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Far Eastern currency turmoil.

The decline in the stock market was unabated. The general index of share prices slided downward from 1735.14 on December 29, 1997 to 1609.16 on January 26, 1998, showing a fall of 126.98 points. Aggregate market capitalisation also showed a fall of Rs.27.893 billion during the same period as shown in the following table:
 General Market
 Index Capitali-
Year Number sation

 (Rs. in billion)

29.12.97 1735.14 516.721
05.01.98 1572.78 522.462
12.01.98 1535.82 500.539
19.01.98 1578.50 468.118
26.01.98 1609.16 488.828

Economic indicators are not encouraging. However, much depends on the release of second tranche of IMF and reported devaluation of rupee at the behest of IMF. The IMF team is to visit Pakistan in early February. Though the State Bank Report depicted a mixed economic picture but Finance Minister Sartaj Aziz appears quite optimistic about the economic indicators. Financial analysts believe that if Pakistan manages to get IMF's second tranche the KSE index may jump around 100 points. The talk of devaluation is also in the air. If the rupee is devalued against dollar, analysts believe that, the market may register a rise in the short term but in the long term financial results will decide the fate of the market.

The report about good sugarcane and potato crops is said to be encouraging and is likely to register a rise in sugar stocks in near future. However, foreign investors are reportedly worried about a low GDP growth in the first six months of current fiscal year as compared to a target of 6 per cent for the whole year.

Polyester Fibre Industry

The Central Board of Revenue has announced exemption from tax/duties on import of machinery and raw materials for manufacture of polyester staple fibre, and has allowed this industry the facilities of No-Duty-No-Drawback. While issuing two original notifications under the Trade Policy for 1997-98, on allowing exemption under Manufacture-in-Bond, and No-Duty-No-Drawback, the CBR had excluded the polyester staple fibre from the list.

However over the past month, the federal government has been facing immense pressure from the industry and the ministry of commerce had directed the CBR to examine prospects of this facility to the polyester staple fibre. Pakistan textile exports have been hit hard from two sides. On the one hand the currency turmoil in the far east that has adversely affected as scores of orders were cancelled, secondly textile exports may get a jolt if European commission finds proof about the wrong declaration of origin of textile production imported into the European Union.

Hub Power, PTCL and ICI remained in focus where foreign and institutional buying was quite evident. The hefty jump in ICI on reports of joining hands with the Dupont in its Port Qasim PTA $450 million plant provided a boost to synthetic and fibre stock. It is expected that the profits of fibre related stocks will show improvement as most of the textile owners have found it a good substitute of cotton. The closure of plants in Korea would also help local manufacturers to increase their earnings after exporting fibre in the international market. Analysts said a 4% rise in the index on strong speculative buying despite news of the resignation of the central bank governor, Dr. Muhammad Yaqub demonstrated that despite the fears of changes in the existing financial policies, investors welcomed the possible change at the top.
Dividend Announcement

 Divi- Bonus/
 dend Right Book
Companies (%) (%) Closing

BOC Pakistan 45 F - 19.12.97
First Cap. sec. Corp 15 10 B 31.12.97
1st Hajveri Modaraba 12.50 - 07.01.98
First Al-Noor Mod. 7.50 - 07.01.98
Islamic Investment Bank - 100 R 31.12.97
Siemens Engineering 30 - 31.12.97

Far Eastern Currency Turmoil

The currency turmoil of the South East Asia is causing a major trouble. Exports of yam and cotton fabrics have dropped at least by 50% and scores of orders have been cancelled due to currency turmoil. The exporters do not see any positive change in the crisis of Far Eastern economics in the near future. The situation will be clear in the next two months that how much export have been lost by the country.

The crisis in the regional countries is at its peak and even China might resort to devaluation of currency. Textile which is the main export item of the country has shown a mixed trend during the first half of this fiscal year. According to the State Bank report exports of the cotton based products have dropped by 1.4% or $34.1 million. In this group cotton yarn posted a net decline of 8.9% this mean a decline of $60.8 million while exports of hosiery and towels fell by 4.5% or $15.9 million and 6.8% or $7.3 million respectively.
Top Ten Companies According to the Turnover in December - 1997

Name of Companies Turnover Highest Lowest

Hub Power Co. 38,647,500 59.25 54.20
PTCL 'A' 170,226,000 35.50 30.75
ICI Pakistan 144,377,000 22.55 19.15
Southern Electric Power 35,637,000 18.30 15.65
FFC Jordan Fertilizer 18,368,900 21.00 19.00
Dhan Fibres 11,316,500 3.70 3.50
Sui Northern Gas 11,240,000 31.25 25.30
Japan Power Generation 6,709,500 10.45 8.90
Sui Southern Gas 5,859,600 27.80 23.25
KESC 5,402,000 27.70 23.80


Hub Power: Hub-Power, one of the highly capitalized listed company after the PTCL, announced a maiden interim dividend at the rate of 70% for the year ending Dec. 31, 1998 but it seems to have fallen below market expectations as was reflected by active profit-selling.

But analysts said a Rs.7 per share payout on a 10-rupee share is not a small amount and adding capital gains to it, the return on investment becomes fairly attractive. Its share value is expected to rise further after the post-dividend sell-off dries up. The UK-based company has earned a pretax profit of Rs.5.308 billion for the half year ended Dec. 31.

Canavan East Fabrics Ltd.: Caravan East Fabrics Ltd., Karachi, have assured the Corporate Law Authority that they will pay by February 28 to the minority share-holders, the guaranteed dividend for the financial year ending June 30, 1997 from their own resources at the rate of 16%, it was officially stated. The company had promised to pay 15% dividend on the shares prescribed through public issue on June 24, 1996. Eligible will be the subscribers themselves, as well as subsequent holders of these shares, as on the date of AGM held on December 26, 1997.
Vital Statistics at a Glance

 December November

Companies Listed on KSE (Nos.) 781 783
Paid-up Capital (Rs. billion) 208.807 207.977
Aggregate Market Capitalisation 524.148 538.017
State Bank General Index - -
KSE Index 1753.82 1772.24
Cos. Applied for Listing (Nos.) - -
Monthwise Turnover (Mln. Shares) 849.020 1013.831

Indus Fruit Leased to Nestle: Indus Fruit Product (IFP) has been leased out to Nestle Milkpak on an annual rental of Rs.9 million from Jan 1. The lease rental will increase by 10 per cent per annum as per the agreement. The company's annual report for 1996-97 says it earned a gross revenue of Rs. 8.32 million suffering an after tax loss Rs.40.27 million. The accumulated losses stand of Rs. 156.29 million. Its current liabilities exceed current assets by Rs. 135 million with the liabilities standing at Rs. 141 million against the assets of Rs.6 million. "The increase in loss compared to previous year's Rs.37 million is mainly due to a write off empty bottles amounting to Rs.6.68 million.
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Author:Haque, Ansarul
Publication:Economic Review
Date:Jan 1, 1998
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