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Stocks hug 28-month high level. (Stock Market).

Asad, S. Hasan

KSE-100 index climbed 10.7 per cent during August to 1974.59 surpassing the 28-month high level following Karachi Stock Exchange's decision allowing foreign companies to open brokerage houses in the country with 100 per cent equity. Likewise the aggregate market capitalisation registered a jump of 9.4 per cent to Rs.455.774 billion with a gain of Rs.39.35 billion.

In the first week or so, the index was almost flat as there was slight decline between August 1 and 5. Nonetheless, during the second week (August 5 to 12), the index rose 3.4 per cent or 60.26 points, thanks to the timely support by some domestic institutions and leading players and fresh buying in mega issues such as PTCL, Hubco, MOB and 101. Average daily business turnover resulted in 59 million shares, a rise of healthy 79 percent as compared to 33 million shares recorded in the week earlier. All eyes were focused on the corporate announcements by some mega issues particularly Hubco and others. The interim working results and dividends coming in, notably from 101 Pakistan, Dawood Hercules, some of the second-liners in the textile sector signalled a major corporate breakthrough and could well prove a stepping stone in the market's upward journey in the coming weeks.

In the week August 12 to 19, KSE index registered a modest rise of less than 1 per cent. Average daily volume amounted to 137.61 million shares, a 133 per cent increase over the previous week's average daily volume. The most active issues were Hubco and PSO, both of which attracted interest on fundamental grounds.

Although the trend was bullish but the reaction of the leading brokers to the SECP reforms agenda for the stock market may lead to a decline in volumes along with some decrease in the index. Analyst believe that these reforms will have a positive impact on the stock market in the long run. Yet, some short term backlash cannot be ruled out.

In the week ending August 26, the index jumped 2.9 percent as are result of higher than expected dividends declared by Shell Pakistan, Lever Brothers and PSO of 140%, 116%, (interim) and 80% respectively. (See following Corporate Briefs). The dividend-driven rally was so strong that it did not allow the bears to tilt the balance in their favour.

Most leading stock analysts predicted that the near-term outlook appears bullish despite the fears of a showdown between the top hierarchy of the KSE and SECP high-ups in coming weeks as the bait of capital gains will not let the investors sit on the sidelines.

An interim dividend at the rate of 116% by the Lever Brothers seems to have signalled that the other MNCs may follow it allowing the bulls to push the index to a new peak level before the national elections.

Although analysts and traders continued to stress that the market was in an overbought situation and felt that a technical correction was due, positive expectations with regard to Hubco and some other major pivotals along with constant positive corporate news during the week fuelled the already upbeat trend in the index.

In the last week (August 26-30), the index rose 3.4 per cent or 64.94 points. Massive buying in the leading base shares PTCL, PSO and Hubco, holding weightage of about 50 per cent in the index shows that the big ones are out to make sure it hits three-year highs.

All roads on the Karachi stocks last week led to PSO as the speculative force were not inclined to loosen their squeeze, rather intensified it, pushing the 10-rupee share at one stage to a record high of Rs.208. Its privatisation news, apart from the current bull-run, owes the strength to a record cash dividend of 130% plus bonus shares of 20%.

Other pivotals notably PTCL, Hub Power. Engro Chemical and some others joined the PSO, allowing the KSE index to rise to a new peak level after successively breaching through different barriers to close around 1,974 points and market capitalisation at Rs.456 billion.

The speculative rise of the market despite good dividend from the mega issues has raised many questions, the most important among them being whether the run--up is genuine or speculative" The local market has a history of snap collapses after many a speculative price flare-ups in the past.

Analysts observed that September could well be an eventful month for share business as most of the mega issues, including Hub Power, will announce their final dividend, which could take the market to new highs. The company has already paid an interim dividend of 40% a couple of months back. The management of Hub Power could give a pleasant surprise to its shareholders in September when its board meets.

The sell-off a portion of a state stake in mega and massively capitalised issues a such as PTCL and PSO needs a lot of groundwork and strategic buyers. But, according to an analyst, both are missing".

The optimism on the amicable settlement of the new SECP demands seem to have generated by last week's meeting between the chief of SECP and chairman of KSE. The report of positive developments in the meeting between the two further aided the sentiment.

Among the factors contributing to bull-run are the higher inflow of remittances, slashed rates of profit on national savings schemes and lower mark-up announced by banks both on PLS account and long-term deposits. With little avenues for investment elsewhere, stock market obviously was the main beneficiary.

CORPORATE BRIEFS

EM Oil Mills, Maqbool Co. sale Agreements Signed: The Privatisation Commission made sale agreements with the two successful bidders for the sale of shares in two ghee mills. The agreements made here on July 31 for 100% stake in EM Oil Mills and Industries Ltd. and 61.8% shares of Maqbool Company Ltd.

The Commission had received highest offers in the open bidding for these units in April this year, amounting to Rs.94.05 million for 1,939,276 shares for EM Oil Mills at Rs.48.50 per share from Star Cotton Corp. (Pvt.) Ltd., and Rs.27.58 million for 270,435 shares of Maqbool Company, at Rs.102 per share from Madina Enterprises, making a total of Rs.121.63 million for both units.

KESC Incurs Rs.17.176b Loss in 6 Months: The Karachi Electric Supply Corporation incurred a loss of Rs.17.176 billion in six months up to June 30, 2002, according to a report. The report said that total revenue of KESC increased by Rs.2.065 billion during 2001-02 which was not sufficient to cover even the cost of fuel and power purchase. The financial charges also increased by Rs.1.984 billion over previous year, which increased the net loss for the year from Rs. 16.201 billion to Rs.17.176 billion. Had the financial charges been maintained atthe previous year's level, the loss for the year would have amounted to Rs.15.191 billion. The present tariff is insufficient to cover the total cost of KESC operation.

Capital Market Gets $ 55 m Foreign Investment in Jan-March: Chairman, Securities ad Exchange Commission, Khalid Mirza has said that country's capital market has received $55 million foreign investment during the first quarter (January to March) of this calendar year.

Rs.5 Per Kg. CED Levied on Raw Sugar Import: The ECC of the cabinet on August 5 imposed central excise duty at the rate of Rs 5 per kg on raw sugar import and excluded it from Duty and Tax Remission Rules for Exports (DTRE) regime to prevent any misuse of this facility, to protect the interest soft he farmer sand local industry.

Maple Leaf TFC Over Subscribed: A ceremony for successful closing of Rs.250 million TFC issue (including Rs.25 million greenshoe option which was highly oversubscribed) of Maple Leaf Current Factory Ltd., a Kohinoor Maple Leaf Group Company, was held at PC Lahore on August 3.

MCB Beats Estimates, Posts 87% Growth: The financial results of Muslim Commercial Bank recorded remarkable growth and posted an increase of 87% in the six months to June 30, 2002 above market expectations. The profits amounted to Rs.837.6 million in six months to June 30, 2002 from Rs.448.9 million of the same period last year.

PSMA Estimates 55m. Tonnes Cane Output this Year: The Pakistan Sugar Mills Association has estimated 55 million tonnes sugarcane for 2002-03 on the basis of a detailed study on EI-Nino weather phenomenon and its effects on Pakistan, against 49 million tonnes of 2001-02.

Surplus Sugar Forces Sindh Mills to Delay Crushing: Sugar mills in Sindh are completely helpless to sell the surplus stock of sugar, which has compelled them to delay the seasonal operation this year for about a month Consumer Financing of Benefit Buyers, Banks, Industry: The banks have been allowed to give loans for consumer items like motorcycles, TV sets, air conditioners, washing machines, etc. This announcement was made at a joint press conference addressed by the State Bank governor Dr. Ishrat Hussain and Commerce Minister Abdul Razzak Dawood on August 12. The leasing companies are already in this business but the restriction on the banks has also been waived. The central bank, through a circular issued on July 30, had allowed banks to finance consumer durable items. The object is to give boost to the local industry. "It is a win-win situation for all concerned," Razzak said, adding the TV industry has already shown positive results. Last year's TV production was 465,000 which rose to 600,000 in one yea r (or by 29%).

Dawood Leasing's TFCs Oversubscribed: The Terms Finance Certificates of Dawood Leasing Co. has been oversubscribed by four times to Rs.189.825 million. This was the second tranche of the five-year perpetual TFCs.

Bumper Cane Crop May Raise Sugar Stocks to 4m. Tonnes: While foreseeing bright prospects of the second bumper sugarcane crop, the millers have estimated 3.6 million tonnes sugar production for 2002-03, which may raise the net total of sugar quantity to over 4 million tonnes as the year would leave 0.4 million tonnes surplus. This would be the highest ever sugar stock in Pakistan's history.

A PSMA report on stock availability, including next seasons estimates, shows that sugar availability for 2001-02 was 3.89 million tonnes. This included 620,790 tonnes carryover stocks and 0.33 million tonnes imported and raw sugar. Total domestic consumption for 12 months, estimated at 270,000 tonnes per month was 3.24 million tonnes. This did not include market stock of around 0.3 million tonnes, the PSMA said.

Foreign Investment up Rs.349m in July: Foreign investment at KSE showed marked improvement in July following reduction in tension with India and continuous flow of dollars from multilateral donor agencies.

KSE released the data on August 16 in respect of purchases and sales of shares by foreign investors. Foreign investors bought 28.717 million shares valued at Rs.659.241 million in July which they sold 15.953 million shares worth Rs.310.l72 million, indicating a net inflow of Rs.349.069 million or $5.9 million.

MCB's TFCs Oversubscribed Six Times: The inaugural Term Finance Certificates issue of Muslim Commercial Bank Ltd. has been oversubscribed over 6 times. As per initial subscription figures received from the banks, a total of Rs. 1,207.78 million was received against Rs.200 million offered to the general public.

Government May Raise Feed Gas Prices for Fertilizer Industry: The government is likely to increase feed gas prices by 5% for the fertilizer industry as recommended by the Oil and Gas Regulatory Authority. Munir Ahmad Chairman, OGRA, said that the federal government may bear accumulated revenue loss due to delay in notifying 5% increase in feed gas price from July 1 through an increase greater than 5% from September, which according to him will ensure implementation on Fertilizer Policy 2001,in true spirit.

Lever Bros. May Earn up to Rs.825m Profit: Lever Brothers profit in six months up to June 30, 2002, may range between Rs.800 million and Rs.825 million.

Remittances Post 262.7% Jump in July: Home Remittances registered the highest ever increase, recording an amount of $307.41 million in July this year, a jump of 262.7 percent compared to last year. During June 2002, the country had received $268.54 million as workers' remittances, against $85. 85 million in June 2001, posting an impressive increase of 212.8%.

NBP Records Growth of 32% in 2001: National Bank of Pakistan would diversify its banking operations and tap different avenues like credit cards, mutual funds, house mortgage, auto loans, to help boost its profitability. The Bank recorded a growth of 32% in 2001, which is commendable, despite decline in interest rates as principal objectives were restructuring efforts, improving institutional productivity, cost rationalisation and a much more focussed marketing strategy.

Lever Brothers Declares Rs.58 per Share Dividend: Profits of Unilever Pakistan Ltd. recorded a quantum jump of 54% in the six months ended June 30, 2002.

In view of the financial results for the half year, the directors recommended an interim dividend of Rs.58 per share of Rs.50 i.e. 116%. The sales of the company amounted to Rs. 10.947 million from Rs.9.642 billion of the corresponding period a year ago.

FDI in July up by 73.8%: The foreign direct investment during July 2002 at $42.4 million was 74% higher if compared with $24.4 million of July 2001. The net foreign investment during July 2002 was at $41.9 million after witnessing a portfolio flight of $0.5 million The net foreign investment is 131.5% higher than the corresponding month of last year when it was $18.1 million. The portfolio flight during July 2001 was $6.3 million.

Current Price Hike Invites MCA Intervention: The north-south war for major share in price hike, attracted the Monopoly Control Authority intervention asking the manufacturers to justify their price increase.

Last week (middle August), the cement manufacturers increased the prices of their product by 12.5% and reduced production to maintain minimum supply, a move to artificial increase in demand.

However, the Sindh and Balochistan cement manufacturers said they had not increased the prices and were working at 70%, or above, of production capacity.

The cement prices were increased by Rs.25 per bag, which pushed the price to Rs.245 per bag, from the earlier Rs.220 per bag. The Monopoly Control Authority issued a notification to all cement manufacturers and asked them to furnish the ex-factory price per tonne and capacity being utilised.

Shell Pak Declares 140% Dividend: Shell Pakistan Limited declared a hefty dividend of 140% and its profit amounted to Rs.1.06 billion in the year ended June 30, 2002.

PSO Offers Highest-Ever 80% Cash Dividend: Pakistan State Oil Ltd. announced a record cash dividend for its shareholders as its profits grew by 42% to Rs.3.2 billion in the year ended June 30, 2002. The Board of Management of Pakistan State Oil Company on August 22 approved a final dividend comprising 80% cash (Rs.8/share) and 20% bonus shares for 2001-02. Combined with the earlier two interim cash dividends of Rs.5 per share, the total amounts Rs.13 per share resulting in the highest ever cash pay out of Rs. 1.86 billion to shareholders of the company.

Privatisation Fetches Rs.92.5b Till Now: The Board of Privatisation Commission informed that the total proceeds amounted to Rs.56 billion since PC inception in 1991 to October 1999, whereas the board managed to hold bidding worth Rs.36.5 billion against a smaller number public sector entities.

FFC to Inject Rs.3b to Improve FFCJ Footing: The board of directors of Fauji Fertilizer Company (FFC) has approved to inject Rs.3 billion in FFC Jordan Fertilizer Company to improve its financial footing and absorb losses.

Fauji Fertilizer's board decided about the investment plan on August 20. The board decided to inject funds through the purchase of FFC-Jordan shares at a discount of 35%.

FFC-Jordan has included Rs. 1 billion subsidies, given by he federal government, in its financial results. Now the company has Rs.4 billion to help it pay off bank loans and avert the ongoing losses, an analyst said.

PSMA Seeks Aug-Dec. ST Payment Deferment: Sugar mills have demanded deferment of sales tax on sugar for August-December, claiming it can help them overcome financial woes and enter new crushing season. It adds that retail prices have remained between Rs.19.50 and Rs.22 a kg and these rates were close to production cost. Availability vis-a-vis consumption has caused a glut-like situation pertaining to domestic prices remained depressed throughout last year.

Lucky Cement First Pant to Switch Over to Coal Firing System: The first new coal firing system in cement industry in the country has been commissioned at the Lucky Cement plant in the NWFP. The plant is now using 100% coal. The new system will save the country foreign exchange of $15 million per year, which would have been otherwise spent on furnace oil. The installation of new system is based on modern equipment like crusher stacker, Re-claimer and Vertical Roller Mills imported from China.

With the increase in the rising cost of furnace oil, the government had expressed the desire that the cement industry may switch over to coal. Many cement plants are reported to have started working on the switchover to the coal system.

PC to Divest 26% Shares in POL: The Cabinet Committee on Privatisation in a meeting on August 29 gave a go-ahead to the Privatisation Commission to divest government's 26% shares in Pakistan Oilfields Ltd An official announcement said the committee also approved offering for sale 5% additional shares of National Bank of Pakistan with a green shoe option of another 5% in case of oversubscription.
 Aggregate
 General Market
 Index Capitali-
Date Number sation

 (Rs. in billion)

01.08.2002 1783.30 416.424
05.08.2002 1782.56 415.503
12.08.2002 1842.82 428.896
19.08.2002 1855.83 431.850
26.08.2002 1909.65 442.584
30.08.2002 1974.59 455.774

Source: Business Recorder

Vital Statistics at a Glance

 September August

Companies Listed on KSE (Nos.) 724 725
Paid-up Capital (Rs. billion) 274.650 274.641
Aggregate Market Capitalisation 455.774 455.774
(Rs. bln.)
KSE Index 2018.75 1974.59
Cos. Applied for Listing (Nos.) -- --
Monthwise Turnover (Million Shares) 2653.546 3059.039

Source: Karachi Stock Exchange

Top Ten Companies According to the Turnover in August 2002

 Total Highest Lowest
Name of Companies Turnover (Rs.) (Rs.)

PTCL 'A' 80,470,500 19.90 19.45
PSO 41,261,500 207.80 194.00
Hub Power Co. 31,855,500 28.65 28.30
National Bank 11,760,000 24.65 23.65
ICP SEMF (XD) 8,245,500 29.80 28.20
Engro 8,100,200 64.60 62.90
Adamjee XDXB 5,396,500 42.00 39.65
Sui Northern XB 4,315,000 15.65 15.40
FFC Jordan 4,153,500 6.50 6.15
Fauji Fertilizer 3,365,700 52.25 51.15

Source: Business Recorder

Dividend Announcement

 Bonus/
 Dividend Right Book
Companies (%) (%) Closing

Balochistan Glass -- 200R 07.10.02
Bolan Castings 60 -- 09.10.02
Clover Pakistan 32.50 -- 08.10.02
International Industry 55(F) -- 24.09.02
Jahangir Siddiqui 22 -- 02.10.02
Millat Tractors 130 -- 03 10.02
Pak Paper Products 25 25B 02.10.02
Pak Paper Sack 45 -- 08.10.02
Treat Corporation 133 -- 08.10.02

Source: Karachi Stock Exchange
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Author:Asad, S. Hasan
Publication:Economic Review
Geographic Code:9PAKI
Date:Sep 1, 2002
Words:3304
Previous Article:Rupee continues to rise. (Currency Market).
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