First public offering after 10 months

[LahoreEstate]

KARACHI: The KSE-100 share index has reclaimed 4,000 points or almost 85 per cent of the value that it had lost following the removal of the ‘floor’ on Dec 15. But most market gurus admit that the benefit is not widespread.

‘The number of stocks that are now pushing the market higher can be counted on the finger tips of one hand,’ says a big player.

Heavyweight oil exploration and production; refineries and the oil marketing companies are several laps ahead of other sectors, such as fertiliser, cement and banking.

The solution to the concentration of trading in fewer shares is widely recognised to be new listings.

But it has been almost 10 months before the first company dared step into the market.

The three-day public offer of shares in Nishat Power Ltd (NPL) closed on Aug 31. It will be a little while before the subscription figures are compiled and made public.

‘It is for the first time in a decade that the KSE saw no new listings in the first half of the year,’ Mohammad Sohail, CEO at Topline Securities, wrote in his earlier report.

Granted that one swallow does not make a summer, but as Sohail says: ‘The likely positive response to this (Nishat Power) issue will set the direction for more of upcoming offerings.’

The decade of 90s was understandably a booming period for the new companies. It was then that the doors of the equity market were thrown open for foreign investors, which saw prices of shares multiply many times, making even mediocre companies very expensive. On average, 30 new companies sought listing at the stock market during that golden decade and in consequence, the number of listed companies quickly soared to 767 in early 2000, from 487 in 1990.

Things on the new listing front were not as bad as before the bloodbath began at the market in the middle of 2008.

The stock exchange’s daily quotations still show several companies which were then in various stages of seeking entry into the market: ‘applied for listing; prospectus cleared by the exchange and companies in process of formal listing.’ But the avalanche of sell orders from foreigners and weak country economic fundamentals caused issuers to put their offerings on the hold.

Even the high lending rates by banks, could not lure sponsors to raise cheaper capital from the stock market.

Is there a method in this madness? The one issue (Media Times Limited) that was floated at fag end of 2008 and listed on Jan 2 this year, was a disaster in regard to public interest. Against the offer of Rs336 million, an insignificant sum of Rs3 million was subscribed.

The remaining stock of the huge amount of Rs333 million had to be picked up by the underwriters. But people at the market say that those were extraordinary difficult times, when the market had melted to its historic lows. It is not all the same now. So whatever might be keeping companies away?

Stock strategists believe that the equity market is suffering from three big pains: Weak economic fundamentals; security concerns and absence of, what brokers term ‘user-friendly’ leverage product. And there are other more disconcerting issues that the participants usually sweep under the carpet.

They include lack of tax benefit to listed companies against unlisted firm and the hassle of doing loads of paperwork to comply with the listing rules and corporate governance requirements.

The Securities and Exchange Commission of Pakistan registered 243 companies during July taking the total corporate portfolio to 53,424 companies.

The new incorporation could be joyous as it promotes more companies to be under the fold of the regulated sector. But it is scarcely enviable that only one in 80 of those registered are listed on the stock exchanges.

Many look up at the government to take a lead in offering more of its holdings in big entities to the public through the stock exchange.

If there is a genuine desire to privatise part of big public assets through the capital market, there could not be a better time than the current period of recovery, when the government can hope to fetch lucrative price for its assets.

http://www.dawn.com/wps/wcm/connect/dawn...hs--szh-03