THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated November  13, 2003

 

MARKET THIS WEEK

On the back of its 6% WoW rise the week before, the KSE-100 Index continued its upward march, rising by 2.5% on a WOW basis. Monday was positive as usual, boosted by expectations of the refunds from the OGDCL subscription, a government-opposition pact regarding the LFO issue and improved Indo-Pak relations. Furthermore, rumors regarding PSO's privatization next month and a proposed price created further excitement in the market that was offset to a certain extent as retail investors sought to square their positions.

 

 

 

Tuesday, institutions were active on the back of the positive rating assigned to the new PIB issue by S&P. Wednesday's session was boosted by the SBP's decision to keep cut off yields on T-Bills steady. Furthermore, excitement was created on the back of strong results expectations from cement and banking companies. However, continued PSO speculation increased market volatility while institutional buying helped the market consolidate its earlier gains. Thursday saw the market lose ground backed by rumors of a delay with regards to PSO's privatization and retail investors' profit taking. The fall was compounded as banks sought to book capital gains as they prepared for their results announcements and as the market prepared for the restriction on COT transactions which would be limited to 30 selected stocks from Monday. Friday saw the continuation of the trend that was however, offset by institutional buying at lower levels and on the back of new rumors regarding PSO's privatization.

OUTLOOK FOR THE FUTURE

With the OGDCL refunds taking place, we expect a portion of the refunded amount to enter the market, which should boost the market in the upcoming week. Furthermore, as we approach the end of December, we would expect investors to begin targeting companies that may be expected to report strong results and dividends. This should be boosted by the positive statements coming out of New Delhi. However, any decision by the MMA to ignore the government's request to defer their protest till after the SAARC conference in January may deal a blow to the market.

FUNDAMENTAL CHANGES

The major developments this week were:

•A highly confident treasury and a statement regarding a compromise from the MMA leader indicate that some positive outcome regarding the LFO issue may become a reality in the short term.

•The SBP carried out the last auction of the jumbo bond series on Friday, which helped it nearly achieve its original target of collecting PkR50bn. It accepted bids for PkR8bn worth of 10-year bonds, PkR3.6bn worth of 5-year bonds and PkR2bn worth of 3-year bonds. The cut-off yield on the 10-year PIB was left at the same level as the last auction, i.e., 6.23%. However, yields on the 3 and 5-year bonds declined marginally from 4.09% to 3.95% and from 5.12% to 5.00% respectively.

•According to figures released, Pakistan's trade deficit during July-November widened by 3.67% YoY to $449mn, even though exports rose by 11.53% YoY to $4.83bn whilst imports rose by 11.09% YoY to $5.28bn. However, the ratio of exports to imports actually improved during the period to 91.5% from 91.15% recorded last year.

•According to an official of the SBP, Pakistan has to pay $176mn in interest and debt repayment on December 13th, on its foreign currency bond maturing in 2005.

THIS WEEK'S TOP STORIES

PSO PRIVATIZATION - ANOTHER WAVE OF SPECULATION!

Though the news item regarding PSO's privatization appeared in yesterday's Business Recorder appears to be fake, it may generate some speculative hype in the market today. This will definitely help the vested interest holders behind this news to achieve their objectives, but we rule out any permanent recovery in the share price of the stock. We maintain our earlier stance that PSO's privatization is still anybody's guess. Though the government has been able to resolve most of the irritants; higher price expectations from the government, differences in views of the interested parties on this privatization and the ongoing political uncertainty are the factors that are causing delays in the privatization of this giant OMC.

PTCL - SPECULATION ABOUT PRIVATIZATION & CORPORATE SPLIT!

With shifting focus of the speculators among various privatization plays, various stories about PTCL have started emerging over the last 2-3 weeks. First such speculation is about the Privatization Commission (PC) taking an initiative of calling fresh EOIs after the reports of emerging interest for the giant telecom. Second speculation was surged after the press reports regarding government's consideration regarding splitting the company into various segments either as per business basis or on a regional basis. Though both these speculations caused a positive impact over the stock price and enabled it to outperform the other large cap stocks, theoretically both are in direct conflict to each other.

 

 

MOBILE PCOS

Allowing mobile PCOs in the rural areas is definitely a bold step taken by the Pakistan Telecom Regulatory Authority. Though villages near to the large cities have already illegal PCOs using mobile phones, this step will open the rural side of the telephony to the cellular operators in the country. Having said this, we do not believe that mobile PCOs will have similar economic attraction as other fixed line operators enjoy at the moment.

FFC BIN QASIM - 2.66% RIGHTS ISSUE!

A 2.66% rights issue at par from FFC Bin Qasim is unlikely to make any significant impact on the current state of affairs of the company. It will neither cause any significant dilution in earnings nor will it have any negative implication on the share price. Having said that, the current run up in the share price of the company makes it a perfect candidate for a Sell at current levels.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

15.63

15.96

2.11%

Avg. Dly T/O (mn. shares)

345.50

304.63

-11.83%

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

375.45

323.98

-13.71%

No. of Trading Sessions

5

5

 

KSE 100 Index

4199.96

4305.44

2.51%

KSE ALL Share Index

2661.73

2722.28

2.27%

 

 

Source: KSE, MSCI, KASB