Stocks market tumbles on govt’s sell off plan

  • Govt announces to sell 5 to 20 per cent of its shareholdings in OGDCL, PPL and UBL
  • KSE 100-share index nosedives by 193.81 points or 0.71 percent

The risk-averse investors on the country’s sentiments-driven equity market reacted negatively on Wednesday as the cash-strapped federal government finally unveiled its plan to put up for sale five to 20 percent of its shareholdings in heavyweights like OGDCL, PPL and UBL.

The government’s shares in the OGDCL, PPL and UBL stand respectively at 85 percent having a market value of Rs 998 billion, 78 percent worth Rs 380 billion and 20 percent valuing Rs 36 billion, according to Topline Research.

In total the government owns Rs 1.641 trillion worth of shareholdings in eight listed Public Sector Enterprises (PSEs) including HBL (42 percent), NBP (76 percent), KAPCO (46 percent), ABL (11 percent), MARI (18 percent), OGDC, PPL and UBL.

After peaking to the historic high of 27,309.02 points just Tuesday, the KSE 100-share index nosedived by 193.81 points or 0.71 percent Wednesday to close at 27,115.21 points.

The trading turnover stood at 3.1.29 million shares with trading value declining to Rs 13.8 billion from Tuesday’s Rs 14.9 billion. The market capital accumulated at Rs 6.55 trillion with only 148 of the total 387 scrips traded setting in the green zone in terms of share price. The 228 scrips lost value while 13 remained unchanged.

“Selling in index heavyweights was seen after the government issued Expression of Interest to offer shares of OGDC, PPL and UBL,” said equity analyst Samar Iqbal of Topline Securities.

The OGDC fell 1.5 percent while the PPL and UBL declined by 2.1 percent  and 1.2 percent, respectively, pushing the benchmark index 194 points down, said the analyst.

She said the HUBC and textile companies also witnessed a selling pressure due to continuous strengthening of the rupee which Wednesday appreciated against the dollar to Rs 98.7 on the open market with the State Bank having notified the interbank exchange rate for Thursday at Rs 98.04.

“While the investors remained active in autos, pharma and cement stocks,” the analyst said.

Ashen Mehanti, a director at Arif Habib Corporation, viewed that the index fell for profit taking witnessed in the overbought market after the rupee hit the eight-month high on the back of receipts of $ 750 million under Pakistan Development Fund (PDF).

With the central bank reportedly keeping mum on the source of PDF, the much-needed millions of dollars are reported to have been extended to the funds-starved Pakistan by some “friendly countries”.

Saudi Arabia is believed to be prominent among those countries taking the PML (N)-ruled Pakistan’s economic woes seriously.

“Textile stocks battered as rupee recovered sharply impacting export prospects for the sector followed by oil exploration and energy stocks recording turnover in US dollar,” Mehanti added.

The day’s negative trend, the market analysts said, was following the Sharif government’s fresh move to privatize 31 of the loss- and even profit-making PSEs.

The Privatization Commission (PC) is said to have invited Expression of Interest (EOI) for the appointment of financial advisor for offering of up to 10 percent of the government shares in OGDC, the country’s largest listed company with a market capital of $11.7 million.

Moreover, the Commission also has invited EOIs for the appointment of Lead Manager(s) and Book Runner(s) for offering of up to 5 percent of the government’s stakes in PPL and its 20 percent residual holding in the UBL.

“With the aforementioned offer, GoP will be able to raise up to Rs177bn (US$1.8bn),” said Topline analyst Vahaj Ahmed.

Moreover, he said, the investors that have more than doubled their investments in last two-year stock market boom will take this news in a positive manner.

The thriving property market and 150 percent average profit growth of textile companies in FY13 have fuelled a lot of liquidity with High Net Worth Individuals (HNWI) which would help in absorbing the sale of shares by government, he said.

“We believe it may take another 3 months before these deals come closer to execution, at which point we may see some pressure in the market,” said Vahaj.