KARACHI: The local equity market would have raised Rs72.2 billion in 10 new initial public offerings (IPOs) and secondary issues before the dawn of 2015; it has already mopped up Rs58bn in nine IPOs and one is in the pipeline.

The figure compares favourably with just three new issues worth Rs4bn the previous year.

The major amount has been raised from secondary offerings by the Privatisation Commission. For a long time now, the government has stingily held on to all its holdings in public companies.

The private sector listings have also been all too slow, which has resulted in too much cash chasing for too few shares at the market.

All that seems to have changed in 2014 as the stock market provided a return of 27pc for the third year, after almost 49pc return in each of the past two years.

Such mouth-watering gains have lured more and more investors to the stocks, though the benchmark KSE-100 index looms at the dizzy high of 32,000 points.

“It would be prudent for the small investors to be discreet in the selection of stocks for investment,” cautions stock broker Aqeel Karim Dhedhi.

According to analysts at brokerage Topline Securities, the number of new offerings in 2014 has swelled after a gap of seven years. They mention that compared to average annual offerings of around three new issues in the past five years, the double-digit offerings in the current year is impressive.

It reminds veteran brokers of the decade of 1990s when the thirst for new offerings and doleful of money made by retail investors in IPO applications pulled hordes of new investors into the equity market.

All of that led to oversubscription, which encouraged more companies to enter the market and on average 30 new offerings were seen in the first fierce bull run after doors of the stock market were thrown open to the foreign investors by the Benazir (PPP) government.

While the current month has been historically cool in regard to new issues, the Pakistan market has seen as many as four new companies mobilise funds from the equity market in 2014, after almost 18 years.

“Although the four offerings may create some liquidity shortages ahead of December closing, the overall momentum signals continuation of bull run in 2015,” say analysts.

The ten offerings (primary and secondary) during 2014 include the following: Hascol of the offer size of Rs1.4bn; UBL Rs38.2bn; PPL Rs15.3bn; EPQL Rs1.2bn; Saif Power Rs1.4bn; Allied Bank Rs13.2bn; Systems Limited Rs520m; Synthetic Products Enterprises Rs757m and Sindh Modaraba Rs135m.

Market watchers at Topline Securities say the demand in IPOs was due to declining interest rates, where the government bond yields were down 210bps in the last 11 weeks. As a result, more funds are expected to flow freely into equities.

Published in Dawn, December 27th, 2014