KSE off-market trading: many stocks selling at 17-20 percent lower rates

[Naveed Yaseen]

AHMED MALIK
KARACHI (October 20 2008): The off-market trading at the local bourses increased substantially, and many stocks were being sold at this counter at 17 to 20 percent less than official prices, it is learnt. The floor mechanism rule forced the weak investors to sell out their holdings at less than official prices at the off-market counter.

"Unable to offload their holdings at official counter due to price floor rule, the weak investors opted to sell out their shares through the off-market trading to save them from further losses and to settle their positions", analysts said.

The market witnessed heavy decline in average daily trading volumes as the buyers were getting shares at discounted prices in the off-market. A substantial increase in off-market transactions was seen during last week as average trading volume at this counter was 10.4 million shares as compared to normal market average of 0.7 million shares.

"With hardly any activity on the official cash counter, we have seen a substantial increase in off-market deals along with activities in the odd-lot counter where there is no price floor applicable", Muhammad Sohail, senior analyst at JS Global Capital said.

While the continuation of the price floor rule is hampering activity in the normal market, more than normal off-market transactions have been witnessed since there is no price limit prevailing there, he said.

A portion of the transactions in off-market are the actual buying and selling of the investors, thus reflecting the true market value of the stocks. "Based on this week's transaction, we estimate the KSE-100 index is close to 7,400 points, 19.4 percent down from the official closing of 9,184 points level", Atif Zafar, another analyst at JS Global Capital in his research report said. Last week, the average trading increased to $5.3 million at the off-market counter as compared to average daily trading of $0.09 million in the normal market, he said. At normal counter, average daily volumes last week were at record low levels because buyers were getting shares at discounted prices in the off-market, Atif said.

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