THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated Aug 09, 2003

 

MARKET THIS WEEK

The stock market continued its upward trend this week too. A significant increase in volumes along with shifting of interest from the less fancy stocks into the top tiers are the two key feature of the market this week. Average daily turnover for the week was also up 36% to 732mn shares. Four factors were mainly responsible for the continuation of the bull run: i) despite SBP's aggressive money mopping up, the

 

 

 

market remained fairly liquid with atleast PkR20-25bn worth of excess liquidity, which forced the institutional investors to go aggressive in the stock market and at the same time also resulted in the sustainability of the current badla rates; ii) pre-result drives in the stocks like POL, PSO and Hubco are providing the market further support in its bull run; iii) the usual pre-bid date speculation in PSO was also at its top as punters were speculating on the PC's board meeting scheduled for Friday; and iv) positive news flow on the political side where a resolution on the Legal Framework Order is very much likely.

OUTLOOK FOR THE FOLLOWING WEEK

Given the current enthusiasm of the investors and the positive news flow, we do not expect an end to the ongoing bull rally in the short term. And more importantly, the awakening of PTCL and Hubco is likely to increase the momentum of the current bull run. Even PSO's rally is unlikely to get affected with the absence of announcement of the bidding date, as PSO is expected to announce its FY03 results next week. And in case of a bonus issuance, the recovery in PSO will be unprecedented. We also expect a further increase in the market volume with most of the activity likely to be skewed towards the top tiers. The recently "limit-ups" like TRG, Maple Leaf and Fauji Cement are likely to face the reversal of fortunes as the rallies in these stocks have very little to do with fundamentals.

FUNDAMENTAL CHANGES

THE MAJOR DEVELOPMENTS THIS WEEK WERE:

•In an effort to exploit the opportunities provided by the deregulation policy, PTCL has decided to install 200,000 wireless lines in different regions. PTCL will utilize this opening by spreading wireless solutions and is likely to give tough competition to not only the new entrants, but to mobile service providers as well.

•Taking another step towards cutting costs, PTCL signed a new agreement with British Telecom for uplink services of fiber link bandwidth following the expiry of a similar contract with Singtel. Reportedly, British Telecom would be charging US$50,000pa for the same service for which Singtel was charging US$200,000pa.

•The Managing Director of Pakistan State Oil stated that the investment plan of the company to set up a refinery would be given a final approval by the new owners, post privatization of the oil giant.

•Exports were up 8.98% to US$890.034mn while imports were at US$997.818mn, up 7.61% YoY in July this year. As a result of higher YoY increase in exports, the trade deficit has come down to US$107.784mn, almost 2.51% lower YoY.

•The LFO issue has seen a likely resolution this week. The government has made three offers to the MMA regarding (I) Presidential term for the uniform upto October 31st 2004, (II) National Security Council being reportable to the parliament, and (III) Presidential dissolution powers for the parliament will be subject to the approval of the Supreme Court.

 

 

•The government now seems to betaking serious note of high cement prices, even after the reduction of 25% in CED charges. In this regard the Ministry of Industries and Production called a meeting of cement manufacturers on 8th of August.

•The response to SBP's t-bill auction was unprecedented. Against its planned size of PkR45bn, the bank received total bids worth PkR94bn. This response has also encouraged SBP to raise its target. The bank has accepted bids over PkR51bn, around PkR41.127bn for 12 months and PkR10.226bn for 3 months paper. The cut off yields have also come down significantly to 1.089% and 1.423% for 3 months and 12 months terms respectively. The declines in the two maturities are 54bps and 75bps respectively.

•Reportedly, WAPDA has awarded a contract to Karachi Container and Engineering Limited for supplying 55,000 tons per month/ 666,000 tons per annum High Sulphur Furnace Oil (HSFO).

•The prospects of high growth in the auto sector has raised the optimism level of all the automobile assemblers in Pakistan.

•Karachi Stock Exchange finalized the auction of the 4 membership seats. KSE had earlier asked the top three bidders to match the bid offered by Pak-Kuwait Investment Company (PKIC). The fourth membership seat has been awarded to Habib Bank AG Zurich, which agreed to raise its bid.

THIS WEEK'S TOP STORIES

DECLINE IN PETROLEUM CONSUMPTION

Overall consumption of Petroleum, Oil and Lubricant products registered a decline of 2% YoY. Furnace Oil (FO) consumption recorded a decline of almost 6%, and has been the major factor responsible for the decline in overall consumption of POL products. Increased availability of gas and high water availability has resulted in reduced off-take of FO by the power sector, which accounts for the majority of FO consumption in the country. In addition, switchover exercise to coal from FO by major cement manufacturers has also served to reduce FO consumption in the country.

PTCL - THE KING LIVES ON!

With the telecom sector now officially open to new entrants, PTCL has increased it pace of preparation for the expected competition. During our visit with the company's management we witnessed quite a few positive changes, which will definitely help PTCL re-establish its image amongst the general public. With the induction of fresh blood with good educational and professional backgrounds into management, a focus on market orientation and the realization of the need to overcome its inefficiencies, PTCL seems to be at the beginning of a new era.

ENGRO — ANALYST BRIEFING

While most of the blue chips are still preparing their half yearly accounts, here is one good example which has even made a presentation to the analysts. Engro, the premier in this tradition has in fact changed the venue of this event from the rowdy place of KSE to the calm head offices of the company.Whilst the operating highlights of the company were very much there in the result announcement made to the KSE, the analyst briefing was highlighted the urea industry outlook, state of affairs of company's other businesses and company's future plans.

ICI - YOY GROWTH, BUT QOQ DECLINE

We expect ICI Pakistan to post after tax profits of PkR285mn (EPS: PkR2.05). However, almost 60% of earnings in 2H03 are accounted for by 1Q03 results (PkR172mn). We believe that the market has more than discounted all the positive elements of the result announcement. While 2H03 results are likely to show a 26% YoY growth, 2Q03 results are not likely to be strong. We expect ICI Pakistan to register a decline of 34% QoQ in its bottom line. 1Q03 was exceptional for all companies with exposure to the oil chain. However, the decline in prices in April-03 has affected all the players significantly.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

15.45

16.61

7.44

Avg. Dly T/O (mn. shares)

466.53

731.85

56.87

Avg. Dly T/O (US$ mn.)

411.68

735.67

78.70

No. of Trading Sessions

5

5

 

KSE 100 Index

4019.52

4322.93

7.55

KSE ALL Share Index

2574.33

2755.78

7.04

 

 

Source: KSE, MSCI, KASB