June 29, 2012 (JS Research)
The market continued with subdued activity amid the political turbulence. On the political front, Presidential Ordinance which was issued to provide constitutional cover to former Prime Minister’s decisions was challenged. Other major highlights during the week included: 1) Competition Commission of Pakistan (CCP) issuing show cause notices to fertilizer companies, 2) PSO starting additional supply of furnace oil to generate 1200MW of power and 3) Indus Motor and Honda raising car prices to compensate for Euro II compliance. Consequently, the KSE-100 index closed at 13,801, up 0.5%WoW with average daily volumes of 69mn shares, up 0.3%WoW. Foreigners were net sellers of US$5.6mn.
CCP issues notices to fertilizer producers
Post the enquiry report on ‘unreasonable increase in the price of urea fertilizer’, CCP initiated proceedings against the urea producers for abusing their dominant position in the market by issuing show cause notices to all the fertilizer producers. On the other hand, State Bank of Pakistan urged the GoP to eliminate price gap between locally produced and imported urea. As a result, the key fertilizer stocks namely FFC, FFBL, ENGRO and FATIMA all underperformed the market by 1.4%, 1.0%, 3.0% and 0.5%, respectively on WoW basis.
Additional furnace oil supply for power
New Prime Minister directed the finance ministry to collect outstanding dues from GoP bodies and provide funds to PSO so as to start additional supply of furnace oil to generate 1200MW of power.
Indus and Honda raises car prices
During the week, Indus Motor and Honda raised their car prices to compensate for the Euro II compliance. However, INDU and HCAR underperformed the market by 2.9% and 6.4%, respectively.
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