KARACHI, Jan 4: During the year since January 2004, textile sector (in a sample of six key companies) outperformed the KSE-100 index by 78 per cent, and analysts were bullish on the sector for the current year, as well.
Analysts reasoned that the opening up of world markets (post-WTO) and low cotton prices were the major reasons for their positive stance on the sector. "Most well managed textile companies, in our opinion, have the infrastructure and the competitive edge needed to perform and excel in open markets," wrote Elixir Securities in its daily report.
The analysts mentioned that as per figures released by the Pakistan Cotton Ginners Association, cotton arrivals as of 1st January 2005 stood at 13.1 million bales. Region wise break-up showed a 10pc increase in output from Sindh and a 12pc increase in Punjab output on a year-on-year basis.
According to market sources, in the wake of excess supply, cotton prices hovered below Rs2000 per maund and ruled at around Rs1,910 per maund, which represented a sharp contrast from the previous year, when prices had sky rocketed to over Rs3,000 per maund.
Trading Corporation of Pakistan was noted to be intervening regularly in the open market to support prices from retreating further. Analysts stated that with the domestic glut in cotton, an alternative was the export of cotton.
"However, despite price competitiveness (local price at Rs1,910 per maund versus international price of approximately Rs2,150 per maund), we do not foresee substantial cotton exports," said the analysts, adding that the government was not in favour of encouraging export of raw cotton and its focus was rightly on value addition.
That being the case, i.e, low cotton prices and no encouragement for export of raw cotton, analysts believed that local spinning/composite units would benefit.
