Tuesday, on the other hand, proved to be the only
day in the week where the index closed lower than the previous day's
closing. Volumes remained low on both Tuesday and Wednesday, the last
two trading sessions of the year 2003. This was in line with
expectations since volumes tend to taper off during the last few
trading sessions of the calendar year. Thursday and Friday's sessions
registered very minor gains. While the closing values of the index
showed little movement, intra-day trading on both days remained
volatile. This resulted in reasonable price rises, followed by a
reversal of these gains by the end of the day. This pattern of trading
is reflective of the fact that there is little news in market to drive
stock prices in a particular direction.
OUTLOOK FOR THE FUTURE
The key driver of investment sentiment during the
next week is likely to be the outcome of the ongoing SAARC summit in
Islamabad. The cordial relationship that has been developing between
Pakistan and India over the past few weeks is expected to reach new
heights with the arrival of the Indian Prime Minister. Given the extra
effort being made by both sides to improve relations, it is unlikely
that any contentious issue will be raised during the meeting.
Additionally, the speed with which the privatization process of HBL
has been finalized is likely to revitalize the interest of investors
in the privatization of PSO. This, in turn, is likely to lead to a
boost in general market sentiment.
1QFY04 — ON TARGET FOR 5.4%
The State Bank released its 1QFY04 report wherein
it predicted that GDP growth would beat the targeted 5.3% for FY04 on
the back of better than targeted industrial and export performance.
Whilst the agricultural sector is expected to attain its target,
imports are forecast to grow at a higher than targeted rate. At the
same time, inflation as measured by the CPI has risen marginally on
the back of consumer demand growth. For the future we see growth
continuing strongly however, the pressure on the rupee from the
reduced current account surplus and increased capital account deficit
and inflationary pressures in the economy may put downward and upward
pressures on the rupee and interest rates respectively.
The real sector of the economy saw strong growth
during the quarter, and looks to be on target to meet and in some
cases exceed the targets set for FY04.
Agriculture sector: The agricultural sector should
meet its target of 4.2% for FY04. The sector was boosted by a strong
rice harvest on the back of improved water availability. However, the
early rains damaged the cotton crop and so it looks likely that the
year's cotton target will not be met.
Industrial sector: Industrial output on the other
hand is expected to grow by 7.2% versus a target of 7.1% for FY04.
This target beating performance is based on the 8.9% growth in the LSM
sector versus an FY04 target of 8.8%. The sector grew by 10.1% (2003:
4.3%) during the quarter on the back of strong growth in Large Scale
Manufacturing (11.7%) and electricity generation (6.5%). This growth
was driven by strong demand for consumer durables on the back of low
interest rates, increased credit availability and increased consumer
Inflation growth remained on a downward trend that
began in February 2003 during the quarter relative to the same period
year before. This deceleration was more pronounced in the case of food
items leading to a 2.6% annualized CPI inflation rate by the end of
September 03, which is lower than the 3.6% recorded at the end of
September 02. Whilst the rate of inflation had previously bottomed out
at 1.4% in July, it has spiked during October 03 on the back of
increased energy and food prices on account of continued problems in
the Middle East and the Ramazan effect respectively.
Net private sector credit saw strong growth during
the quarter, +PkR23.1bn versus -PkR26.8bn last year, on the back of
the low interest rates, increased emphasis placed on consumer and
agriculture sector financing by commercial banks and increased
consumer awareness regarding the availability of financing options.
Credit off-take was further boosted by the high financing requirements
of the textile sector in view of the cotton crop shortage. Demand for
money was further affected by the first rise in net government
budgetary borrowing in eight quarters.
Fiscal discipline was visible during the quarter as
the consolidated budget deficit narrowed slightly from PkR41.0bn to
PkR40.9bn (0.9% of GDP) when compared to the same period last year.
This marginal fall in the deficit was due to a 7.9% YoY rise in
revenue collections to PkR12.1bn on the back of a 20.7% YoY rise in
non-tax revenues, a 3.6% YoY rise in tax revenues and higher payments
from the USA for logistical support. Expenses on the other hand rose
by PkR12bn, (6.2% YoY) however, current spending dropped by PkR2.2bn,
1.4% YoY, public enterprise expenditures dropped by 1444.2% YoY and
interest payments declined by 10.1%YoY. Defence spending however shot
up by PkR13.1bn, 40.3% YoY, due to operations on the Afghan border,
but this is to be paid for by the US logistics support receipts.
The overall balance remained at $770mn during the
quarter on the back of an 18.5% YoY decline in the current account
surplus and a 131.8% YoY rise in the capital account deficit. The
decline in the current account surplus was caused by a 14% YoY fall in
workers' remittances, the inclusion of travel related payments
(increase of 1114.3% YoY) through exchange companies and a 23.1% YoY
fall in the trade balance during the quarter. The rise in the capital
account deficit during the quarter on the other hand was caused by a
fall in foreign direct investment by 31.2% YoY, mainly due to a fall
in investment in the chemical sector due to inflows related to ICI
Pakistan's expansion last year, a 59% fall in non-food aid and
increased settlement of foreign currency trade related loans against
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