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.
The KSE-100 index has been persistently moving upward. What factors are
driving the market?
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.
What could be the future direction of market in short and medium terms?
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.
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.
How the divestment policy of the GoP has supported the market?
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.
What are the prospects of privatization of PSO and PTCL?
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.
Mutual Funds worth Rs 10 billion will be floated in next 3-6 months.
What could be the possible impact on the market?
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.