The Karachi stocks market whereas is peaking to new highs in terms of trading volumes on the back of investors’ hope for the materialisation of government’s assurances regarding the implementation of a reformed CGT regime from April 1, the market observers feel uncomfortable with the rallying trades that, they believe, should have been wide-board and not concentrated in nature.
Thursday saw the traded shares at KSE’s ready-counter hitting a new high of 358 million shares up by 12 per cent or 39 million shares compared to 318 million of the previous day.
The benchmark KSE100-share index also rallying well above 13,000 points gaining 26 points on Thursday to close at 13,271.39 points. But, this rally on account of trades and index, the analysts say, was not reflective of the situation on ground.
“Too many stocks adding too few points to the index,” said Khurram Schehzad, head of research at InvestCap.
The index is mainly driven by traditional heavyweights from selected sectors like oil and gas, FMCG, fertiliser and banks.
These scrips the analysts said had added the most to the benchmark index since 12th of January. The market has so far yielded a solid gain of 17 per cent YTD12.
“Glancing closely through the broader trends reveals that there still has been a concentrated activity (in terms of volumes) towards the lower-tier scrips compared to a wide-board rally that should have been the case,” Schehzad viewed.
Cumulatively, the analyst said, the top-10 most influencing stocks added a whopping 1,257 points to the index where the index, in total, gained 1,897 points since the commencement of the year 2012.
This translated into a 2/3rd or 66 per cent contribution to the current market rally while the rest was shared by the remaining 90 scrips constituting the benchmark.
On the contrary, volumes contribution from the very set of stocks has been only 15 per cent by far, with the National Bank and Fauji Fertilizer Company being on top. “85 per cent of the market activity at the bourse has been generated through either 2nd or 3rd-tier stocks,” said Schehzad.
“Take example of yesterday’s market activity when KSE100 was down primarily due to selling observed in the Oil and Gas sector with volumes in the same being at minuscule levels while the total market volumes easily crossed 300mn mark!,” he added.
Also Thursday’s jump on the volumes front the analysts attributed to the second and third tier scrips. “The stocks closed higher amid higher trades post major announcements at KSE led by second and third tier stocks on strong valuations,” said Ashen Mehanti, director at Arif Habib Securities.
The market observers link the prevailing record breaking spirit at the Karachi bourse to the government’s future action towards its commitment on the CGT-related reforms saying a long stretch from April 01 might have serious consequences on both market volumes as well as the returns.
