THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated June 14, 2003

 

MARKET THIS WEEK

The post budget week saw the index gain 121 points during the week, and in the process forming yet another new high of 3264. The volumes also depicted a strong trend as average daily share turnover reached to 462mn shares as against 311mn shares in the previous week.

 

 

 

The presentation of the Federal Budget for FY2004 was the main feature of the market this week. Reportedly, the government struck a deal with the Opposition parties according to which the Opposition did not disrupt the budget session. The relatively smooth flow of the budget presentation subsided the fears of the market and the market responded positively to this development. Monday, the first trading day after the announcement of the budget saw the Index gain 53 points (1.65%). However, since then, the market's behavior has been very volatile. Second tier stocks, which do not have strong fundamentals, have by far been the major performers during the week which further raise our concern over the sustainability of the current up-trend in the index.

OUTLOOK FOR THE FOLLOWING WEEK: While the KSE-100 Index rose up substantially, we believe that the market is unlikely to continue this trend in the coming week. If one observes the performance during the week, the market has displayed a very volatile behavior. The Index has seen wild intra day swings throughout the week, with second tiers stealing the show. Until and unless, there is some positive fundamental news flow, we believe that the Index is likely to undergo a technical correction. We advise investors to maintain a very cautious strategy, trading only on daily basis. The current volatility in the market just not justify carrying over of long positions in to the next day.

FUNDAMENTAL CHANGES: The major developments this week were:

•Reportedly, the opposition moved ahead with a temporary understanding with the treasury benches for a relatively smoother running of the parliament. The disciplined protest from the opposition on the budget day was a result of this agreement.

•The government announced the Federal Budget for FY04 on Saturday, which was the main trigger for the market this week when trading resumed on Monday. The first trading day after the budget announcement saw the Index gaining 53 points as investors swarmed to the market on the back of the smooth flowing of the budget session. The cement stocks led the rally on the back of the government incentives to the construction industry announced in the budget.

•The Cabinet Committee on Privatization approved the privatization plan for 1QFY04. According to the announcement, the government plans to divest 5% additional shares of SSGC and NBP (5% green shoe option in both), while 2.5% shares of Oil and Gas Development Co. Ltd. (OGDCL) will be offered to the general public with a green shoe option of another 2.5%.

•The pre-budget overly enthusiastic money market got a reality check after the Finance Minister indicated that the government was expecting the interest rates to remain at the current levels. This became more evident in the recently held T-Bill auction where rates on the 12-month T-Bill fell by 30bps to 2.37%.

 

 

COMPANY REVIEW: OGDCL

The government has recently announced that it plans to divest 2.5% of its holding in Oil and Gas Development Company Limited (OGDCL) during 1QFY04.

The Initial Public Offer of OGDCL also carries a green shoe option of 100%, which means that should the green shoe option be exercised, the government would be divesting a total of 5% of its shareholding in OGDCL through the stock exchange. The purpose of this report is just to provide a preview of OGDCL and is entirely based on information collected through publicly available data.

Oil and Gas Development Company Limited (OGDCL) is the largest oil exploration and production company in Pakistan and is owned by the Government of Pakistan. The government has recently decided to offload its total shareholding in OGDCL through the stock market. The public offer, which is expected in 1QFY04, envisages an Initial Public Offer of 2.5% along with a green shoe option of another 2.5%.

OVERVIEW: The Oil and Gas Development Corporation (OGDC) was established in 1961 as a Statutory Corporation under the Government of Pakistan. Financial and administrative autonomy was given to the Corporation during the 7th Five Year Plan (1988-1993). It has been incorporated as a Public Limited Company with effect from 23rd October 1997 and is now known as Oil and Gas Development Company Limited (OGDCL).

OGDCL not only carries out exploration and development activities on its own but also enters into joint ventures for oil and gas exploration. Presently OGDCL is 100% owner in 4 concessions. In addition, it is the operator as well as a working interest owner in 15 concessions and partner in 17 concessions operated by other oil companies.

ACTIVITIES: OGDCL has conducted extensive surveys to identify potential hydrocarbon bearing structures and has carried out drilling in order to exploit available oil and gas resources. As of 11th January 2003, OGDCL has drilled 173 exploratory wells and 228 development wells.

FINANCIAL PERFORMANCE: The authorized share capital of OGDCL is PkR25bn. The issued, subscribed and paidup capital is PkR10.752bn, which is wholly owned by the Government of Pakistan.

As of January 1, 2003 OGDCL had a total manpower strength of 12,093 comprising of 1,634 officers/executives and 10,459 subordinate staff.

RESERVES: OGDCL's updated estimates for remaining recoverable oil and gas reserves as on 1st January 2003 stood at 10,050 billion standard cubic feet of gas and 145 standard million barrels of oil.

 

 

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

12.07

12.51

3.66

Total Turnover (mn shares)

1055.05

2311.99

119.13

Value Traded (US$ mn.)

664.26

1356.28

104.18

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. Shares)

211.01

462.40

119.13

Avg. Dly T/O (US$ mn)

132.85

271.26

104.18

KSE 100 Index

3141.82

3264.63

3.91

KSE All Shares Index

1995.14

2069.02

3.70

 

 

Source: KSE, MSCI, KASB