Unabated Downsizing

Article excerpt

A steep downswing was witnessed in the stock market. The fall unprecedented a loss of 169.03 points in one go. Aggregate market value declined to Rs.428.80 billion showing a loss of Rs.50.45 billion.

                         Aggregate
             General        Market
               Index     Capitali-
Year          Number        sation

                  (Rs. in billion)

20.04.98     1595.13       479.350
27.04.98     1610.53       443.042
04.05.98     1562.23       430.892
11.05.98     1550.00       428.900
18.05.98     1426.16             -

Spill-over of India's nuclear explosions was severely felt at KSE that substantially accelerated selling pressure and the index plunged by over hundred twenty five points. The KSE index went down and stood at 1412.35 which was the lowest during the last eight months. The general perception that was prevailing in the market was if Pakistan followed the suit through explosions its economic repercussions in the wake of international economic sanctions would be much harder on Islamabad than New Delhi because Pakistan was economically weak and placed heavy reliance on foreign assistance to keep itself above water.

A leading analyst said that in case Pakistan conducted the test, the fate of the stocks would be worse than that of the Bombay bourse which took a deep plunge after nuclear explosions by India. It was learnt that Bombay bourse, during the period, suffered a fall of approximately 100 points, while Karachi market, too, lost over 100 points. "If we explode, the market is likely to shed over 200 points in just one session" group of leading analysts expressed the fear.

Another factor responsible for the downtrend was the row over the issue of tariff reduction between government and IPPs. Recent Lahore High Court directive restraining Hubco from transferring its funds abroad brought the scrip down, under heavy foreign selling pressure. The ongoing confrontation adversely affected all the listed issues which fell like a house of cards. According to a report from April 23 to May 14 (14 sessions in all), the index depicted a net decline of 204.08 points. The total loss in the shape of market capitalisation amounted to Rs.49.606 billion. Fuel and energy sector was the worst victim, registering a decline of Rs.23.405 billion, followed by communication sector (Rs.15.833 billion), chemical and pharma (Rs.4.506 billion), food and allied (Rs.2.174 billion), banks (Rs.1.693 billion), and synthetic group by Rs.879 million. At a quick look, all the blue-chips, investment, trading and core stock showed sharp falls. The scrips received heavy beating and most of them slipped to 15 to 18-month low levels.

It is generally believed in the face of nuclear race that the share of defence budget will be swelled further, leaving little for economic development programmes. Uncertainty in the region is a stumbling block in the flow of foreign investment. Possibility of recovery of stocks is out of sight with apprehensions of further decline.

Grays of Cambridge (Pakistan) Limited

The company was incorporated as a public limited company and engaged in the manufacturing and marketing of quality sports goods. The sales of the company recorded an increase of 10.61% from Rs.40.35 million to Rs.44.63 million during the first half of 1997. Similarly, the pretax profit showed an increase of 2.82% from Rs.13.82 million to Rs.14.21 million during the same corresponding period. The management of the company is optimistic over the trading results for this period and is also confident that the next six months will further strengthen its corporate position as mentioned in Director's Report of the company. The company declared 200% cash dividend in 1997.

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