Updated March 12, 2004


The index came closer to 5000 during this week than it ever has in the past, with the index closing at 4,917.87 on Monday. However, it appears that the "psychological barrier" keeping the market from crossing the 5000 points barrier is intact and the market slipped back from its all time high. Overall, the index closed at 4,903.85 at the end of Thursday's session compared to 4,900.43 on Friday last week.





This translates into a 0.07 percent WoW gain. The market generally saw small movements on the first four days of the week with the biggest move (in absolute terms) of -26.37 points on Wednesday. As indicated previously, small range-bound movements are a natural consequence lack of news that can drive the market in a particular direction. Moreover, volumes remained low throughout the week and are expected to decline further during the coming trading sessions.


As indicated above, the psychological barrier seems intact and it appears unlikely that the index will cross the 5000 points mark without the backing of strong positive news, despite the fact that it would take less than a 2 percent gain over Thursday's close of 4903.85 to do so. Thus, next week is likely to continue to witness range-bound movements in the index. Lack of news from either the corporate or the political front is expected to further strengthen this trend. Overall, the most significant factor likely to impact the market during the coming trading sessions is the Pakistan-India cricket tournament. Volumes are expected to decline considerably with a number of punters shifting their focus towards the matches rather than the local bourse. These low volumes should further ensure the maintenance of range-bound trading in the market during the coming week.


The major developments this week were:

* The Task Force for rationalization of power tariffs proposed an immediate reduction of power tariffs by an average of 54.3 paisa/unit for WAPDA and 15 paisa/unit for KESC. The proposal is yet to receive the approval by the government. The Task Force also opposed the petition recently filed by WAPDA for an increase in power tariffs and proposed reduction in provincial duties and taxes for bringing about a reduction in power tariffs.

* The EU formally imposed anti-dumping duty of 13.1 percent on bed linen imports from Pakistan.

* Pakistan's trade deficit expanded during the first eight months of the current fiscal year, to $1.216bn, 45% higher YoY. As per the Federal Bureau of Statistics, the rise in the deficit was caused by the 13.8% YoY rise in exports to $7.878bn and 17.2% YoY rise in imports to $9.094bn. Thus, Pakistan's import coverage ratio dropped from 89.2% attained last year and 87.7% attained last month, to 87% for the July-February 2004. The government's targets for the current fiscal year are $12.1bn of exports, $12.8bn of imports and a trade deficit of $700mn.

* As per a newspaper report, cement prices were recently raised by PkR5-10bag. The government has called a meeting of all the cement manufacturers to discuss this issue.

* According to the CBR Chairman, PkR312bn were collected during July-February 2004, which is 14.8% higher than the amount collected during the same period last year and is 1% above the provisional figures that were released earlier. This collection figure is 4% higher than the target of PkR298.9bn that was set for the period and represents 61% of the full year target of PkR510bn.

* The Securities and Exchange Commission stated that it will initiate a probe into allegations of insider trading in the shares of Pakistan Oilfields Limited. SECP reportedly received data spread over 450 pages and other information from the Karachi Stock Exchange relating to the trading activity in POL on Feb 23. The probe relates to the announcement of POL's half yearly results in two stages, where the announcement relating to the dividend payout was received after a lag.

* The government declined the proposal by the Power Sector task force to allow WAPDA to refinance its total loans worth PkR149bn. The reason cited for the refusal was the involvement of many multilateral agencies, which according to the government were unwilling to refinance the loans. The government however agreed to allow WAPDA to prepay loans worth PkR20bn to the government through borrowing from the local banks.



* The State Bank has asked banks/DFIs to report fresh loans granted by the institutions to a party after rescheduling or restructuring of its existing facilities separately.

* The IMF asked the government for updated revenue collection figures for the current fiscal year as part of its 8th review of the PRGF that was extended to Pakistan. An IMF mission is arriving in Pakistan later this month to discuss the current year's performance and next year's targets.

* Representatives of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) met with the Finance Minister and presented their point of view with regards the decision to allow the import of used/reconditioned cars and to lower duties on imports, which they felt would be harmful to the industry. Reportedly, the Minister assured the visitors that their investments would remain secure and encouraged them to further increase their investments. The auto assemblers also met the Finance Minister later in the week to present their point of view with regards to the government's recent policy moves related to the reduction in import duties and the import of reconditioned/second-hand cars. The assemblers pointed out to the minister that premiums have declined from PkR100,000-150,000/unit last year to 40,000-70,000/unit currently. Furthermore, they pointed out that delivery times had also dropped significantly from 1 year to 4-6 months. Lastly, the visitors pointed out that the industry planned to invest PkR8bn in addition to the investments that have already been made to increase capacity and productivity, which they expect will result in the increase in car production to 188,000 units per annum by FY2007-08.

* Money supply growth broke the FY04 target of 11.06%. As per newly released statistics, the money supply grew by 11.07% during the first 8 months of the current fiscal year on the back of the strong 12.7% growth in net domestic assets. Interestingly, during the same period last year, money supply grew by 10.7% on the back of the 93% growth in net foreign assets.