on its 6 months paper to 1.72%. Needless to say that this is another lifetime low for interest rates in Pakistan.

Hubco turned ex-dividend on 1st of April and this event enabled the large institutional investors to restart their buying spree as previously they were avoiding this stock owing to the fact that at higher price, their carrying cost would become higher, while dividend can only contribute towards their current earnings. Although we admit that this is a fundamentally weak argument, do not forget that these institutions are still working with old concepts of historic cost conventions.

 

 

Engro saw an interesting twist in its historic tale of takeover. Reportedly 16 papers have been filed for the 10 slots of board of directors. Among these, 10 were management nominees, 2 are from Dawood Group and 4 are from private sector. The management has also informed the KSE about a possible out of court settlement with the stock raider, Dawood Group. It is an interesting development and we can smell a resolution of this issue. Good for Engro and good for Dawood, while our sympathies are with those who were carrying this stock on the hopes that DH will come to the market to buy more shares.

The political landscape of the country saw some negative clouds when, the US slapped sanctions on KRL and alleged it to transfer missiles and nuclear technology from and to the North Korea, respectively. While Musharraf immediately called Collin Powell for betray, but the US reaction was nothing unusual. This has damaged the US image further among the general public, where the hardliners are repeating their earlier claims that the US is not a loyal friend. It showed similar attitude in the past as well and it will continue this in future too. However, market forces were busy accommodating bankers at the exchange

THIS WEEK'S TOP STORIES

Pakistan Telecom Growth is still intact

We tend to differ with the general perception about PTCL that de-regulation will eat into company's profitability. Our analysis indicates that company has significant growth potential owing to its huge backbone as well as strategic stakes in companies like Ufone. Operating in a gradually growing economy along with over 2% population growth, PTCL is likely to be the major beneficiary of the growing pie.

FERTILIZER REVIEW: A GOOD SEASON

The NFDC's provisional numbers show a 13% rise in nutrient consumption so far during Rabi 2002-03, primarily due to improved water availability this winter season. Demand for urea increased by 4% while that of DAP rose by 32%. MoM demand for fertilizer rose by 17.5% in February 2003, primarily due to significantly lower off-take during January, which was due to higher then usual off-take during December 2002. With the international urea being relatively more expensive that local urea, we do not expect any decrease is urea price other then the already agreed upon decline of PkR20 per bag. Going forward we expect urea prices to rise in line with costs.

ENGRO: ARE WE MOVING TOWARDS A RESOLUTION?

 

 

With major developments taking place in Engro, we feel we must keep investors abreast, where this time two pieces of news items forced us to write today's story. Firstly, the announcement from Engro of the names of the candidates filing nominations for the board election and secondly, the story carried by Dawn about a likely resolution. If we club the two items together, our immediate reaction was that finally the take-over dispute is moving towards its resolution. Why a resolution looking at the shareholding structure, the sole conclusion that can be drawn is that Engro's progressive management cannot stop private sector candidates owing to its relatively low ownership of the company.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

10.36

10.32

-0.39

Total Turnover (mn shares)

808.34

878.57

8.69

Value Traded (US$ mn.)

635.08

746.44

17.53

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. Shares)

161.67

175.71

8.69

Avg. Dly T/O (US$ mn)

127.02

149.29

17.53

KSE 100 Index

2744.18

2778.62

1.26

KSE All Shares Index

1695.48

n.a

n.a

 

 

Source: KSE, MSCI, KASB