ISLAMABAD, June 4: The Karachi Stock Exchange (KSE) crash in April was not a “fault” of the brokers as had been case in some previous market fall but was mainly due to substantial decline in the share price of a number of scrips, claims Pakistan Economic Survey 2004-05, released here on Saturday.
Ironically, the survey has jumped to the conclusion by shifting the responsibility from brokers to scrips at a time when an independent task force constituted by the Securities and Exchange Commission of Pakistan (SECP) is still investigating the reasons of stock exchange crash. The small investors suffered over $12 billion losses due to the continuous bearish trend and brokers are believed to be the main characters in the episode.
The survey has stressed the need for conducting investigations into a number of factors to understand the reasons for the crash which included delay in the privatization of government-owned companies; withdrawal of funds by financiers; excessive buying by several brokers in the future market who were not able to get exit opportunity due to the continuous decline in the market; sellers in the March future contract were carrying hedged positions from ready market; sellers decided not to square up their positions in the March future contract; and downward circuit breakers blocked the opportunity of exit from the market.
The survey claimed: “The stock market turned bearish since March 16, 2005 and the KSE 100 index dropped as low as to 6939 on April 12, 2005 from the peak of 10, 303 on March 15, 2005 showing a decline of 32.7 per cent...Notwithstanding sharp fall there were no broker defaults in the stock market and also market was not closed or suspended, as had been the case in some previous market falls.”
It said substantial decline in the share prices of Oil and Gas Development Corporation (OGDC), Pakistan Telecommunication Company (PTCL), Pakistan State Oil (PSO) and National Bank of Pakistan (SBP) caused the downfall in the index.
The total decline in KSE 100-share index to the extent of 1,759 points out of total 2,600 points (68 per cent) from its peak of 10,303 points was due to these scrips, it observed.
Out of 16 leading stock markets in the world, the KSE share index increased by 37 per cent in terms of US dollar during July-May 13, 2004-05, surpassed only by Sri Lanka, Indonesia and India, the survey claimed.
SECTORAL PERFORMANCE: During the first nine months of the outgoing fiscal year, the KSE 100-share index and aggregate market capitalisation of 12 different sectors have increased by 47.2 per cent and 55.8 per cent respectively, as against their increase of 50.1 per cent and 78.3 per cent in the same period last year respectively, the survey shows.
Total turnover of shares on the KSE was 17.7 billion in the first nine months of 2004-05 as compared to 65.2 billion in the same period last year. All but two of the 12 major trading groups on the KSE (cotton and other textiles, pharmaceutical and chemicals, auto and allied, cable and electric goods, paper and board, cement, fuel and energy, transport and communication, banks and other financial institutions and miscellaneous) witnessed growth in their share indices.
The growth is ranging between 0.5 per cent (bank and other financial institutions) to 63.7 per cent (fuel and energy). The engineering, sugar and allied sectors encountered slight declines in their share indices.
The survey maintained that during the calendar year 2004, total profit before taxation of the 12 trading groups stood at Rs229.5 billion as compared to their pre-taxation profit of Rs136.8 billion in 2003.
There were 217 companies listed with the KSE under the cotton and other textiles group, which recorded a growth of 19.3 per cent during the first nine months of the current fiscal year as compared to a growth of 34.3 per cent in the corresponding period last year, the survey said.
