By SHABBIR H. KAZMI
Updated June 23, 2001

The market behaviour during the week has become a cause of serious concern. Massive selling in Pakistan State Oil and a very high Badla rate seems to be the outcome of severe liquidity crunch. During the next and the following weeks KSE-100 index is expected to plunge as it will be very difficult for the weak holders to keep their holdings intact. With more and more scrips to come under T+3 system daily trading volume is expected to go down considerably and oversupply may erode share prices in general. Since budget impact is neutral for most of the sectors interest of investors may also remain low.

PAKISTAN STATE OIL COMPANY

The scrip has registered price erosion during the week mainly due to large scale selling by an institutional investor. While it is difficult to attribute a plausible reason for this, the only fear is that this investor facing liquidity crunch was forced to liquidate its holding. With the increase in prices of POL products, the Company may not witness any significant reduction in its sales due to deeper market penetration as compared to other oil marketing companies, at least in the medium term. While the Company is not expected to witness any reduction in its core business of furnace oil, the poor financial condition of WAPDA and KESC is expected to adversely impact its cashflow. The situation is expected to further aggravate due to NEPRA's refusal to allow electricity tariff hike to WAPDA.

PAKISTAN TELECOMMUNICATION COMPANY

The GoP has imposed Rs 2,000 per connection on cellular phones. At present a reasonably good cellular phone costs Rs 3,599, this high surcharge is likely to severely hamper growth of cellular phones population. PTCL's fully owned cellular subsidiary has already captured 16 per cent market share with the launch of its service. However, this success has not been on taking business away from the existing private sector operators, Rather, its focus outside the three large cities has led to expansion of the market size. This is expected to improve PTCL's franchise value in the context of planned sale of the company's management stake to a strategic buyer. According to a KASB report while the indicative price comes to US$ one per share the GoP is looking at a figure nearer to US$ two per share.

LEVER BROTHERS PAKISTAN

The 5 per cent hike in import duty to 30 per cent on tea is expected to proliferate its smuggling and adversely impact sales of companies like Lever Brothers. The hike in import duty will squeeze its margins of tea business. While price of tea was reduced recently, it is once again expected to go up after the hike in import duty. However, the Company will not be able to pass on the full impact of duty to consumers. As the GoP intends to pursue documentation, it is expected to benefit the companies in the organized sector. With the reduction in corporate tax, potential for reinvestment and/or dividend payout is expected to further improve. Another factor expected to improve earnings of the Company is reduction of the minimum import duty.

INTERNATIONAL KNITWEAR

The Company has released accounts for year ending June 30, 2000 at a time when its half yearly results should have been made public. It may not be of any consequence for the investors but should be noted by the regulators as such delays do not indicate good governance. On sale of Rs 51.8 million the Company has posted 13.2 per cent gross profit amounting to Rs 6.85 million. However, nearly 44 per cent or Rs 3 million towards payment of financial charges. Another point of concern is that while profit after tax for the year 2000 was Rs 1.2 million, accumulated losses as at June 30, 2000 exceeded Rs 25.6 million. This clearly indicates that the company will not be able to wipe out these losses for many years. Therefore, it is imperative for the sponsors to increase paid-up capital of the Company to overcome liquidity crunch — a reason for higher financial charges.

SUI SOUTHERN GAS COMPANY

The Company offered one billion rupee term finance certificates (TFCs). Out of this Pre-IPO amounted Rs 800 million and public offer was for Rs 200 million. Against the public offer a total of 158 applications were received amounting to Rs 229.6 million. Allotments to the general public is being made as per the basis of allotment published in the prospectus. All applications for Rs 5,000, Rs 25,000 and Rs 100,000 have been accommodated and applications of over Rs 100,000 are being allotted on pro rata basis.

SHAHEEN INSURANCE COMPANY

The Board of Directors of the Company, a project of Shaheen Foundation, has approved to issue two million right shares at par value in proportion of one share for every three shares. This is to meet the requirements of new Insurance Ordinance. The issue has been underwritten. It seems that the need to issue shares has been necessitated due to persistent losses during 1997-1999 period.

MOVEMENT AT A GLANCE
SCRIP	HIGH (Rs.)	LOW (Rs.)	CLOSING  PRICE	TURNOVER  (SHARE MN)
PSO	145.60	120.00	127.00	121,345,200
PTCL	18.35	17.55	17.85	70,229,000
Hubco	19.75	19.20	19.45	54,661,500
FFC Jordan	6.30	5.80	5.95	15,618,000
Engro	59.40	56.40	57.40	12,751,700
Fauji Fertilizer	37.60	35.90	36.00	9,407,800
Dewan Fibre	18.70	17.30	17.70	8,838,500
MCB	27.10	23.50	24.10	7,084,500
Shell Pakistan	254.00	242.00	246.50	361,200