THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated June 21, 2003

 

MARKET THIS WEEK

The KSE-100 Index rose by 42.4 points (1.3%) during the week to close at 3307.09. The volatile trend exhibited by the market last week continued and the index fluctuated between a range of 3260-3300. Average daily trading volumes declined by 17% to 383mn shares.

 

 

 

The investors are continuously picking up stocks, which have not performed in the recent rally. One example of this behavior was Hub Power Company, the share price of which rose 2.37% during the week. The stock had been more or less stagnant throughout the bull-run of 300-points in the market. PTCL also witnessed investors' interest as the stock rose by 1.64% during the week. In addition, second tier stocks remained under the spot light. KSE MD's statement regarding fragility of the market was an eye opener for the retail investors.

OUTLOOK FOR THE FOLLOWING WEEK

The market is finally beginning to show some signs of pressure as badla volumes have also risen sharply. Coupled with that, badla rates in second tier stocks jumped up substantially, which is another cause of concern. We are of the opinion that the market is slightly loosing its steam and is ripe for correction. The volatility in the market is also exhibiting the increase in the level of risk. We advise investors to maintain a cautious approach and maintain an intra-day trading strategy. Over the near term, we expect only two major triggers which may move the market in the positive direction (i) favorable outcome of the President's visit to the US, (ii) any news flow on PSO's privatization.

FUNDAMENTAL CHANGES

THE MAJOR DEVELOPMENTS THIS WEEK WERE:
The Oil Companies Advisory Committee, in its meeting held on 15 June 2003, revised POL prices in the range of 0.6-2.5%. The marginal price hike was more or less anticipated by the market

State Bank of Pakistan (SBP) continued its efforts to move up the rates for forthcoming issue of PIBs when the bank mopped up PkR10bn from the market through an open market operation. The amount was picked up for tenure of 1 week and the rate offered was at 1.1%. Meanwhile, the yields on the 10-year PlBs jumped by over 100bps after the bank's announcement for the PlBs bidding. Reportedly, the central bank is trying to jack up the PIB yields to minimize the rate cut on the NSS.

IMF gave its nod to the release of the sixth tranche of US$123mn under the PRGF program to Pakistan. Though the Fund has raised its concern over the financial performance of the power sector, and some slippages in the overall reform program currently being implemented, we remain optimistic about the completion of the PRGF program.

The opposition tabled a no-trust move against the Speaker National Assembly. While we expect that the opposition's move is unlikely to be successful, it will once again make the government realize of the thin majority it commands in the National Assembly. The government has announced that it will put its weight behind the Speaker National Assembly, which is likely to be enough for the Speaker to pass through the no-trust move.

 

 

TELECOM SECTOR REVIEW: NEW DEVELOPMENTS

With the upcoming deregulation policy, things have become quite vibrant in telecom industry these days. Where all of a sudden, lots of activities can be witnessed in the sector. In order to capture the over all picture, we have discussed the new developments in this week's story. Our focus will be on Inauguration of WorldCALL new "Broadband Cable Network" in Karachi and PTCL's first corporate customer centre. In our opinion, with the announcement of deregulation policy, expected in next few weeks, these activities are likely to fuel up. We maintain our overweight stance for the telecom sector as a whole where PTCL is our favorite pick.

WORLDCALL BROADBAND CABLE NETWORK:

WorldCALL inaugurated its Broadband Cable Network in Karachi, where the group is already operating a similar facility in Lahore with around 40K+ customer base. With the inauguration of the cable network, WorldCALL has entered into the largest market of the country, Karachi where it can eventually become a fixed line operator after the deregulation of the sector. As mentioned above, the company is already operating in Lahore and possesses reasonable customer base to start with as a fixed line telephone operator. It is also important to note that WorldCALL also has plans to start similar cable operations in Islamabad in the medium term. With its existing strengths and future plans, WorldCALL has the potential to create a baby telco covering all the major cities like Lahore, Karachi and Islamabad. This, however, is likely to be too small to threat PTCL as a fixed line operator but will eat some market share of the incumbent. WorldCall is planning to invest around US$30mn in this project, going forward.

PTCL FIRST CORPORATE CUSTOMER CENTER

As a step towards market orientation, we appreciate PTCL's move of opening its first corporate customer service center. With the help of such steps, the company is putting an effort to save its huge customer base, which due to the deregulation will be open to new emerging competition. This is a right step in the right direction and we believe that PTCL needs to speed up its efforts to further improve its image to retain its customer base. In this regard the company has also signed an agreement with Pakistan Post Office where the customer can pay their telephone bills at the post offices as well. Apart from these the company is also planning to introduce cable and Internet services through the same cable, which provides telephonic services, where PTCL is also planning to launch TV channel to further facilitate its customer base. In our opinion these steps are likely to help PTCL in maintaining its dominance even in deregulated environment. We maintain our BUY for the company.

UPCOMING ATTRACTIONS:

With wireless local loop becoming the major growth engine in telecom sector we expect the mobile phone teledensity to outpace fixed line teledensity over the next few years in Pakistan. The reason for our believe is that at present there are approximately 2.4mn mobile phone subscribers in the country where Mobilink owns around 1.4mn subscribers, Ufone owns 500,000 and Paktel and Instaphone jointly own 500,000 subscribers. Mobilink is now planning to increase its capacity to 2mn while Ufone is planning to increase its capacity to 1.5mn subscribers. However, Instaphone and Paktel have not announced any capacity enhancement plans but we believe that they will also increase their capacity by at least 500,000 over the period of next one year. In our opinion that this enhanced capacity will be absorbed by the subscribers within 12-24 months owing to significant pending demand in the cellular industry at the moment. Thus, mobile phone teledensity is likely to come at par with the fixed line teledensity over next two years.

 

 

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

12.51

12.72

1.69

Total Turnover (mn shares)

2311.99

1917.39

-17.07

Value Traded (US$ mn.)

1356.28

1280.37

-5.60

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. Shares)

462.40

383.48

-17.07

Avg. Dly T/O (US$ mn)

271.26

256.07

-5.60

KSE 100 Index

3264.63

3307.09

1.30

KSE All Shares Index

2069.02

2106.50

1.81

 

 

Source: KSE, MSCI, KASB