THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated January 10, 2004

 

MARKET THIS WEEK

As expected, the outcome of the SAARC summit helped stocks settle higher than previous week's close. The index rose from 4,473.93 to 4,570.14, translating into a WoW gain of 2.15%. Generally positive development of relations between India and Pakistan, including a meeting between President Musharraf and Indian Prime Minister Vajpayee, drove stocks higher on the first three days of the week.

 

 

 

 

The SAARC led mini-rally peaked on Wednesday when the index rose by 1.12% in response to news that Pakistan and India intend to hold peace dialogues next month to resolve all outstanding issues, including Kashmir. Similar to last week's trading pattern, the index fell only one day in the week as Thursday's session marginally returned some of the gains in response to news that Kuwait Petroleum is reconsidering options for the PSO bidding. However, the last trading session of the week helped recoup the small decline as the index closed at well over the 4500 mark.

Outlook for the Future

With continued absence of significant news from the corporate front, the direction of the market during the next week will primarily be driven by political developments. Particularly, after the successful completion of SAARC, the market will be looking for solid actions to backup the verbal gestures made by both India and Pakistan during the summit. Although neither side is likely to make any radical move, there is an expectation that some steps will be taken to solidify the goodwill that has been developing between the two countries. The delivery of OGDC shares to shareholders is also likely to impact trading. More precisely, trading in the shares of the company is likely to become more volatile. Given the large volume with which OGDC has been trading over the past few weeks, this volatility is likely to carry over to the index as well.

FUNDAMENTAL CHANGES

The major developments this week were:

•The three-day SAARC summit was concluded in Islamabad during the early half of the week. The highlight of the summit was a one-on-one meeting between President Musharraf and Indian Prime Minister Vajpayee, which led to the signing of a joint declaration between the two countries.

•The State Bank announced its plans to auction 15 and 20-year PIBs on January 19th. The sale target has been set at PkR3bn for each bond. While the yields on these bonds will be determined by market forces, the State Bank has indicated that the prevailing interest rate structure will not be altered.

•The government reduced import tariffs on fertilizer machinery from 10% to 5%.

•Figures released by the Federal Bureau of Statistics indicated that for 1HFY04, exports grew by 13% YoY to US$5.88bn (1HFY03: US$5.197bn) whilst imports grew 14% YoY to US$6.609bn (1HFY03: US$5.787bn). As a result, trade deficit increased to $729mn from the $590mn recorded during the same period last year.

•The offer for sale of SSGC, initially scheduled between Jan. 8-10, has been delayed. The tight security arrangements during the recent SAARC summit, which resulted in a complete cordoning off of certain areas to the general public, has been cited as the reason for the delay.

 

 

•A newspaper report issued on 7th January indicated that Engro has plans to move into the telecom market through a joint venture with Vodafone. However, this news later turned out to be a false rumor.

•An article printed in the New York Times alleged that Pakistani nuclear scientists supplied centrifuge technology that helped Libya in enriching uranium for use in nuclear weapons.

•A report carried by Bahrain's newspaper indicated that the Kuwait Supreme Oil Council has recommended further study into possible investment in Pakistan's retail fuel market.

•The SBP conducted an auction of 6-month T-bills on Wednesday and collected PkR8.3bn, against a target of PkR5bn, in the process. This led to a slight rise in the cut-off yield from 1.66% to 1.72%, but the weighted average yield was left unchanged at 1.64%.

•The World Bank and IMF are reportedly working together to release $350mn to Pakistan under the Poverty Reduction Support Credit (PRSC). The final disbursement of the funds will depend on Pakistan implementing certain reforms that were mentioned in the PRSP.

•IGI announced plans to increase its stakes in these three associate companies, namely, Nestle, Packages and Tri-Pack. The size of this investment is likely to be around PkR200mn.

•Shares of OGDCL were delivered on Friday. Scrips of all shareholders who requested physical shares were distributed to the banks, while deliveries through the CDC were passed on directly to the depository.

SECOND TIERS CONTINUE OUTPERFORMING THE FIRST TIERS!

With reference to our daily dated December 11th, second tiers continued outperforming the first tiers whereas the first tiers still appear to be a victim of exhaustion owing to multi thousand points bull run and shifting of interest from the current first tiers into government divestments. We are of the opinion that the present trend may continue for another week. However, first tiers will get their much deserved standing once again just before the result announcements. Why? Strong earning performances and cash payouts will set the tone. This puts another question before us. Will this likely performance take the index beyond 5000? Theoretically it can; however, it looks difficult owing to two reasons: (I) the shifting of interest from second tiers to first tiers will lead to an underperformance from the second tiers; and (II) commercial banks appear to be net sellers in the market.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

16.64

17.03

2.34%

Avg. Dly T/O (mn. shares)

209.11

246.15

17.71%

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

235.51

233.00

-1.07%

No. of Trading Sessions

5

5

 

KSE 100 Index

4473.93

4570.15

2.15%

KSE ALL Share Index

2839.81

2906.87

2.36%

 

 

Source: KSE, MSCI, KASB