KARACHI: The compliance department of the Pakistan Stock Exchange (PSX) has sought a clarification from three listed companies for a “substantial” increase in their share prices between September 18 and October 13.

One of the three companies is Philip Morris Pakistan Ltd, which makes and sells cigarettes and tobacco products. It has a free-float of only five per cent, which means the company’s sponsors control 95pc shareholding while the rest is available to the public for trading.

“The PSX has observed (an) unusual movement in the price of the shares of Philip Morris Pakistan Ltd during the period from September 18 to October 13,” said a letter to the company sent by PSX’s head of Listed Companies Compliance Hafiz Maqsood Munshi on October 20.

Under the prevailing Securities Act, a listed company is required to promptly disclose to the general public if it observes any unusual movement in the price or volume of its traded securities. The company must share with the general public the details of any matter or development that is — or may possibly be — relevant to the unusual movement in price or volumes.

Otherwise, the company should issue a statement of the fact that it’s not aware of any such matter or development.

There was no trading in the shares of the cigarette maker on September 18. But its share price closed at Rs324.25 on September 19 after gaining 7.4pc during the trading session. It rose in subsequent sessions and hit Rs540 apiece by the end of the October 13 session, showing an overall increase of 78.9pc in less than a month.

The PSX directed Philip Morris Pakistan Ltd to furnish the sufficient information “as is available” that may have resulted in the unusual movement in its price over the period under consideration.

This is the second time in recent months that the PSX has sought an explanation from Philip Morris Pakistan Ltd for an unusual share price movement. Earlier in June, the frontline regulator asked the cigarette maker to explain a sharp increase from Rs282.27 a share on May 2 to Rs437.43 on May 31, which translates to a 55pc rise. In response, the company expressed its ignorance to the PSX about any material or price-sensitive information.

Capital market regulators around the world keep an eye on any sudden share price movements to protect small investors from fraud. The regulatory requirement is aimed at preventing insider trading, which involves buying and selling of shares by someone with non-public but material information about the stock undergoing a sharp change in its price or trading volume.

The PSX also asked Noon Sugar Mills Ltd, a producer and seller of white sugar and spirit with a free-float of 30pc, to explain the substantial increase in its share price between September 18 and October 13.

Its share price remained flat for most of September but suddenly rose from Rs47 per share on October 2 to Rs75.87 on October 13. It translates to a 61.4pc rise in the share price in less than two weeks.

The third company to receive a letter from the PSX compliance department was Pak Leather Crafts Ltd, a manufacturer and exporter of leather garments. Its share price remained flat for the first 20 days of September but increased from Rs10.54 on September 21 to Rs19.75 on October 13, up 87.4pc in the period under review.

Published in Dawn, October 22th, 2023

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