Updated June 07, 2003



The Index gradually gained during the week to reach its ever-high closing level of 3141 on Friday. The volumes also depicted a rising trending during the week reaching 258mn shares on Friday as against 122mn shares on Monday. However, the overall average daily volumes at 211mn shares for the week were lower by 21% as against last week's average daily volume of 258mn shares.




Apart from the usual active issues of Hubco and PTCL, Dewan Farooque Motors and Bosicor Refinery were the surprise entrants to the top 5 active issue list during the week. Investor interest in Bosicor Refinery was primarily due to the speculation over the expected commissioning of the refinery.

OUTLOOK FOR THE FOLLOWING WEEK: We believe that the budget session is likely to provide a direction to the stock market in the immediate term. While all the major initiatives of the government in the upcoming budget have already been more or less disclosed to the public through media, we believe that the highlight of the budget session is likely to be the reaction of the opposition to the presentation of the budget. Political uncertainty remains one of our key concerns in the immediate term as the government and the opposition are yet to develop a consensus on the issue of Legal Framework Order. However, should the budget session flow smoothly, we expect the market to react positively to it on Monday. The market fundamentals remain strong and we remain bullish in the long term, however, short term performance of the market is likely to be driven by the developments on the political front.

FUNDAMENTAL CHANGES: The week was full of developments on both the political as well as economic front.

The Central Board of Revenue (CBR) has been able to collect around PkR38bn in the month of May, which is around PkR3bn lower than the target set for this month. However, the CBR is hopeful of achieving the shortfall once the final figures received from remote places. May's collection made total YTD collection to PkR390bn, around PkR69bn short of the full year target. This simply means that the board has to collect a huge amount in the last month.

Local car manufacturers bowed to government demand for a price reduction. Price cuts ranging between PkR2000-PkR17500/unit were announced by two manufactures namely Suzuki and Honda. Toyota however, refused to reduce the prices though it has reduced the full payment at booking to PkR100,000/car. This announcement was made after the manufacturers meeting with the industrial minister.



OCAC announced an increase in the prices of petroleum products. This price hike was very much expected after the gradual recovery of the oil prices in the international markets. Except HSD, almost all the products have seen price increases ranging 1.00% to 4.29%.

The NWFP Assembly passed the Shariat Bill in its session held on Monday whereas the Central Government warned of stern action against the NWFP Assembly for making amendments in the Constitution.

Privatization Commission came up with PkR4bn worth of divestment plan in 1QFY04. Four entities have been selected for this sell off; and according to the time frame announced by the PC, the government plans to divest 3.2% of NBP in July; 5% of SSGCL; 2.5% of OGDCL with a green shoe option of 2.5%, and ; 5% of PIA.

The Privatization Commission pre-qualified three bidders for PTCL due diligence namely, Saudi Ogar Limited, Orascom Telecom, and Menara Telecom consortium. This development is likely to subside the fear among investors of further liquidation of PTCL share into the stock market.

The Finance Minister released the Economic Survey for FY2003. Improvement in the GDP at 5.1% from last year's 3.6% is very encouraging and clearly indicates the underlying potential within the economy. The higher than expected sectoral growths in agriculture, manufacturing and services are encouraging as well. The performance in the agriculture sector was impressive despite some shortage in water resources. Other key economic indicators are also showing signs of strong economic recovery.


A 60bps positive surprise in the GDP growth is the most compelling feature of the Economic Survey released by the government on Thursday. The document, which contained the economic performance of first 11 months, is fairly indicative of the recovering economy of the country. These numbers are provisional and may see some revisions when Ministry of Finance and State Bank come up with full years numbers at the end of 1QFY04.

SALIENT FEATURES OF THE SURVEY: Here are the salient features of the economic survey:

GDP GROWTH: The ministry has reported a 5.1% GDP growth for FY03, which is almost 150bps higher than the corresponding figure of last year. This is also 60bps higher than the budgeted figure for this year. Though both the State Bank and Asian Development Bank were predicting about a positive surprise, the ministry was extremely tight lipped about this stellar performance. This high growth number clearly indicates that the economy is reacting favorably to the ongoing economic reforms. Moreover, a higher growth number this year also means a relatively lower growth next year owing to larger base impact. Per capita income. The survey has also reported a significant improvement in the per capita income, which has gone up to US$492 from US$419.



SECTORAL PERFORMANCE: Though the manufacturing segment has shown the largest growth (7.7%), it was the agriculture sector that gave a surprise by registering a 4.2% YoY growth owing to good performance by the large cash crops. Services remained a stable performer by posting 5.5% growth.

REVENUES: The government has slashed its yearly revenue target of PkR460bn to PkR452bn owing to relatively higher target for the last month of FY03. Reportedly the government has conveyed this downward adjustment to the International Financial Institutions as well. And the FY03 fiscal deficit of 4.6% has already incorporated this revenue shortfall. The revenue collection as a percentage of GDP has also increased.

FISCAL DEFICIT: Owing to better revue collection and tight fiscal management, the government has been able to secure a 60bps YoY improvement in fiscal deficit for the current FY. We believe that this figure also includes the reported shortfall in the state run utilities.

INVESTMENT & SAVINGS: The survey has also reported a significant improvement in the investment and saving trends. Investment as a percentage of GDP has improved to 15.5% while savings have gone up to 19.2%.

TRADE: The survey has reported a high growth in trade activity of the country during FY2003. Though the trade deficit number is larger than anticipated, it looks reasonable if we remove the impact of high international oil prices during the period.

DEVELOPMENT ACTIVITY: The Economic Survey has also reported the enhanced budgeted allocation of PkR146bn. However, other media reports also suggest that owing to the ongoing political uncertainty, actual progress on development work could not match with the increased allocation. Reportedly, only 30% of the budget for the development spending has been spent till now. We are of the opinion that rest of the budgeted allocation will be made out during next FY.

INFLATION: Though we have seen inflation rising up and coming down during the current year in line with the international oil prices, the reported figure of 3.3% is very much in line with the year-end target.

FOREIGN DIRECT INVESTMENT: This is an area where the government has not been able to show a good performance. Against its full year target of US$1bn, the survey has reported that country has been able to attract only US$658mn. However, we believe that the slippage on this target is beyond government control as one of the main cornerstone of government's FDI target, PSO's privatization, could not take place during the current financial year. External side. The external side of the economy was very comfortable with reserves continued improving to US$10.5bn. The net foreign debt number has also been reduced by US$949mn.






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