KARACHI, June 8: The Karachi Stock Exchange 100-index (KSE-100), the benchmark of Pakistan’s stock market rose by 24 per cent to 12,370 points until April 2007, from 9,989 points at the end of fiscal year 2005-06, the Economic Survey 2006-07 pointed out.
Market capitalisation was also noted to have increased by 28.6 per cent to Rs3604 billion from Rs2,801 billion.
The Survey charts a long list of drivers that contributed to the market boom, most of which the government puts to its own credit. There were ‘reforms’ all around that chartered a clear course for the market.
A major factor, nonetheless, appears to be the growing interest of foreign investors in global equity markets, of which Pakistan also received a share.
The Survey lists 16 global markets, 1 0 of which out-performed the Pakistani bourse.
Foreign portfolio investment in Pakistan’s stock market during the first 10 months of the current fiscal amounted to a huge US$1.82 billion, which was stated to be the highest-ever inflow of portfolio investment in Pakistan’s history as against US$1.01 billion in the corresponding period of last year, thereby, registering an increase of 80 per cent.
The growth in portfolio investment was contributed to by issuance of GDR of OGDC and the MCB Bank. Those GDRs are listed at the London Stock Exchange and are receiving strong investors’ interest, the Survey states.
Foreign investors’ interest in Pakistan’s stock market was also reflected by extensive coverage of market by foreign brokerage houses, such as Merrill Lynch, JPMorgan, Credit Suisse, Citigroup and UBS.
The period also witnessed large-scale merger and acquisitions, which included those of Union Bank by Standard Chartered Bank; Prime Commercial Bank by ABN Amro; PICIC Bank by Tamasek of Singapore; Crescent Commercial Bank by Samba; PakTel by China Mobile and a further purchase of stake in Lakson Tobacco by Philip Morris.
The Survey admits that no large privatisations had taken place in the fiscal year 2006-07.
The government still managed capital market transactions for OGDC.
The GDR issuance of UBL was in the pipeline and so also strategic sale of PSO, NIT, PPL.
COMPANY PERFORMANCES: Big blue chip companies performed well, including OGDC; PTCL; NBP and Hub Power.
During the first three quarters of the current fiscal year, combined turnover of shares of 10 big companies (OGDC, PTCL, BoP, D.G Khan cement; FFBL, PPL, NBP, MCB, Lucky Cement and Hubco was 13.3 billion which constituted 39.7 per cent of total turnover at KSE. Those 10 companies earned profit after tax of Rs122.6 billion in the current fiscal year up to March 2007.
Out of Rs122.6 billion taxed profit, the share of PTCL and OGDC was Rs66.8 billion, representing 54.5 per cent of 10 big companies.
The survey deduced: “This indicates that the business environment in the current fiscal year has improved appreciably for the blue chip companies.”
Be that as it may, a cursory glance at the Survey reveals that the overall performance of listed companies turned more depressing as a lesser number of 407 companies, out of a total of 651 listed at the KSE, made profit during 2006, compared with 431 profit-making companies out of 661 listed in the year 2005.
Number of loss-making companies increased from 138 to 150.
A year ago, 300 companies had paid dividends to their shareholders, but the number dwindled to 294 during 2006. That brings into fore the question whether small investors who could not afford or chose to invest in large blue chip stocks benefitted from the stock market rally, as much as those investors who secured a larger total return in terms of both dividend and capital gains from investment in fewer larger blue chip stocks.