KSE ends week 4pc higher as corporate results attract investors

Economy

Sunday, 08 February 2009 19:01

Sunday, February 08, 2009
By Salman Siddiqui

KARACHI: The corporate results announcement season for the period ended last December and the appearance of a number of investment-friendly news this week kept the Karachi bourse rising up.

The benchmark KSE 100-share Index again crossed the 5,500 points level that was a major milestone of this week, as the market had dipped to 4,815.34 points five years low on Jan 26, 2009.

With the surge of 220.02 points or 4.09 per cent of this week, the KSE 100-share Index scaled up to 5,597.44 points.

The market has regained 782.10 points or 16.24 per cent in the last two consecutive weeks. Prior to this, market had declined by 66 per cent to Jan 26 position since April 18, 2008 all time high closing of 15,676 points.

The KSE 30-share Index, which is heavily dominated by banking stocks, soared by another 438.97 points or 8.44 per cent and closed at 5,634.78 points.

The banking, insurance and energy stocks were very much prominent in placing the market on high side, as stocks enjoying heavy weightage on indices from these sectors are to announce their corporate results next week.

The banks remained in the limelight this week shored by Force Sale Value (FSV) relaxation and the reports that banks may be allowed to spread investment impairment losses over two years rather than take a one time earnings hit.

Meanwhile, banking spreads also increased by 12bps MoM averaging at 7.75 per cent in December, observed Gul-e-Zehra Jafri at KASB Securities.

?We believe that further corporate results announcement would take the centre stage in shaping the market behaviour in the upcoming week. Among the major companies, MCB, NRL and ICI are scheduled to announce results during next week,? she added.

Atif Zafar at JS Research says: ?After impressive showing by the fertilizer sector depicting an increase of 24 per cent in profitability, market is looking forward towards corporate result announcements in the upcoming weeks with positive expectations. Next week, two major companies NRL and MCB will be announcing their December end results.?

Selling pressure from offshore investors also declined over the week as foreigners bought shares worth $8 million and sold $21.1 million, resulting in net selling of US$13.1 million in the outgoing week, he said and added, net selling by offshore investors during the outgoing week was considerably lower than the previous two week?s total of US$87.3 million. As a result, net selling post lifting of the price floor has now reached US$180 million.

Average daily volumes in the ready market stood at 177 million shares versus 180.7 million shares depicting a decrease of just two per cent on week-on-week basis. On the CFS counter, limited activity was witnessed. CFS investment ended the weekend at Rs507 million with average annualized rate of 19.2 per cent, JS Research calculated.

An inflow of Rs64 billion was recorded in the overall market capitalisation that improved to Rs1,764 billion by the weekend.

The maintaining of Discount Rate (DR) at 15 per cent by the central bank for the next quarter was in somehow line with the market expectation, as some quarters were expecting a fractional cut in DR as economic variables have started fixing in the right direction, said Ahsan Mehanti at Shahzad Chamdia.

He maintained that if economy continues to grow in the right direction then the chances of notable cut in DR was expected in the monetary policy announcement for the last quarter of fiscal year 2009.

Therefore, high expectation of receiving smart payouts in the week ahead and investment made by NIT-State Enterprise Fund helped market bringing out from prolonged depression, he added.

Arif Habib Securities, EFU General Insurance, MCB Bank, Allied Bank and Habib Bank were major gainers while Standard Chartered Bank, EFU Life Assurance, JS Global Capital, Indus Motor and WorldCall Telecom were major losers at the KSE this week, according to KASB Securities.


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ADB lends $300m for water, sanitation in Sindh

Economy

Saturday, 07 February 2009 09:01

Saturday, February 07, 2009
By Mehtab Haider

ISLAMABAD: The Asian Development Bank (ADB) and Pakistan on Friday signed a $300 million loan agreement for making improvement in water and sanitation services for second-tier cities of Sindh.

Over the next 10 years, the financing facility would be provided in various installments to improve basic urban services for nearly four million people across about 20 towns in Sindh. First tranche worth $38 million of the facility was disbursed on Friday.

Under the initiative, public-private partnership mechanism will be promoted for improving service delivery in second-tier cities of Sindh, the second largest populated province.

?The ADB plans to approve $1.5 billion for various projects in Pakistan during calendar year 2009 against disbursement of $1.87 billion in 2008,? ADB?s Country Director Rune Stroem said while replying to various questions of journalists after the signing ceremony here.

Economic Affairs Division Secretary Farrakh Qayyum and Rune Stroem signed the agreement for the Sindh Cities Improvement Investment Programme (SCIP).

The ADB director stressed the need for improving social service delivery by enhancing transparency. Sindh?s Additional Secretary Nazar Mohammad told reporters the provision of services was on the decline, sending more people into the clutches of poverty.

EAD Secretary Farrakh Qayyum told reporters the Sindh government would pay back the loan in rupees and the Centre would be responsible for payment in dollars. ?Payment of external debt and liabilities is the responsibility of the federal government but their rupee component will be provided by Sindh,? he said.

To a query about complaints by provinces that the Centre was overcharging on loans, the EAD secretary said re-lending policy was being devised in consultation with the federating units and the new policy would be tabled before the Economic Coordination Committee (ECC) for final approval within two to three weeks.

According to the ADB, an estimated 570,000 households in targeted cities will directly benefit from the investment programme. The multi-tranche financing facility will provide funds for physical investment in water supply, waste water and solid waste management infrastructure, including piped water supply networks targeting potable water, covered drains, sewage treatment, waste collection vehicles and sanitary landfills.

A $2.5 million technical grant will support increased efficiency and accountability of the first urban service corporation. The programme will also support Sindh in establishing a provincial focal point for urban sector management reforms.

?The investment will help the provincial government cope with mounting challenges to provision of basic urban services to an estimated four million residents of Sindh?s secondary cities over the next several years,? said Rune Stroem.

The first tranche of $38 million will focus on institutional change and priority infrastructure in northern Sindh cities of Sukkur, New Sukkur, Rohri, Khairpur, Shikarpur and Larkana.

Sindh is faced with rising population growth, a severe deficit in basic urban infrastructure and services and growing urban poverty. The core challenge that Sindh cities face is inadequate basic services like water supply, waste water and solid waste management. Limited access to and poor quality of water, together with poor sanitation, spread diseases and cause chronic illnesses such as diarrhea, especially among children.

The programme introduces local government-organised urban services corporations, staffed by professional managers and skilled technicians and tasked with water supply, waste water and solid waste management services. This approach is innovative as it brings together key elements necessary to improve service delivery, clear roles and responsibilities, skilled people including private sector expertise, performance incentives and increased accountability.

The first of these local-government organised corporations is the Sukkur-based North Sindh Urban Services Corporation Limited, incorporated in November 2008.


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Mild steel bar prices touch Rs 57,000 per tonne

Economy

Friday, 06 February 2009 07:57

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RIZWAN BHATTI
KARACHI (February 06 2009): Prices of mild steel bar (sariya) have shot up by Rs 8,000 per tonne due to the shortage of raw material in the domestic market, traders said. They blamed black-marketing for this price rise by the country"s largest steel producer-Pakistan Steel, saying it has contrived to cause shortage of billets in the market, making the steel bar costlier.

Consequently, the price of mild steel bar a basic input of construction industry, is rising gradually in the local market, although prices of billet are stable, they added. The price of steel bar made by billet has surged by some Rs 8,000 per tonne to Rs 57,000 per tonne as compared to Rs 49,000 per tonne previously, traders informed Business Recorder.

The price of scrape steel bar has increased by Rs 7,000 per tonne to Rs 55,000-55,500 per tonne from Rs 48,500 per tonne in the domestic market. They said on the last working day mild steel trading was at its peak in the Moin steel market, the city"s largest steel market, because of reports of the rise in prices of the mild steel. However, in the evening trading came to a halt, after the announcement of new mild steel bar prices by the rolling mills, they said.

The rising prices of steel bar could further hurt the construction activity, which is already declining due to the economic slowdown, they added. "PS is not properly distributing the billets to the rolling mills, while scrape prices also have shot up sharply and both factors contributed in creating shortage of the raw material in the domestic market," said an owner of re-rolling mill.

He said that since it is impossible for re-rolling mills to sell the commodity at the existing price, they have increased the price. In future, if shortage of raw material increased further mild steel prices would also go up. The country"s demand for billets is around 500,000 tonnes annually, of which some 250,000 tonnes are produced by PS, while the remaining gap is met through imports from Russia, South Africa, Ukraine and Egypt.


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LPG pricing system comes under fire

Economy

Monday, 02 February 2009 17:30

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Monday, February 02, 2009
By Mushtaq Ghumman


ISLAMABAD: The fixation of liquefied petroleum gas (LPG) price on the model of Saudi Aramco Contract Price (CP) is being criticized by some of the industry"s stakeholders who feel that they are not being treated fairly by the policy makers.

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"Whether it is the CP policy or proposals to impose "PDL" on local producers, or to exempt imports from LPG, the main intention behind the idea is to force the local producers to set the prices at artificially high rates to facilitate imports," said one of the stakeholders while talking to Business Recorder. The Economic Co-ordination Committee (ECC) of the Cabinet, in one of its recent meeting had directed the Petroleum Ministry to call a meeting to finalise new LPG pricing formula, and submit it again for consideration.

Official sources told Business Recorder that the ministry has yet to finalise the formula as the Advisor to Prime Minister was busy in giving final touches to the petroleum policy and meeting with the exploration and production (E&P) companies.

Under the Deregulation Order 2000, issued a month ahead of commissioning of Parco"s refinery, the GoP deregulated the LPG sector, leaving the pricing process between the buyer and seller, based on market factors and with no GoP involvement.

Deregulation led to an investment of over $300 million in the LPG sector, creation of over 30,000 jobs, and strong competition. There are 70 LPG marketing companies licensed by the Oil and Gas Regulatory Authority (Ogra), with another 70 reportedly coming up.

In January 2007, Shaukat Aziz had imposed so-called "import parity pricing mechanism" by forcing the local LPG producers to sell LPG at Saudi Arabian export price. The policy was defended by the then Secretary Petroleum Ahmad Waqar on following grounds: (i) policy would cater to "latent demand", leading to imports of 4,000 tons per day (in a country where local production is 1,400 tons per day, and demand is highly seasonal and price-sensitive); (ii) policy would lead to lower and stable prices by crowding out "middlemen".

From January through November 2007, Ogra notified the Saudi Aramco Contract Price (CP) to all producers. Under the policy, the CP was the upper limit, but because of Ogra notifications, the CP became the enforceable price each month (the then OGDC MD Arshad Nassar said price LPG below the Ogra-notified price would mean inviting NAB action).

Aziz also ordered that customs duty be waived on imported LPG, and that no income tax be payable at the import stage. The CP policy led to an increase of 60 percent in prices across the LPG value-chain, dropping demand and roiling the industry. He said that OGDC and Parco and other producers were forced into giving discounts because consumers resisted international prices and had more affordable alternative fuels available to them.

Total LPG availability in Pakistan increased, by 0.25 percent. In calendar year 2006, when the CP policy was not in place, Pakistan had imported 46,000 tons LPG. In calendar year 2007, when the CP policy was in place, Pakistan imported only 47,000 tons LPG, which meant that the policy was a failure--by any measure.

In December 2007, the ECC directed Ogra not to notify prices to producers. The CP cap for producers is prevalent till today and there is no bar on anyone from importing LPG into Pakistan, and two LPG marketing companies and an LPG producer have imported 8,000 tons LPG during January alone.

There are reports that the government is being pushed to go further than Aziz by forcing local producers to sell product at CP plus $150 per ton, using the same specious arguments as used previously.


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