STOCK MARKET UPDATE:31.05.2012

STOCK:

Karachi Stocks Down 199.10 Points:
KARACHI, May 30: At close of trading, the KSE-100 index was at 13872.75, down 199.10 points.

May 30, 2012

5 TOP GAINERS  &  LOOSERS:

Rafhan Maize	Rs 29.12	UniLiver Food	Rs (152.37)
Mitchells Fruit	Rs 15.05	Nestle Pak	Rs (50.13)
Island Textiles	Rs 9.05	Bata Pak	Rs (9.05)
Pak Oilfields	Rs 5.53	Seimens Pak	Rs (8.33)
Indus Motor Co	Rs 4.20	Pak Services	Rs (7.71)

KSE Index loses 200 points on nervousness

KARACHI, May 30: Shares plunged on the Karachi Stock Exchange on Wednesday with the KSE-100 index posting a massive loss of 200.09 points and closing at 13,871.76 points.
The stocks climbed higher in early trade but were pushed back by the bears once more below the 14,000 level, which traders said was turning out to be a strong resistance for the market.
The foreign investors picked up equities valued at $2.93 million on Wednesday, quite in contrast with the offloading of the
day earlier. Yet the banks reduced portfolio by $2.53 million.
Many brokers and dealers said that investors nervousness just before the budget was quite understandable. Most preferred to remain on the sidelines. That was represented by a dip in volume of trade by 19 per cent to 129 million shares, from 160 million shares that changed hands a day earlier.
Trading value also stood reduced to Rs5.643 billion, from Rs5.835 billion. The aggregate value of all shares quoted on the exchange came down by Rs53 billion to Rs3.548 trillion on Wednesday, from Rs3.601 trillion the previous day.
Equity dealer, Samar Iqbal at Topline Securities said that the declining rupee against the dollar and news of tax on gas price affected investor sentiments. Also uncertainty in the global stocks and currency markets forced investors to stay on the sidelines.
Ahsan Mehanti at Arif Habib Corp commented that the local equity market remained in bearish frame of mind amid thin trade on investor concerns over unstable macroeconomic situation and falling rupee-dollar parity.
He said that the proposals for increase in gas development cess for industrial sector, fall in global stocks and commodities on eurozone debt crises, limited foreign and institutional support played a catalyst role in bearish sentiments in stocks across the board. Investors also remained cautious ahead of budget announcements and uncertainty over Pak-US relations.
The news flow did not offer much to cheer. The country was thought to miss the export revenue target due to declining cotton prices in the international market. The cotton exports in terms of quantity had doubled in the current fiscal year as compared to last year from 0.534 million bales to 1.171 million bales.
Yet the export earnings were expected to recede to $231 million, from $320 million due to decline in cotton prices. The country was also believed to be going wayward in regard to current account deficit, owing to slow foreign inflows and high trade deficits.
Pakistan’s current account balance in last fiscal year (FY11) stood positive for the first time in six years and surplus by $540 million primarily driven by all-time high inflows of home remittances and goods exports.
On the slightly positive note, reports were that the draft Foreign Assistance Policy Framework had recommended to the government to give preference to grants and soft-loans over other types of loans, which would be used only in those cases where it had been established that the proposed project would contribute to investment that would accelerate economic growth. The market cap based KSE-30 index plunged by 221.93 points on Wednesday to 12,021.35 points. The declining
stocks at 201 were more than twice the rising issues at 99 with 67 of the 367 active issues remaining unchanged.
On the active list, all ten top volume leaders ended in the minus territory. BankIslami Pakistan, the recent investors’ favorite lost 62 paisa to Rs11.42 on 16m shares. Engro Corporation retreated by Rs5.20 to Rs108.50 on 9m shares, D.G.
Khan Cement was down by Rs1.65 to Rs41.49 on 9m shares, Jah Sidd Co eased by 63 paisa to Rs15.62 on 9m shares, Fauji Cement slid 16 paisa to Rs6.10 on 6m shares.
Fauji Fertiliser was down by Rs4 to Rs109.06 on 5m shares and Fatima Fertiliser shed 48 paisa to Rs24.31 on 4m shares.
Engro Foods declined by Rs3.40 to Rs68.20 on 4m shares and Azgard Nine slipped by 8 paisa to Rs6.80 on 3m shares.

ANNOUCEMENTS/COMPANY NEWS:

TDF to drive cement earnings: KARACHI, May 30: The cement companies are attempting to use tire derived fuel (TDF) as an alternative to coal in manufacturing as a means to improve margins.A report by analyst Yawar Uz Zaman at Investcapital stated that energy costs formed as much as 60 per cent of the totals of cost of cement production. Most of the country’s plants were based on coal technology and the prices of coal were prone to wild swings. They touched the peak of $138.50 per ton; though receding recently to $91.85 per ton.
“This volatile movement in coal prices disturbs manufacturer’s margins and some of the industry giants have started to consider implementing other affordable technology which has lower fluctuation than coal and is also environment-friendly,” the analyst says. He noted that the two biggest plants, Lucky and DG Khan had already introduced TDF at their plants. A comparable analysis of using coal verses shredded tires in cement manufacturing reveal the following: Taking coal price at $100 per ton, the conversion to TDF based technology would result in savings of Rs333 per ton or (Rs17 per bag), analyst calculated.
Currently, the average per ton cost of shredded tires is hovering around Rs9,054. However, in case of further decline in coal prices, there would be no benefit from plant conversion, the analyst argues.
He stated that Lucky Cement had completed 20 per cent conversion, which had resulted in annualised cost savings of Rs292 million.
At D.G. Cement, the TDF based fuel plant was currently in trial run and it would be operational in first half of financial year 2013. The successful conversion to TDF from coal was thought to enable the company to lock in Rs1.4 billion annually.
Going forward, TDF technology being less expensive and 25 per cent more efficient than coal, companies turning to the new technology could minimise energy costs. However, the industry-wise benefit was murky due to higher interest rate scenario,
which would block plans of many companies to convert their coal based plant to alternative fuels.
Hubco to payoff tax liability of Rs1.65bn: KARACHI, May 30: The Hub Power Company announced on Wednesday that the company had decided to payoff tax liability amounting to Rs1.65 billion that it was in dispute with the tax authorities.
Nauman Khan at brokerage Topline Securities recalls that the company was in dispute with the country’s tax authority regarding non-deduction of withholding tax at the time of issuance of shares to sponsors against project development cost incurred by them.
The tax department assessed a tax liability of Rs1.9b of which company had already deposited Rs297million in accordance with the departmental procedure. However, with long pending case since 1999, the assessed liability had grown to Rs3.25b accumulation of late payment penalty and interest charges.
Earlier in March this year, Islamabad High Court had dismissed a petition by Hubco against levy of that tax. The company has filed appeals before the Supreme Court.
“The management decision to pay depicts company’s prudent attitude towards resolving all the outstanding tax issues in an amicable manner rather than opting to take a course of confrontation that may affect shareholders as was happened recently when tax authority froze Hubco’s bank accounts,” says Nauman.
Nurali Barkatali, analyst at BMA Capital Management Ltd, commented that in deciding to clear the liability, Hubco was availing a tax benefit scheme launched by FBR through SRO 547 issued on May 22, 2012.
As per the SRO, exemption would be granted on whole of the amount, in respect of default surcharge and penalty for non-payment, if the defaulter pays actual tax dues by May 31, 2012.
The SRO further states that, in case refund becomes payable as a result of judgment of court after the issuance of the aforementioned notification, the tax deposited by that tax payer would be refunded.
Analysts concurred that after discussion with the company’s management, they were of the view that the one-time payment of Rs1.6 billion would not affect the financial earnings for year 2012, as the tax did not relate to the current fiscal year and
also because the company was still defending the case in the court. Yet, it represented cash outflow of Rs1.6b that could affect company’s dividend payout in the coming quarters. Nauman stated that he expected the earning per share of Rs5.9 in financial year 2012. The company could pay final cash dividend of Rs3 per share (Rs3 interim already paid) by borrowings.
The directors may, however, opt to reduce the dividend looking at the cash outflow due to tax payment. Nurali at BMA stated that on Tuesday’s closing price of the stock at Rs40.49 per share, Hubco offered a FY13 dividend yield of 15 per cent which was 150bps above recent cut-off of the 10-year Pakistan Inves-tment Bond.

Company news: KARACHI, May 30: Pakistan International Airlines (PIA) has reduced the total number of departments from 12 to seven after reorganisation to improve functioning of the national carrier, a press release said.
KARACHI: Etisalat will deploy international social responsibility and sustainability reporting standards including Global Reporting Initiative (GRI) and ISO 26000 across Asia, the Middle East and Africa.
KARACHI: Pakistan Mercantile Exchange (PMEX) held a workshop in Lahore and Islamabad for its brokers and investors. The workshops are part of a series of trainings   for investors interested in trading commodities  on PMEX.
KARACHI: Stakeholders at ‘Strategizing for resilience against disasters — a microfinance dialogue’, organised by Pakistan Poverty Alleviation Fund, stressed the need for developing a viable framework for microfinance sector to protect the vulnerable from the disastrous effects of natural catastrophes, says a press release.

MOHAMMED SALEEM MANSOORI