Apr 12 - 18, 2004






has been working with AKD Securities as an Investment Analyst for eight months now. After doing her major in Finance from Institute of Business Administration (IBA), Karachi in May 2003, she made her debut in the equities brokerage industry. As far as she remembers, Finance has been her passion and feels that AKD Research has been instrumental in helping her discovering her true potential and implementing the theoretical knowledge, which she had acquired during her specialization. She is currently covering Fertilizer, Agriauto, Airline and fast moving consumer goods (FMCGs) sectors.

PAGE: The KSE-100 index has been persistently moving upward. What factors are driving the market?

MUNEEZA IMTIAZ: Negative real returns on deposits are raising liquidity preferences in the economy, leading to greater speculative balances and risk appetite. This is being translated into higher asset prices, including equities. The fundamental aspect of this bullish momentum is the positive change in the country's economic indicators, which has translated into increasing demand for goods and services, resulting in improved profitability for almost all the sectors.

PAGE: What could be the future direction of market in short and medium terms?

MUNEEZA IMTIAZ: If the speculative run up in prices continues to be the driving force of the market, I don't foresee a major correction in the near to medium-term. Our short-term range for the KSE-100 index is between 5200 to 5400, while in the medium-term the market is likely to range between 5100 to 5750. Some important news to be watched out for includes the possible recalling of Expression of Interest for the privatization of Pakistan State Oil Company (PSO). Besides this, the other factors are possible revamp of Fertilizer Policy, the talk of breakup of Pakistan Telecommunication Company (PTCL) into three different entities to help its privatization (could mean cellular arm will be sold off first one time jump in dividend) and the bidding for two cellular licenses.

PAGE: Which of the sectors are attracting specific attention of investors?

MUNEEZA IMTIAZ: The recent bull-run has been led primarily by cement, gas, fertilizer and Commercial Banking stocks. However, a broader picture indicates that almost all stocks irrespective of their operational and fundamental status have contributed to the upwards swing in the KSE-100 index over the past 1-2 years. Though, prices of second and third tier scrips have also gone up at the back of their earning potential, it is yet to be seen whether the payouts by these companies come up to the expectations of the investors or not.

PAGE: How the divestment policy of the GoP has supported the market?



MUNEEZA IMTIAZ: The GoP's divestment policy has been able to attract a lot of institutional and retail interest towards this market, where successful IPOs and POs of scrips like National Bank of Pakistan (NBP), Oil & Gas Development Company (OGDC) and Sui Southern Gas Company (SSGC) have acted as an added trigger for the bullish sentiments. Since the demand for quality scrips still exceeds supply, offer of shares of other state-owned entities to general public will enhance the free float and lessen the pressure on prices. A large number of state-owned entities are still not listed at local stock exchanges.

PAGE: What are the prospects of privatization of PSO and PTCL?

MUNEEZA IMTIAZ: It seems that the GoP has kept privatization of PSO on the back bumper. Offer of shares of Pakistan Petroleum Limited (PPL). Kot Addu Power Company (KAPCO) and Pakistan International Airlines (PAI) to general public has moved up on the priority list. It is unlikely that PSO will be privatized in the near to medium-term, in fact the rumours are that the GoP may re-invite EoIs, which effectively means that there is no interested party at the moment. As for PTCL, I expect the company's subsidiary (PTML) to be privatized within the next 16-20 months, which will be followed by the sell-off of its other arms.

PAGE: Mutual Funds worth Rs 10 billion will be floated in next 3-6 months. What could be the possible impact on the market?

MUNEEZA IMTIAZ: As long as there is huge gap between returns on fixed income securities and stocks, the inflow of funds will be directed towards equities market. I feel that even at these levels there are sectors that offer yields in excess of 8-9%, which makes its lucrative for mutual funds. On a longer-term perspective, the continued growth prospects in certain sectors like Gas, PSF, Telecommunication, and Fertilizer, makes them attractive even at current prices, while others look a little suspect on capacity addition, particularly Cement. Our recommended portfolio is to stay long on sectors that have had a structural shift in demand. Allocations of 25-35%, in long-only and all equity funds, should be set-aside for power and banking sectors as a hedge against down slide in economic fundamentals.