THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated April 26, 2003

 

The KSE-100 index declined by 2.59% to close the week at 2859 points as against 2935 points last week. The overall sentiment through out the week remained depressed apart from the last trading day of the week, which saw the Index gaining 25 points. The fall in the market was triggered on Tuesday over rumors that the State Bank of Pakistan is restricting bank's investment in the stock market to 20% of their capital base. PTCL 

 

recorded the highest total volumes during the week of 216mn shares followed by Hub Power with total volumes of 148mn shares during the week. Average daily volumes for the week declined by 5.54% to 198mn shares.

 

 

OUTLOOK FOR THE FOLLOWING WEEK

After loosing almost 76 points in the Index has shown resilience in staying above 2800 levels. With result announcement by majority of top tier stocks company, the Index is likely to be short of triggers for an upward movement. However, the overall level of the Index appears attractive and the Index seems likely to recover from these levels. We advise our investors to maintain a cautious strategy while investing. Although the last day of the week showed a turnaround in investor sentiment, the Index is likely to remain in a consolidation mode. Also, the tussle between the government and opposition over the LFO is likely to play an overbearing role on the Index.

FUNDAMENTAL CHANGES

•The speculation over proposed amendment in the Prudential Regulations, restricting bank's exposure to stock market to 20% of their capital base was the biggest trigger in the market. However, with clarification that the amendment is still in the discussion phase, the market has shrugged off the implications of such an amendment for now.

•The board of directors of Packages announced its 1QFY03 results. The company earned a net profit of PkR248mn, almost 3.5% lower than the corresponding period of the last year.

•Hubco announced its 3Q03 results on Wednesday, posting a bottom line of PkR1,622mn. Overall, the results are slightly above our expectations. The 55% decline in other income was mainly on the back of low interest rates in the environment while an 18% decline in financial charges is on account of reduction in outstanding debt due to repayment and partly because of the financial restructuring of Hubco's debt by NBP.

•Engro declared a profit of PkR234mn (EPS of PkR1.53) for 1QFY03, reflecting an increase of 67% from PkR140mn in 1QFY02 (EPS of PkR0.90).

•Increasing trend in domestic POL prices on the back of rising international oil prices helped Shell Pakistan to post after tax profits of PkR550mn for 3Q02, up by 114% YoY. Shell's total after tax profits for 9-months (July-Mar) currently stand at PkR1,400mn which is 33% higher than the last year's total profits for FY02 of PkR1,063mn.

•Pakistan PTA posted marginal loss of PkR58mn in 1Q03: Pakistan PTA's improved financial performance was mainly on the back of high PTA prices during Jan-Mar 2003. The company posted an after tax loss of PkR58mn for 1Q03 against an after tax loss of PkR1,354mn in 1Q02.

•PSO announced its 3Q03 results on Friday. The company posted an after tax profit of PkR1,195mn. The company also announce a PkR3/share cash dividend which was taken very positively by the market.

•ICI Pakistan announced its results for 1Q03 posting an after tax profits of PkR172mn. High PSF prices on account of increasing raw material prices during Jan-Mar 2003, were the main reason behind the improved profitability of the company.

•Pakistan Oilfields Limited announced its results for 3Q03 posting an after tax profits of PkR739mn, an improvement of 27% YoY.

•Sui Northern Gas Pipelines Company also announced its 3Q03 results on Friday, posting an after tax profit of PkR519mn for the period.

TECHINAL OUTLOOK

Market has witnessed its first pullback after its retest of 2991. Ability to regain above 2920 within this week would signal a positive sign. Otherwise resistance around 2900 would remain and enable another bout of selling pressure to set a new low towards 2700. Volumes would be a key factor in determining a directional move as rising levels should experience sustained increased activity.

 

 

TEXTILE: Some things you always wanted to know and were too afraid to ask

Cotton crop is the major factor affecting the performance of the textile sector. A good crop not only makes raw material easily available but also result in a decline in cotton prices in the local market. As a result, margins of the companies generally improve. During the late 1990's, continuous depreciation provided textile exporters greater then anticipated returns. With the stabilization of the Pak Rupee, we believe these extra returns will no longer be available to the exporters. The opening up of the world markets in 2005 is expected to provide the textile exporters with a new set of challenges and opportunities, and we believe that they need to gear up to face them.

COTTON CROP

The cotton crop can easily be termed as the single most important factor influencing the textile sector. In FY02 the total cotton production dropped to below 10mn bales as compared to expectations of 10.2mn bales. This was largely due to a decline in cropped area. For FY03 crop, we estimate total production to be in the tune of 10.2-10.3mn bales largely due to the government's commitment to continue to support cotton prices, increase in area cropped and focus on contamination free cotton.

Decline in cotton production not only results in the scarcity of raw materials but also increases the price of cotton, having a detrimental impact in the profits and hence returns of the textile sector. The average cost per mound of FY2002 amounted to PkR1,852 per maund and due to a relatively poorer crop in Kharif 2002, prices increased by 19% to PkR2,211 per maund. Hence we expect raw material prices to rise during the current financial year for most textile companies.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

11.10

10.87

-2.07

Total Turnover (mn shares)

1049.72

991.53

-5.54

Value Traded (US$ mn.)

591.54

603.87

2.08

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. Shares)

209.94

198.31

-5.54

Avg. Dly T/O (US$ mn)

118.31

120.77

2.08

KSE 100 Index

2935.39

2859.31

-2.59

KSE All Shares Index

1831.17

1788.28

-2.34

 

 

Source: KSE, MSCI, KASB