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Karachi stocks during 1990.

Karachi Stocks During 1990

In spite of all the stresses and strains, the performance of the Karachi Stock Exchange has not been quite disappointing. In fact, it has managed to forge ahead in the face of heavy odds. The value of listed capital went up to Rs. 27.6 billion, reflecting an addition of Rs. 5.1 billion during the year. The market capitalisation at the year-end stood at Rs. 54.1 billion having increased from the level of Rs. 48.7 billion at the beginning of the year. The market sentiments are reflected in the State Bank of Pakistan general index which stood at 311.75 at the end of December, 1990 as compared to 287.89 in the first week of January, 1990. Similarly the turnover for the eleven months of the year reflected over 230 million shares of the value of Rs. 15.425 billion as against 198 million shares of the value of Rs. 8.551 billion in the corresponding period a year ago. The response of the general public towards fresh issues has been overwhelming and 47 companies valued at Rs. 1.9 billion evoked a response amounting to Rs. 13.5 billion.

The year 1990 has been a turbulent one for Pakistan. The climate could not be considered to be conducive to investment by any standard. Yet the Karachi Stock Exchange showed remarkable resilience withstanding the vicissitudes of time. The year was marked by widespread ethnic riots in Karachi and Hyderabad, high incidence of kidnappings for ransom and dacoities in Sindh, massing of Indian troops on Pakistan's borders and increase in Indian repression against freedom fighters in held Kashmir, desecration of Babri mosque and the rising wave of communal frenzy in India, election uncertainties in Pakistan, suspension of US aid, economic crunch of the Gulf crisis, including 42 per cent increase in POL prices and the fear of world war in the wake of the Iraqi occupation of Kuwait. All these factors weighed heavily against the market sentiment, making the investors chary and cautious. The capital market, therefore, naturalyl remained volatile throughout the year. In the prevailing fluid situation, nobody was prepared to make any long-term commitment and extended only guarded support to the stocks. In fact, investors were reluctant to take even calculated risk and took refuge in safe havens. Business interest remained confined to selected scrips including investment shares and other blue chips involving little or no risk.

The positive developments which aided the market sentiment included landslide victory of the right wing IJI, wedded to the promotion of the interest of the private sector, initiation of the process of privatisation by allowing setting up of banks in the private sector and denationalisation of the Muslim Commercial Bank and announcement of a new industrial package containing most liberal incentives and concessions for the private sector.

Though psychological depressants were galore which did not allow the market to stage any smart rally, it resounds to the credit of the inherent strength of the share market that at no stage it showed signs of distress and panic selling. The demand for selected scrips continued unabated which averted the danger of rout or collapse. Losses were mostly fractional, while some of the blue chips managed to record handsome gains. The corporate bag contained happy as well as unhappy news. The companies which performed well and whose dividend came up to the expectations of the investors fared much better, while those which gave nil dividend or below expectation return were neglected. The budget for 1990-91 also had a dampening effect on the market as it imposed unprecedented tax burden on the industrial/business community. Particularly the imposition of General Sales Tax, a camouflaged form of Value Added Tax, hurt the private sector badly. Though its implementation was deferred by the PPP Government under pressure from the private sector, the newly elected IJI Government imposed it on IMF's persistent demand.

However, in spite of all these stresses and strains, the performance of the Karachi Stock Exchange has not been quite disappointing. In fact, it has managed to forge ahead in the face of heavy odds. The value of listed capital went up to Rs. 27.6 billion, reflecting an addition of Rs. 5.1 billion during the year. The market capitalisation at the year-end stood at Rs. 54.1 billion having increased from the level of Rs. 48.7 billion at the beginning of the year. The market sentiments are reflected in the State Bank of Pakistan general index which stood at 311.75 at the end of December, 1990 as compared to 287.89 in the first week of January, 1990. Similarly the turnover for the eleven months of the year reflected over 230 million shares of the value of Rs. 15.425 billion as against 198 million shares of the value of Rs. 8.551 billion in the corresponding period a year ago. The response of the general public towards fresh issues has been overwhelming and 47 companies valued at Rs. 1.9 billion evoked a response amounting to Rs. 13.5 billion.

In 1990, the total number of companies listed on the stock exchange upto October stood at 477 as against 438 in 1989, 403 in 1988, 378 in 1987 and 360 in 1986. The number of new companies listed upto October 1990 totalled 39 as against 38 in 1989, 26 in 1988, 18 in 1987 and 9 in 1986. The KSE's general index at the year end was 304.30 as compared to 277.28 a year ago, 262.67 two years ago, 228.39 three years ago and 199.87 four years ago. General index high and low stood at 304.30 and 281.21 respectively in 1990. Nominal value of all listed shares was estimated at Rs. 26,320.3 million in 1990 as against Rs. 52,785.6 million in 1989, Rs. 18,761.8 million in 1988, Rs. 16,889.8 million in 1987 and Rs. 14,427.8 million in 1986. The market value of all listed shares stood at Rs. 61,320.3 million in 1990 as against Rs. 52,785.6 million in 1989, Rs. 43,530.2 million in 1988, Rs. 38,646.8 million in 1987 and Rs. 31,323.9 million in 1986. The market value of new listings upto October 1990 stood at Rs. 4,705.9 million as compared to Rs. 3,426.7 million a year ago, Rs. 1,671.8 million two years ago, Rs. 2,881.6 million three years ago and Rs. 289.4 million four years ago. Total volume of business during 1990 was estimated at 206.550 million in 1990 compared to 214.572 million in 1989, 169.263 million in 1988, 157.298 million in 1987 and 114.088 million in 1986. The average daily share volume stood at 1.105 million in 1990, 0.092 million in 1989, 0.752 million in 1988, 0.652 million in 1987 and 0485 million in 1986.

The above statistical evidence goes to prove that the Karachi Stock Exchange has continued to grow from strength to strength despite serious constraints. The market's firm trend during 1990 is reflected by the unprecedented appreciation in the market capitalisation and daily turnover. Additionally, the number of companies listed and other 23 companies in the process of listing have been another landmark in the history of the Exchange. The number of listed companies will soon exceed the 500 mark.

Despite increase in supply of securities and sporadic disturbances as well as uncertain political conditions during the year, the market has reflected buoyancy and confidence of investors remained alive. Upto October 1990, 39 companies (the figure rose to 47 by December, 1990) were formally listed. These companies offered investment opportunities amounting to Rs. 1584.565 million to the general public and NIT against which the total subscription received was over 7 times i.e. Rs. 11.229.991 million. This confirms the view that the public response to the good scrips is always encouraging. However, it is non-availability of good scripts in reasonable quantity to the medium and large investors which has resulted in lack of depth in the market. The investors are looking forward to the disinvestment of nationalised banks and other public sector units which will offer some very good avenues of investment. The 25 per cent shares of Muslim Commercial Bank are likely to be offered shortly to the general public at a premium which may be around the break-up value of the share which works out to Rs. 26 against the face value of Rs. 10.

The company received listing applications from 62 companies during the year which is a record figure. Of this 47 have already been listed. On January 4, the KSE honoured the management of 25 top companies listed on the stock exchange for exemplary performance for the year 1989. The Exchange gives away excellence award every year as an encouragement for further excellence and this was the 12th in a series. The top 25 companies earned recognition because of their contribution to national productivity and development efforts as well as for diffusion of their prosperity over a wider base thus paving the way for smooth and democratic economic order in the country. Three companies have kept the investors' confidence high and have been instrumental in furthering the development of the equity market of the country.

The concept of award distribution was introduced 12 years ago as the need was felt to induct competition by appreciating the performance of listed companies. The objective has been largely achieved which is evident from the fact that the basic minimum required to earn a place among the top 25 companies has shown an improvement over these years. In 1978 when the award was first introduced, the last company to qualify for the award had distributed 31 per cent to its shareholders. Last years 1989 the minimum distribution to qualify for the award was 40 per cent. Similarly the feature of earning per share, introduced in 1981, has also recorded an improvement during the period. The marginal company included in 1989's list has an earning of Rs. 9 per share as against Rs. 7 per share in 1981.

The following criteria were laid down for selection of 25 top companies for 1989: 1) Minimum distribution of 40 per cent was made a prerequisite for compiling the top 25 companies. 2) Weightage on the following basis was allocated:

* Earning per share 40%
 * Distribution 35%
 * Turnover 25%


The first companies which secured the highest number in aggregate were selected for the Top Companies' Awards.

The list of award winners has been given below in a separate table. The companies which fared very badly giving nil dividend included Colony Woollen, Harnai Woollen, International Floor Covering, Al-Abid Silk, Bengal Fibre, Karim Silk, Nilom Rayon, Noor Silk, most of the Jute Shares, Cement Shares, and Scrips in the Tobacco, Engineering Auto and Allied Engineering, Transport and Communication groups. Particularly disappointing has been the performance of PIA which was disinvested with great panfare last year. Its market value came down to Rs. 6.30 on December 31, 1990 as against the paid-up value of Rs. 10 since the management disappointed the shareholders by denying any dividend for 1989. Investment, textile, sugar, energy and pharmaceutical issues remained the hot favourite of investors during the year under review.
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Title Annotation:Comments
Author:Jabir, Rafique
Publication:Economic Review
Date:Jan 1, 1991
Words:1901
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