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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 Dec 24, 2005

MARKET THIS WEEK

The market remained range bound during the week. Though, positive news on PTCL privatization deal did provide the much-needed impetus to the market, the Bull Run was short-lived and volumes of less than 300mn shares were witnessed on the last two trading days. Overall, the average daily volumes witnessed a WoW decline of 11.62% and the index fell by 0.25% WoW.

OUTLOOK FOR THE FUTURE

With the year-end approaching, we believe that both the institutional and individual investors are likely to remain on the sidelines. The settlement of the future contracts and uncertainty on the political front regarding the Kalabagh Dam issue is likely to put pressure on the index. We are selectively positive on the market and recommend investors to go long in Pakistan Oilfields, Fauji Fertilizer Bin Qasim, Nishat Mills, Callmate Telips and Azgard Nine. From a dividend yield perspective, KAPCO looks attractive.

FUNDAMENTAL CHANGES

The major developments this week were:

*India and Pakistan have agreed to start work on the US$7bn Trans-national pipeline project from Mid-2007 and complete the project by 2010.

*A total of 10.4mn bales have reached ginneries, down 11.3% from the same time last year whereas a fortnight ago the current crop was closer to 13% short of the previous year.

*OPEC officials have hinted at an oil price range of US$45-55/bbl for CY06 as its heaviest crude brand. According to Chairman of Orascom Telecom, Nassef Sawaris, Orascom is expected to invest US$500mn in Pakistan during 2006.

*Changes in the mechanism of Continuous Financing System (CFS) have resulted in some discomfort among investors, primarily owing to the lack of understanding of the system.

*Reportedly, E&P companies have threatened the government with shut down of gas production in case the government does not remove cap on gas prices.

*The government is considering an increase in gas prices by at least 15.2% from 01-Jan-2006.

*In a surprise move, SNGPL has suspended gas supply (due to winter load shedding) to an additional 110 companies on Multan Road and Sheikhupura Faisalabad Road, despite a strong negative reaction by Aptma on the first tranche of supply cut and SNGPL's own earlier undertaking to supply 50% of the requirement of in the area.

*Large Scale Manufacturing (LSM) growth came in at 8.7% in 1QFY06 (compared to 24.9% during the same period last year).

*Reportedly, Pakistan has allowed Etisalat to make the payment for 26% stake in Pakistan Telecommunication Company Limited (PTCL) over a period of five years.

*The last auction of this calendar year saw T-bill yields for 3, 6 and 12-month tenors left unchanged.

*The KSE board in a meeting decided to approve the SECP directive to elect a non-member director as the Chairman of the Exchange.

*In an effort to bring more investment in Dairy Industry Ministry of Finance has forwarded a proposal to grant Zero-rating status for Sales Tax to the industry.

*According to Chairman of Orascom Telecom, Nassef Sawaris, Orascom is expected to invest US$500mn in Pakistan during 2006.

THIS WEEK'S TOP STORIES

PSO - READY FOR A DECLINE IN PETROLEUM PRICES?

We believe that petroleum product prices could potentially decline by an average of 6-8% in 2HFY06, which can lead to substantial inventory losses for the Oil Marketing Companies (OMCs). While 1QFY06 saw profitability of OMCs skyrocket on the back of higher prices and inventory gains, we expect this trend to reverse in 2HFY06. The government has already started collecting revenue in the form of Petroleum Development Levy (PDL) from the downstream oil sector. Given the sensitive nature of petroleum prices, we expect the political pressure on the government to increase if international oil prices continue to hover below the US$60/bbl mark. According to a newspaper report, the government has already recovered approximately PRs5bn in the form of PDL, as against revenue loss of PRs10bn in the first four months of FY06. We maintain our Neutral stance on Pakistan State Oil at current levels. Privatization remains the only trigger in the near term for the stock.

CREDIT DEMAND- STILL HIGHER!

Late cotton crop arrival and Capex cycle resulted in higher private credit off take in July to Dec 3rd. As per State Bank of Pakistan (SBP), private credit off take was recorded at PRs209.02bn compared to PRs176.03bn in the corresponding period last year. In our view, Manufacturing sector, where pricing power is underpinned by high utilization rates has triggered demand for private credit. This is also reflected in the import statistics. Trade deficit in the first 5M were recorded at US$4.55bn (US$1.86bn in 5MFY05) primarily on account of higher imports. In 1QFY06, total machinery imports were recorded at US$1.62bn (compared to US$1.00bn over the same period last year), whilst petroleum products import was recorded at US$1.45bn (as against US$954mn last year). As a result of higher credit off take, we expect SBP to maintain cutoff yields in tomorrow's T-bill auction. Cutoff yields of 3, 6 and 12M T-bills currently stand at 8.10%, 8.29% and 8.79%. We also expect 6M T-bill yields to be around 7.5-7.7% by Jun-06.

GAS PRICE HIKE- NOT A CONCERN FOR FERTILIZERS

With an increase of 15.2% in fuel gas prices, we expect urea cost to increase by PRs9.5/bag. To mitigate the impact of this on gross margins, we expect fertilizer companies to announce at least PRs10-11/bag increase in urea prices to PRs490/bag. Given the tight demand supply situation in the country, improved purchasing power of farmers from previous cotton crop and higher farm credit, we expect farmers to absorb the said increase in prices. Meanwhile we expect minimum government intervention over fertilizer price increase owing to its concerns over rising subsidy on imported urea. At current levels, we do not see much trigger for upside in FFC (currently trading at 14% premium to our fair value of PRs119/share); while we can expect some excitement in Engro over the announcement of gas supply by Jan-06 and bonus expectations with 2005 results. FFBL remains our long-term pick in the sector offering a 25% upside to our fair value of PRs47.9/share.

MARKET ROUNDUP

 

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

45.73

45.56

-0.37%

Avg. Dly T/O (mn. shares)

348.50

308.00

-11.62%

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

493.99

434.21

-12.10%

No. of Trading Sessions

5

5

 

KSE 100 Index

9514.83

9491.47

-0.25%

KSE ALL Share Index

6404.80

6387.06

-0.28%

 
 

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