BULLS RULE KSE - Weekly Report

Volumes improved as 756 million shares exchanged hands in the overall market during the week
KARACHI: Karachi stock market went through a bullish week as its main index ended near 2 per cent up mainly on decline in PIB yields, SC decision on Sharif brothers and rising international oil prices however deteriorating law and order situation remained a concern for the market participants.
The benchmark KSE 100-Index rose by 130 points or 1.82 per cent to end at a level of 7,276 points.
"Buying activity witnessed as PIB yields fall by 61 basis points in 10 years, tenor indicating falling interest rate trend. Bullish activity remained in oil sector as international oil prices cross 63 USD" said Ahsan Mehanti, CEO Shehzad Chamdia Securities.
Ahsan added that expectations of record PSDP allocation of over Rs 600 billion in Federal Budget 2009-10 invited investment in cement sector.
Sharif brothers eligibility for elections, gains in international equity markets & rise in oil prices played a catalyst role for positive activity in the market.
Moreover, investors remained positive on oil marketing companies due to limited fall of local petroleum prices. Gas line deals with Iran taken positive for gas marketing companies.
Week started with a minor gain of 27 points on Monday as investors took position at attractive levels but the participation of investors was limited due to strike call in the city, index moved in a limited range where at a moment during intra-day trading it touched its lowest level of the week of 7,125 points. Mixed activities stayed during the next two days also, where index closed 3 and 12 points up respectively on Tuesday and Wednesday.
On Tuesday there was uncertainty on the Supreme Court's decision regarding Sharif brother's eligibility but on the next day market saw some positive activities during intra-day trading on SC decision but market witnessed pressure due to Lahore incident.
Decline in PIB yields played a catalyst role for the bullish activity in the market on Thursday where the index gained 99 points, hopes of early end of the military action was also a factor for the bullish move.
Market continued to show positive activities on Friday where during intra-day trading it touched its highest level of the week of 7,368 points but as it was the last trading day of the week investors preferred to book profits at higher levels and market ended with a minor loss of 11 points below 7,300 levels.
Despite some positive activities in the market, there was net selling by the foreign investors as according to the figures released by NCCPL there was net foreign selling of around $4.15 million during the week.
Volumes too were improved as 756 million shares exchanged hands in the overall market during the week which is 177 million shares more as compared to a turnover of 579 million shares a week earlier.
Out of total 383 active issues, 215 ended positive and 145 negative while 23 issues remained unchanged.

Business Updates

KSE directed to establish unified trading platform.

ISLAMABAD (June 01, 2009): The Competition Commission of Pakistan (CCP) has directed Karachi Stock Exchange (KSE) to establish a Singular Unified Trading Platform for the central execution of the trading orders of all the stock exchanges within six months period.

Big investment potential in banking sector: Governor SBP

Governor of State Bank of Pakistan (SBP), Syed Salim Raza, has said that Pakistan’s banking system has great potential for further investment. He was speaking at a ceremony held here for the launching of Silkbank Limited, formerly Saudi Pak Commercial Bank Limited, says a SBP statement. Raza said the performance of country’s financial sector, which is largely dominated by banks, has been outstanding throughout the current economic situation. He stated that the banking sector has over the years nurtured itself in a way that it is able to withstand some of the shocks it has faced in the last 18 months or so. “The banking system is on strong footing and has long term potential, a feature which has served to attract a substantial amount of Foreign Direct Investment (FDI) in the sector, with established global financial institutions now active participants in the domestic financial sector,” the Governor SBP said.

Small investors should stick to mutual funds: NIT

This was stated by the National Investment Trust chairman, Tariq Iqbal Khan, while briefing reporters on the capital market and the role of mutual funds in its development.

He said that the fundamentals of economy had improved, but the capital market was overly-depressed due to political and law and order situation.

He pointed out that mutual funds and bonds market were more favoured instruments of investment in developed economies.

For example, he said, against bank deposits of $66.9 billion in Pakistan, the net assets managed by mutual funds were equivalent to $2.75 billion, which was only 4.4 per cent of the bank deposits.

India had bank deposits of $751.8 billion and the net assets under the management of mutual funds were to the tune of $77.5 billion or 10.3 per cent of the bank deposits.

The US had bank deposits of $7363.7 billion while net assets managed by the mutual funds were $9248.9 per cent or equivalent to 125.6 per cent of its bank deposits.

He said out of 107 mutual funds operating in Pakistan 86 were open-end mutual funds and 21 were closed-end mutual funds. Seven pension funds were among the open-end mutual funds.

Currently, he said, the capital market of Pakistan had capitalisation of $25.7 billion against $602.4 billion in India and $13,886 billion in the US. Net assets of mutual funds in Pakistan’s capital market were to the tune of $2.75 billion equivalent to 10.7 per cent of the market capitalisation, he added.

Against this, the net asset value of Indian capital market was $77.5 billion equivalent to $12.9 billion of the market capitalisation.

The net assets of the US capital market were $9248.9 billion which was 66.6 per cent of market capitalisation.

He dispelled the general perception that some institutions, including the NIT, intervened in the in the falling capital market on the instructions of the government to give it a boost. He said the institutions act independently and take investment or selling decisions in the larger interest of investors.

He said this was the reason that the NIT had constantly been outperforming average growth at the Karachi Stock Market.

He said in depressed times the NIT losses were always lower than the general decline in the capital market.

He said institutions did intervene in the capital market to stabilise it in the larger interest of investors.

He said almost all mutual funds operating in Pakistan were being run by highly qualified professionals.

He said that the NIT had about 38 per cent share of the total open-end funds of Pakistan and 80 per cent of the open-end equity funds. The trust, he said, had investment in around 450, out of total 651 companies listed on KSE.

Value of NIT’s fund invested in the market at current price levels was around Rs72 billion. He said that the NIT was the single largest institutional investor in the KSE. Presently, he said that the NIT had over 55,000 unit holders, who collectively hold 1.9 billion NIT units.

Only the cash-rich may play stocks!

The total number of investor account in the Central Depository Company (CDC) currently stands at 0.05 million while those in the sub-accounts aggregate 0.25 million. In a population of 170 million, it would be one in a thousand that dabble in stocks. Fruitless to compare that with one in four persons that visit the Dalal Street in Mumbai or every second American who invests his money and future in stocks.

Markets all through the world were in melting pot in the year 2008, but there are indications of recovery. The KSE, which plunged by a historic 60 per cent during the year, the 100-share index tumbling from 15,760 to 4,800, pushed hundreds of middle class households to the brink of poverty. The injured were spared the agony of waiting for Probe reports as most people agreed that the greatest sufferers were those who bought stocks on borrowed money.

That brought on to surface the simmering revolt against the ‘badla,’ named as CFS and further glamourised into CFS Mk-II by the previous SECP chairman. Haji Ghani Haji Usman, who was one of the two major brokers who spearheaded the successful movement by more than 100 brokers to the end to ‘badla’ is aghast at the regulators’ dilly dallying on replacing the outgoing leverage product with another one with better features.

He says that a consultative committee was set up to review and release a new derivative product in the market, but after four meetings and a passage of two weeks, the public is at a loss to know, how far the progress has been made.

‘The Securities and Exchange Commission of Pakistan must ask the committee to come up with the alternative leverage product within 10 days,’ he says.

The consultative committee of 10 members has received much flak for what most believe to be its slow progress. But Aftab Diwan, who heads the committee, says that its consultations with the SECP on a new leverage product was only a part of the job. ‘The consultative group has been assigned the task of looking at all aspects of the capital market, including risk management and to discuss them with the SECP,’ says Mr Diwan. ‘Discovering a new leverage product is primarily the job of the stock exchanges,’ he says in defence.

SECP chairman Salman A Shaikh could not be reached, but spokesman for the apex regulator shifted the responsibility on the committee.

‘We are waiting for recommendations of the committee,’ said Imran Ghaznavi and added that the SECP would look into the features of the new product when one is placed on the table.

No one at the stock exchange, among the committee members or at the SECP would commit on a firm date for the launch of a new product.

Mr Diwan explained that all stakeholders were being consulted, including the Mutual Fund Association of Pakistan; the Association of Insurance Companies; Modarabas; financial institutions and the bourses. He said that reaching consensus would obviously take a little while.

The market pundits call the matter of new leverage product a ‘grey area.’ There was, however, a general agreement on finding a derivative product that stands up to ‘International best practices.’ But why was a quick introduction of the new leverage product of such paramount importance?

A small investor who had lost all of cash, house and a shop in the stock debacle of 2008, expressed his grievance.

‘During the bloodbath, CFS or ‘badla’ was believed to have caused the greatest amount of hurt,’ he said. That leverage product was scrapped, but small investors who would still like to trade with the hope of recovering of some of their losses, had been deprived of a new derivative product.

‘From the depth of 4,800, the KSE-100 index has clawed up 15 per cent or by around 2,400 points,’ he says. But because of the absence of leverage, only the deep pocket investors, who can take delivery on cash, are able to reap the riches. There is lot of heart burning among leverage players, who stand aside, cast out as the ugly ducklings. But some believe that as volume of trade keeps evaporating to 100 million shares a day from an average of 250 million in the first quarter of last year, the impact might be more widely felt.

Some prophets of doom even suggest cornering of scrips by ‘broker cartels,’ followed by lower locks and the fall of the market into another crisis.

Top Business News

SAEP demands salary raise before June 30th.

President Society of Aircraft Engineers Pakistan (SAEP), Shoukat Jamshed, in a letter to MD PIA has demanded that Executive Committee of the SAEP has decided that prior to the settlement of the working agreement, the core issue of salary ratio between pilots and engineers i.e. 100:55 between average salary of a pilot and average salary of an air craft engineer may be settled down before June 1, 2009 and the remaining parts of the agreement be finalised before June 30, 2009.
As per letter, their demands for salary and better working conditions were long lasting but management was paying no heed towards the issue.
The letter further speaks that minutes-1 of the meeting held on 4th of July, 2008 vide Minutes-I refer HO: HRA & C/102/P&P, in which promise was made to carry out a quality study of the regional airlines regarding the salary ratio of pilots to aircraft engineers and the same was to be completed within 60 days. So far no further progress has been made on this issue. Management in the past also agreed and promised to settle down the issue before March 2008, vide Minutes-I refer HO-HR & A / 111 / HRM, Dated 23 Nov, 2007 and Admin Order No. 15/2007 dated 19th Dec 2007. Moreover, similar understandings were made vide MoUs signed between SAEP and the then management. First MoU was signed between SAEP and management on 24th May 1989; second on 17th October 1996; third on 30th Nov, 2000 and fourth Admin Order No. 05/2001. Referring to Admin Order No. 05/2001, adhoc ratio payment to serving aircraft engineers towards partial maintenance of ratio of 100:55 between the emoluments of pilots and aircraft engineers was made as an acceptance for the subsistence of this ratio. Furthermore, due to the increase in guaranteed flying hours payment (from 50 to 70) of pilots, heavy rise in salary will further widen the gap between existing salary ratio causing momentous strife among the SAEP members.

IMF projects GDP at 3.5pc, single digit inflation in '10.

The International Monetary Fund (IMF) Thursday projected Pakistan’s Gross Domestic Product (GDP) growth at 3.5 percent in financial year 2009-10, saying that the inflation would come down to single digit.
The IMF report on “Regional Economic Outlook: Middle East and Central Asia,” released on Thursday, said that the inflation would come down to 11.9 percent during 2008-09 and further slide to single digit at 7.5 percent in Fiscal year 2009-2010.
The report projected GDP growth at 2.5 percent during 2008-09 which was about 6 percent in 2007-08.
Speaking at the launching ceremony of the report here, IMF Resident Representative Pakistan, Middle East and Central Asia Department, Paul Rose observed that the budget deficit during 2009-10 would remain 4.6 percent.
He said that Pakistan’s Large Scale Manufacturing sector had to face shortfall in exports due to decreasing demand owing to global recession.
He was of the view that if the global recession continues Pakistan economy would be exposed to some risks including further decline in exports and private capital flows and decline in workers’ remittances.
He said that consolidating macroeconomic stability and ensuring protection of vulnerable groups should be policy priorities of the government adding that it needs to take care of the deprived sections of the society.
He said that the vulnerable groups could be protected through strengthening the social safety net by improved targeting of the poor under the Benazir Income Support Programme.
He maintained that the unemployment rate is likely to increase in Pakistan, as the direct investment in the country and foreign remittances have gone down.
He said that the third installment of IMF loan will be issued to Pakistan in July this year.
Briefing about the world economic outlook, he said that financial markets would remain highly stressed where as the world economy will contract in 2009 by around 1.25 percent before recovering gradually in 2010.
He said that emerging economies face dramatic drops in capital inflows, demand for their exports and commodity prices adding that a third wave of the global financial crisis is hitting the world’s poorest and most vulnerable countries.
The IMF representative said that turning around global growth depends critically on concerted policy actions to stabilize financial conditions, as well sustained strong policy support to bolster demand.

APFMA cuts flour price by Rs10 per 20-kg .

ISLAMABAD: The All Pakistan Flour Mills Association (APFMA) has decided to reduce the prices of 20-kg flour bag up to Rs10 to provide flour at affordable prices.

Chairman APFMA Asim Raza said here on Thursday that the prices of flour were different region-wise because of the transportation cost of wheat.

He said that the ex-mill rate for Rawalpindi and Islamabad had been fixed at Rs510 instead Rs520 per 20-kg bag for a period of one month.

The decision in this effect was taken after observing slight decrease in the wheat prices in open market during current month as the price of wheat was reduced by about Rs30-35 per 40 kg, he said.

The millers were buying wheat from the open market at the rate of Rs960-970 per 40kg, which was now available at Rs925-930 per 40kg, the chairman said.

TCP to import sugar, urea to stabilise prices.

KARACHI: The Trading Corporation of Pakistan (TCP) has finalised arrangements to import fertiliser and sugar to meet the expected shortfall of both the commodities during coming months.

It has already issued tenders for import of 100,000 tons sugar and 260,000 tons fertiliser and both the commodities are expected to arrive in second half of next month.

This was stated by Saeed Ahmad Khan, chairman TCP while talking to Dawn in his office on Thursday.

He said that TCP was ready to eliminate shortage of fertiliser for kharif crops as well sugar by importing that much quantity of both the commodities, which could help stabilise prices by increasing their availability in the local market.

The TCP chief said that 260,000 tons urea will start arriving from third week of June because there is a gap of 800,000 tons with production at 4.8 million tons and requirement at 5.6 million tons.

Every year there is fertiliser shortage and the government has to import to stabilise prices so that growers do not suffer, he said. Actually speculators and hoarders take advantage of demand and supply gap to make quick money but in the process country’s major crops suffer adversely due to such tactics.

Consequently, Mr Khan said that the kharif crops of rice, cotton and sugarcane would not face urea shortage as the government was fully alive of the situation and will not allow hoarders and profiteers to surge fertiliser prices to their advantage.

This season the TCP was asked by the government to procure 0.5 million cotton bales but the corporation after procuring 192,698 bales has to stop because cotton prices in the domestic market stabilised.

Responding to a question, he said the TCP procured cotton at an average price of Rs3,202 per maund and presently price in the open market has gone beyond Rs3,600.

The imported 0.1 million tons of sugar is expected to reach Karachi by end- June and hopefully it will help to stabilise prices, which are expected to rise owing to lower production of sugar during the coming season.

According to estimates the TCP chairman said the present stocks of sugar with TCP and sugar mills were at around 2.2 million tons, including 25,000 tons of TCP’s earlier stocks. These stocks would be sufficient for up to November or the start of next crushing season.

Undoubtedly, Mr Khan said the TCP is paying higher price for 0.1 million tons as the world sugar prices have gone up to $474-$494 in May against $451 per ton quoted in February this year.

This would mean that the landed cost to TCP on new imports would come to around Rs50 per kg and the government will sell it at a subsidised rate of Rs38 per kg.

However, he said there was a rare possibility that the corporation would suffer losses on sugar imports because it would be making profits on earlier stocks (imports) when prices in the world market were lower by around $40 per ton and would cost the TCP at Rs20 per kg in local market.

He said that the TCP tendering was transparent as it adheres to PEPRA rules, which under clause 40 do not allow negotiations and the lowest has to be awarded if all tender conditions are met.

Our Staff Reporter adds from Lahore: The problem of issuance of letters of credit (LCs) for the import of urea was resolved on Thursday after the Trading Corporation of Pakistan convinced the banks to provide guarantees for 255,000 tons import.

According to Shahid Hussain Raja, additional secretary (fertiliser) of ministry of food and agriculture, the liquidity crunch mainly caused by wheat procurement had hit the banks and imports alike. The government agencies, especially the Punjab Food Department launched a huge procurement drive, which emptied coffers of most of the banks.

But the TCP convinced the banks on the basis of its improved financial health having received money from provinces against imported wheat supply, he said.

Business & Economy

Global crisis poses risk to Pakistan''s economy: Fund.

ISLAMABAD (May 29, 2009): The global financial crisis and recession pose risk to Pakistan''s economy with it growth, exports, remittances and capital inflow could decline further in the next fiscal year, according to the International Monetary Fund "Regional Economic Outlook: Middle East and Central Asia," released here on Thursday.

Tunisian envoy calls for stronger trade ties.

KAACHI (May 29, 2009): Ambassador of Tunisia, Mourad Bourehla has said that Tunisia is interested to further reinforce its bilateral trade and encourage establishment of industrial units through joint ventures with Pakistan. Speaking at a meeting of Karachi Chamber of Commerce and Industry (KCCI), he said that Tunisia is a part of the most advanced Free Trade Agreement (FTA) with European Union (EU) and a pivot part in others FTA with Arab, and Sub-Saharan countries.

'Businessmen can strengthen trade ties with Indonesia'.

ISLAMABAD (May 29, 2009): Business community has a big role to strengthen the economic and trade ties between Pakistan and Indonesia and to help the two countries in economic stability, said Ishak Latu Consina, Ambassador of Indonesia to Pakistan here on Thursday.

Pak-EU summit: market access, trade facilitation on top of agenda. FAISALABAD (May 29, 2009): Market access and trade facilitation to Pakistani exports in European markets would be on top of agenda in the first ever Pak-EU Summit to be held in Brussels on June 17, 2009. Counsellor Economic Affairs Embassy of Germany, Dr Gregor Schotten disclosed this while addressing the members of Pakistan Textile Exporters Association (PTEA) here on Thursday.

Businessmen apprise Qaim of SITE problems. KARACHI (May 29, 2009): Syed Qaim Ali Shah, Chief Minister of Sindh was appraised about the problems being faced by industries in SITE industrial estate, the biggest shareholder in the GDP and revenue contribution by a delegation of SITE Association of Industry (SAI) here on Tuesday.

Traders' leader to observe hunger strike till death. ISLAMABAD (May 29, 2009): A traders' leader Jahangir Akhtar on Thursday said he would observe hunger strike till death in front of ministries of commerce and industry if his demands were not met. Akhtar, who has started hunger strike till death at Abpara Market against unnecessary delay in approval of Chamber of Small Traders and Cottage Industry, said there is no question of backtracking from a just stance.

Vast scope to export food products to Libya. ISLAMABAD (May 29, 2009): Pakistan has vast scope to enhance export of food products to Libya which imports about 75 percent food products to fulfil its domestic requirements. This was stated by Ambassador of Pakistan in Libya, Jamil Ahmed Khan while giving a presentation to the business community at the Islamabad Chamber of Commerce and Industry.

Steps being taken for promotion of women entrepreneurship. SIALKOT (May 29, 2009): Chairperson Departmental Committee on Women Entrepreneurs of Sialkot Chamber of Commerce and Industry (SCCI), Shabnam Asif has said that all necessary steps are being taken for the development of women entrepreneurship and to address their problems.

Zardari orders return of illegally occupied land to Sindh government. KARACHI (May 29, 2009): Finally, President Asif Ali Zardari has issued instructions to the land owning departments of the federal government to transfer land occupied by katchi abadis to Sindh government for regularisation.

Zardari forms committee to curb land grabbing in Sindh.

KARACHI (May 29, 2009): A high-level meeting with President Asif Ali Zardari in the chair, decided on Thursday to form a provincial-level committee to curb land grabbing in Sindh.