KSE TRENDS

Adm. Mullen's outburst against Pakistan's key intelligence agency ISI has some
reverberations on Pakistani politics as well as decision making of our fund manager
friends.
It’s being said that America would continue to show restraint despite threatening
posture, since any 'unilateral attack' on sanctuaries in North Waziristan may ignite
further trouble for the weak Pakistani political government. The trouble would
emanate within the streets which could wilt present 'democratic set up' wherein all
strong army could push for an interim set up. The shaping up of this scenario is now
evident from recent overtures by army top brass in Pakistan's troubled Sindh province
whereby army chief exchanged notes with Karachi based businessmen that indicate
increased interest to trigger 'political change'. Till now army has shown restraint
despite economic meltdown given political expediency.
In light of this we pronounce that funds should keep FFBL since it would continue to
dominate investors interest since it still provide 30% upside from present price. Many
analysts have failed to capture real value in FFBL (given lack of understanding on agridynamics
+ co relation with international price) and this is evident from funds holding
position on the stock.
Secondly, other fertilizer players are also at an advantageous position such as FFC
and Fatima (we see FFC and Fatima touching new highs). We do not like holding
company i.e. Engro Corp and instead would like investors to wait for Engro Fertilizer
IPO.
Among oil explorers, it is Pakistan Oilfields which continues to remain 'favorite'
despite delays coming in Domial2 (presence of 1mmcfd gas + company's inability of not
lifting thick oil) that would keep investors at tenterhooks. Though, we like OGDC due
to developments in Zin Block where 85 development wells are planned.
Among emerging players, investors should not forget new German plant of Fauji
Cement (FCCL; target price Rs 8/sh) which is now under production. People would
only realize value once it would make a Lotpta like journey in coming months. Among
other emerging players, Engro Foods (EFoods) also provide value.
Among banks, MCB and BAFL provide value (we like BAFL since it provides lot of
liquidity). Despite liquidity constraints, ABL is also a good option.
The developing political situation, though would initially send shivers down the spine,
is likely to give 'sign of relief' to investors in and around December 11'. At present
investors are wary from the current political impasse and are hesitating on filing CGT
returns.