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
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.
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
•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
•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
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.
Mkt. Cap (US $ bn)
Avg. Dly T/O (mn. shares)
Avg. Dly T/O (US$ mn.)
No. of Trading Sessions
KSE 100 Index
KSE ALL Share Index