Investors suffered widespread erosion because of speculation on the last session of the week on rumours that the government might reduce the oil marketing companies' margin from 3.5 percent to 3 percent.
After talking to a score of investors, one of them Javed Ebrahim said that a news from a website news agency carried by some of the private channels on Friday on government's plan to cut the oil marketing companies' margin created nervous selling and Pakistan State Oil suffered a decline of Rs 11.90, or 3.02 percent, to Rs 382.60, and Shell Pakistan lost Rs 8.95, or 1.5 percent, to Rs 575 at the end of the session on Friday.
He said that like him a number of investors took heavy position in the oil stocks on expectations that hurricane Rita would disturb the oil supply from Gulf of Mexico, increasing oil prices internationally. "The rise in oil prices would force the government to increase domestic prices, increasing the earnings of companies, including PSO", he said. However, the speculation created havoc for investors that the government was to reduce oil companies' margins to benefit the common man.
Ebrahim said that for the last over two weeks, the market had been receiving numerous rumours related to market heavyweights, resulting in intra-day corrections, dampening the mood of investors.
He said that a number of investors had agreed that the management of the stock exchange in past said that it would not confirm every rumour erupted in the market during the trading session. However, at least to protect the interests of small investors, the management or the government should immediately clarify the development, such as reduction in oil margin last week.
He added that if the print media carried the news, at least the electronic media should clarify that particular development and also translate the happenings.
Farooq Rehmatullah, Chairman, Shell Pakistan Ltd, on Friday at Aaj transmission said that during the meeting oil marketing companies margin was not discussed.
The share of margin in oil prices is quite minimal and companies in last over a decade had invested more than 110 billion rupees in Pakistan. Through oil margin, companies are upgrading their outlets, improving other facilities, etc.
He pointed out that the oil margin in Pakistan is low compared to other countries in the region like, Thailand, Singapore, India, Sri Lanka and some of the Middle Eastern countries.
Oil prices for the fortnight ending September 30 remained unchanged, resulting in a loss of another Rs 1.5 billion.
The prices as per formula were registering an increase of up to 7 percent in diesel and 6 percent in motor gasoline. However in the greater interest of the consumer the government decided to hold on the prices by subsidising through OMCs, an oil expert said.
At present, the OMCs are subsidising diesel price by Rs 5.36 a litre, kerosene by Rs 7.62 a litre and LDO by Rs 6 a litre.
The price differential claim for the fortnight is Rs 1.5 billion, and total PDC outstanding is Rs 9 billion.
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