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CURRENCY BUYING

SELLING

US Dollar 59.9 60
Bahrain Dinar 158 158.1
Canadian $ 50.85 50.95
Euro 70.75 70.85
Hong Kong $ 7.65 7.7
Japanese Yen 0.508 0.51
Kuwaiti Dinar 204 204.1
UK Pound 103.7 103.8
Last updated: Friday 23 Dec, 2005-12.30 P.M (PST)

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3 DAYS FORECAST
In oC

CITIES MIN MAX

HUM%

FOR.

KARACHI
Today 12 26 38 Sunny
Tomorrow 11 27 38 Sunny
Day after 11 28 38 Sunny
LAHORE
Today 1 20 87 Sunny
Tomorrow 2 20 87 Sunny
Day after 2 21 87 Sunny
ISLAMABAD
Today 0 18 59 Sunny
Tomorrow 0 18 59 Sunny
Day after 0 21 59 Sunny
HUM%: Humidity In %
FOR.: Weather Forecast
updated: Fri - Sun 23-25 Dec, 2005

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KARACHI         - 021 LAHORE          - 042 ISLAMABAD    - 051 FAISALABAD   - 041 MULTAN          - 061 PESHAWAR    - 0521 CANADA          - 1 KUWAIT           - 965 INDIA               - 91 IRAN                - 98 U.K                   - 44 U.A.E                - 971 U.S.A                - 1

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  CAPITAL MARKETS
 
 

 

 

 

 
  STOCK MARKET AT A GLANCE

By SHABBIR H. KAZMI
Updated Nov 12, 2005

MARKET THIS WEEK

Pakistan Telecommunication Company Limited (PTCL) was yet again the sentiment driver for the index. PTCL moved from negative to positive territory on the back of rumors about the transaction coming through or not, taking the market along with it. As the week was predominantly marked with optimism regarding PTCL, we saw the market registering positive closings on three of the four trading days. Aided by this, the market closed 4.24% above last week's closing.

OUTLOOK FOR THE FUTURE

It should be more of the same in the coming week. A final announcement regarding outcome of negotiations with Etisalat over PTCL take over is expected over the weekend. Should this come through, it will be a major determinant of market's direction over the short term. Other than PTCL, review of domestic oil prices will also be tracked with interest. If the government decides to reduce prices of domestic petroleum products, Oil Marketing Companies (OMCs) will be negatively impacted. With the uncertainty regarding PTCL dominating

the market, one should go long in fundamentally sound stocks. Pakistan Oilfields Azgard Nine, Chenab Ltd, Fauji Bin Qasim, KAPCO, ICI Pakistan, Nishat Chunian, Nishat Mills and Packages are our picks for the week.

FUNDAMENTAL CHANGES

The major developments this week were:

•Securities and Exchange Commission of Pakistan (SECP) has relaxed mutual fund management regulations by waiving off the requirement of foreign collaboration for management of open-end mutual funds. Under the previous rules, all open-end mutual funds were required to collaborate with foreign fund managers to become eligible for managing open-end funds.

•As per news reports, Adhi well 17 has turned in to a producing well with production of 1,500bpd of crude and 5MMCFD of gas. The well would be brought to full commercial production shortly once the well is linked to main installation. Local Cement Sales were up 13% YoY for the first four months of FY06 while exports have dropped by 6% YoY.

•DVCOM along with other Wireless Local Loop (WLL) operators has moved a petition before Lahore High Court demanding refund of their license fee.

•Reportedly, the ministry has proposed (1) cut in OMCs margins (2) exclusion of sales tax from OMC margin calculation. While, we rule the possibility of cut in OMC margins, which currently stand at 3.5% of retail price for the regulated products, the government may decide to exclude sales tax from margin calculation.

•The government has shown its preference for issuing GDR of state owned enterprise (SOE) to raise US$500mn from offshore investment following successful entry into Euro and Islamic bond market last year.

•World oil prices have extended their losing streak and touched a four month low of US$57.80/bbl. Yesterday, oil lost another US$1.13 on news of unexpected increase in US crude stock and comfortable heating oil inventories ahead of winter season.

•A statement on the outcome of negotiations with Etisalat regarding PTCL sell off is expected today. ???In a meeting held with Aptma members yesterday, the Commerce Minister announced that Pakistan's textile exports to the EU would be granted 20% concession in customs duty under the new GSP rules coming into play from January 2006.

•Dewan Farooque Motors reported earnings after tax of PRs39.4mn (EPS: PRs0.51) for 1Q06 as against PRs38.2mn (EPS: PRs0.50), 2% higher YoY.

•Lucky Cement posted after tax earnings of PRs342mn (EPS: PRS1.30), 35% YoY growth.

THIS WEEK'S TOP STORIES

BANKS - PR REVISION TO LEAD TO HIGHER PROVISIONS

The revision in the aging criteria under the Prudential Regulations is likely to lead to higher provision expenses by commercial banks. With the changes taking immediate effect, the impact of additional provisions is likely to affect this year's earnings. Although the revision in the benefit allowed under Forced Sales Value to loans above PRs5.0mn is also likely to lead to higher provisions, we believe that the impact of this would be more on smaller banks.

INFLATION IN OCT-05 LIKELY TO BE HIGHER (SEASONALITY, CALAMITY)

We expect inflation to touch higher at 8.83% in Oct-05 (from 8.53% in Sep-05) driven by the Ramadan effect, and high demand emanating after the earthquake. However, this is a pure seasonality play. Headline inflation during Ramadan in FY05 and FY04 were recorded at 9.26% (from 8.7% a month earlier) and 5.4% (from 4.2% a month earlier) respectively. In Oct-05, we expect transport and fuel inflation to be recorded at 24.7% (from 20.7% in Sep-05) and 8.9% (from 6.9% in Sep-05) owing to the +7.0% increase in petroleum prices announced on Oct 1st. Given the change in methodology, we expect core inflation to remain intact at 7.9%.

However, as per old methodology, we expect core inflation to touch 10.0%. In today's T-bill auction we expect low participation owing to very tight situation in the money market. Additionally, no inflows are expected during the week. Thus, in our opinion, cutoff yields are likely to remain unchanged, while there is a possibility that the SBP may reject the auction if higher yields are demanded. We believe that the State Bank of Pakistan's tightening cycle is over as credit off take, headline CPI inflation and money supply is abating. Going forward, we expect SBP to marginally cut yields on T-bills, as more variables are pointing in this direction.

INDUS MOTOR: EXPANSION ON THE WAY!

Auto stocks have performed considerably well on the back of increasing auto demand and a weaker yen. A demand-supply gap still exists in the market, which has prompted the auto assemblers to increase their production capacity in order to benefit from the growing consumer demand. Like other auto assemblers, Indus Motor Company is in the process of expanding its capacity as well in a number of stages. Furthermore, there is an increased focus on trading activity by the company via product diversity. Indus Motor Company has an established product portfolio consisting of Toyota and Daihatsu brands. In light of growing auto demand, capacity expansion, impressive 1Q06 earnings profile and good dividend pay out; we maintain our positive stance on Indus Motor.

CURRENT ACCOUNT DEFICIT WIDENING - BUT IN COMFORTABLE ZONE!

Despite huge current account deficit recorded in 1QFY06, we believe Pakistan's balance of payment position is in the comfortable zone, as Pakistan received exceptional non-debt generating flows (Worker remittances, FDIs, and FPIs) during the period. Total current deficit was recorded at US$1,427mn (compared to a surplus of US$119mn during the same period last year). We believe huge trade and services account deficit is primarily attributed to high machinery and oil import. Total trade and services account deficit was recorded at US$2,742mn in 1QFY06 (compared to a deficit of US$1,363mn during the same period last year), whilst total current account transfers were recorded at US$1,913mn. Going forward, we expect pace of current account deficit to slow down in the remaining part of current fiscal as oil prices are receding from US$70/bbl to US$58/bbl. In addition, we also expect machinery import growth to taper off as most of the industries are completing their Balancing Modernization and Replacements (BMR) programs. We expect current account deficit to reach US$4.62bn in FY06.

MARKET ROUNDUP

 

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

39.93

41.74

4.53%

Avg. Dly T/O (mn. shares)

243.22

453.51

86.46%

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

399.48

731.22

83.04%

No. of Trading Sessions

2

4

18

KSE 100 Index

8436.62

8793.93

4.24%

KSE ALL Share Index

5619.91

5858.11

4.24%

 
 

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