CAPITAL MARKETS

 

1- FOREX KERB WATCH

2- COT WEEKLY REVIEW

3- FINEX WEEK

4. STOCK WATCH
5. STOCK MARKET AT A GLANCE


STOCK MARKET AT A GLANCE


By SHABBIR H. KAZMI
Updated Mar 19, 2005

 

 

The KSE-100 index crossed the 10,000 mark this week. However, the market continued to witness high volatility throughout the week. On Monday, market breached 10,000 levels on the back of fertilizer, cement, and oil sector. OGDC remained in the limelight throughout the week. On Tuesday, OGDC led the index and the market witnessed the sharp gain. Wednesday saw selling pressure and most of the profit taking was witnessed in the oil stocks. However, other sectors like fertilizer, cement and banking also felt the heat of profit taking. On Thursday, market sentiments were at it its lower helm and KSE-100 index plunged by a mammoth 441 points. On Friday, market bullish trend resurfaced during the first trading session on the back of rumors of a US$2/share reference price for PTCL. But, below market consensus result of NBP dragged the index in the negative territory. On the whole, KSE-100 index lost 104.31 points over last week.

OUTLOOK FOR THE FUTURE

We reiterate view of maintaining a cautious approach for next week. In our view, privatization fever is almost over in the market. In sum, the sentiments are likely to remain weak during the next week. We are advising our investors to restrict their trading on stop loss basis. Fertilizer sector will remain on the driving seat on the back of higher demand and rising urea prices. We expect oil sector to remain range bond.

FUNDAMENTAL CHANGES

The major developments this week were:

•PIB auction is to be held on Mar-26.

•PkR202bn PSDP is expected to remain under utilized.

•Car production up by 24.5% YoY during Jul-Feb.

•Industrial sector grew by 13.91% during the first seven month of current fiscal year.

•The Ministry of Privatization has undertaken to float the shares of State Life Insurance Company (Slic) and United Bank Limited (UBL) before the end of FY05.

•The Bank of Punjab has decided to set up an asset management company.

•Commenting on the recent trend in oil prices, the Iranian oil minister has expressed his opinion that the OPEC is satisfied with a higher band of oil prices.

•Telenor Pakistan has launched its postpaid and prepaid cellular phone service.

•The Karachi Stock Exchange has decided to change the existing composition of the KSE-100 index, which would be implemented from April 01, 2005.

•Yields of 3-M and 12-M T-bill increased by 26bps and 46bps.

•Secretary of State, Condoleezza Rice, discussed US discomfort on the Iran gas pipeline project whilst in India.

•World Trade Organization (WTO) Council has deferred Pakistan's request for extension of deletion program for the local auto- manufacturers

•In a record-breaking spree, crude oil prices soared to a new high of $57.60/bbl on the New York exchange.

•According to the data released by State Bank of Pakistan (SBP), country's total worker remittances were recorded at US$2,606mn in the first 8-M of current fiscal year

•The clash, which involved the Bugti tribesmen and the Frontier Corps, resulted in the killing of five FC personnel and as many as fifty Bugti tribesmen whilst injuring another 150.

NATIONAL BANK OF PAKISTAN — CY04 RESULTS REVIEW

National Bank of Pakistan announced its CY04 results, posting after tax profits of PkR6,243mn (EPS: PkR12.68). The results show a 49% improvement over last years profits of PkR4,811mn (EPS: PkR8.53). Although the average lending rates declined during CY04, a corresponding decline in deposit rates enabled the bank to report a 14% growth in net interest margins. Another factor driving the growth in the net interest income has been the rising advances to deposit ratio. Non-interest income of the bank also showed a 15% growth, which in our opinion has been mainly driven by the strong growth in fee based income of the bank. NBP announced a 15% cash dividend and a 20% stock dividend for the year, which although was handsome fell slightly short of market expectations.

CY04 RESULTS

National Bank of Pakistan announced its CY04 results. The bank posted after tax profits of PkR6,243mn (EPS: PkR12.68), 49% YoY higher when compared to last year. The results show a massive improvement over last year despite a decline in average lending rates last year. The bank, however, has been able to curtail the impact of this through a corresponding decline in deposit rates.

A HANDSOME PAYOUT

NBP announced a cash dividend of PkR1.50/share, and a stock dividend (bonus) of 20% in addition to the cash payout. For the last three years, National Bank has been maintain a consistent cash payout of PkR1.25/share. The stock dividend, although equivalent to last year at 20%, however fell slightly below market expectations. The bank also informed that it has already applied for an increase in the authorized paid up capital of the bank to PkR7.5bn from PkR5.0bn.

 

 

STABLE NON-INTEREST INCOME

Income from capital markets made a significant proportion of last year's profits. Though capital market income has also been significant this year, its lower than last year. However, the decline in capital market income has been more than compensated from the fee based income, which has picked up primarily owing to higher trade volumes in the last year. We expect the non-fee income to remain strong in coming year as well. The income from capital markets should also pick up owing to the strong performance by the stock market in CY05.

THIS WEEK'S TOP STORIES

PRIVATIZATION — ANOTHER MILESTONE ACHIEVED

With the pre-qualification of parties for the privatization of Pakistan Telecom Co. Ltd. and National Refinery Limited, another milestone has been achieved by the Privatization Commission. Almost all the big names appearing in the expression list have been pre-qualified by the Privatization Commission. However, we now expect privatization news flow on these two companies to dry down, with the pre-qualified parties now getting busy with the due diligence process. So while the stock prices of the two companies are likely to react strongly to the pre-qualification news, there is not much news flow expected for a couple of months. On the other hand, Pakistan State Oil and Pakistan Petroleum Limited are likely to see some continued excitement with their Expression of Interests due on 31-Mar-2005 and 30-April-2005, respectively.

INFLATION — RISING INTERNATIONALLY

We are revising our inflation target for FY05, owing to the rise in both domestic and international oil prices. Our revised inflation target stands at 8.2% compared to our previous target of 7.3% for FY05. Although, we are optimistic that inflation numbers will be moderate from Mar-June 05. We believe that Pakistan is not the only country, which is encountering inflation. Even developed countries like US, EU, and country like China is facing inflation worries. China's CPI inflation rose to 3.9% in Feb-05, up from 1.9% in Jan-05. According to the data released by Federal Bureau of Statistics (FBS), inflation rose by 9.95% year over year in Feb-05, as compared to 4.3% during the same period last year. Again, food inflation (carrying 40% weight) went up by 12.91%, followed by housing rent (12.34%) in the month of Feb-05 alone. In our view, food inflation remained higher because 1) unexpected rainfall, generally in Pakistan and particularly in upcountry, caused a disruption in food supplies 2) food supply-bottlenecks by and large fueled the food prices, 3) food inflation was lower in Feb-04, and thus the low base affect once again resulted in high inflation in Feb-05. Looking forward, we expect that food inflation is likely to come down in the remaining part of the year due to 1) High base affect will come in to play, and 2) pressure on food price is likely to ease off as wheat crop is expected to arrive shortly in the market. Moreover, SBP has invited the tenders for 3, 12-M T-bill tenders. The outcome for this tender would be exciting to watch, owing to the recently announced high inflation numbers.

PETROLEUM PRICES — CONTINUING THEIR UPTREND

Domestic petroleum prices continue to move upward despite rising agitation from masses and opposition parties. Oil Companies Advisory Committee recently announced an increase in petroleum prices in the range of 3-4%. The recent increases in domestic petroleum prices, while mainly fueled by rising international prices, have also increased on the back of government's decision to raise revenues from petroleum product sales. OMC's on the other hand would be pleased with the rising petroleum prices. We expect a pre-tax inventory gain of PkR246mn for PSO and PkR102mn for Shell as a result of the latest price increase. We believe that the government would continue to raise domestic petroleum prices in line with international oil prices. A decision to cap petroleum prices would send out a negative signal to prospective investors of PSO about the intervention of the government in price setting.

NATIONAL BANK — PRE-RESULT REVIEW

National Bank of Pakistan is scheduled to announce its FY04 results tomorrow. We expect the bank to post after tax profits of PkR6,121mn (EPS: PkR12.43) for the year, 46% YoY higher as compared to last year. In terms of growth in advances and deposits, National Bank has been lagging the average for the banking sector, where most of the smaller banks have recorded handsome growth in deposits and advances. While lending rates have been lower for the year, the decline has been more than compensated through a decline in deposit rates, which have resulted in stable net interest margins. National Bank's payout has been fairly consistent over the last three years. Cash payout has remained stable at PkR1.25/share over the last three years, but we expect some improvement in the payout on the back of rising profitability. While bonus payout has also been consistent, this year's bonus announcement can be hampered by the authorized paid capital, currently standing at PkR5.0bn. We recommend a Neutral stance on NBP as we believe that most of the positives have already been discounted in the price.

PTCL — GEARING UP FOR COMPETITION

PTCL is likely to continue making the environment more and more competitive for the new operators in the telecom market. The Telecom giant has announced that it is considering reducing NWD and ILD call tariffs by around 15-30% this year. While there are talks about a reduction in local call tariffs, we believe that they are already competitive and are unlikely to be reduced significantly. We do not expect any significant negative implications for PTCL. Our view is based on: (I) the reduction in ILD call rates would not have much of an affect on PTCL owing to its insignificance in total revenues and lower TAR levels; (II) the reduction in DLD will fuel the growth as it has been doing for the past many years, however, the growth is unlikely to mitigate the full impact of this reduction owing to the higher quantum of tariff cuts and higher competition. We believe that in the medium to longer term, PTCL would be able to effectively handle the competition by making the environment more and more competitive. The said reduction in tariffs does not affect our earning estimates significantly as we had been anticipating a reduction in tariffs. We believe that the proposed privatization of PTCL would continue to be the major trigger for the stock price.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

44.55

43.64

-2.04%

Avg. Dly T/O (mn. shares)

800.05

537.61

-32.80%

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

1547.63

898.93

-41.92%

No. of Trading Sessions

5

5

23

KSE 100 Index

9603.73

9499.42

-1.09%