The share prices during the last fiscal year recorded an increase of 41 percent despite March crisis, resulting in massive erosion, impetus was mainly because of higher corporate results, improvement in macro-economic indicators and the privatisation of state-owned companies.
The local stock market went through a highly turbulent FY05, whereby records all across the board were broken. From the first-ever closing in five-digits (ie above 10,000 points) to the secon-highest ever trading volume (1,086 million shares on February 23, 2005), and an intra-day gain and loss records in terms of points, the KSE-100 Index was literally a roller-coaster ride during FY05, which closed the year at 7450.
According to a report prepared by Khalid Iqbal Siddiqui, head of research at Investcapital Securities, the KSE-100 Index ended the FY05 with a gain of 41.1 percent, which translates into 2171 points. This compares well with a return of 55.2 percent during FY04, despite a larger base. Even though the stock market saw its worst-ever crash with a decline of 26.2 percent in equity values (using the KSE-100 Index as benchmark) during a short span of two weeks in March 2005, the fiscal year ended with yet another excellent return for stock market investors.
"We would also like to mention here that once again, that being a total return index, the 41.1 percent gain of the KSE index during FY05 is inclusive of dividends", he added.
More often than not, it has been the high possibility of manipulation in badla, which has caused various stock market crises. However, this mantle of destruction was taken over with consummate ease by yet another leveraging tool, ie stock futures.
The March settlement crisis caused the stock exchanges and regulatory authorities to shift to overdrive to try and resolve the situation. This resulted in a more stringent set of regulations for stock futures and higher requirements for deposits against exposures in the stock futures market.
The knell has been tolled for badla, as it will be completely phased out by August 26, 2005. This date was also arrived at following a spate of never-ending deliberations between the stock exchange members and regulatory authorities.
The FY05 has also been unique in terms of privatisations both via strategic sales and via capital market transactions. It saw the largest single strategic sale in the history of the country with PTCL was privatised after a long wait of over a decade. Both PTCL and NRL generated higher than expected revenues for the government. The rally up to 10,000 points also had its roots in the government''s privatisation progress with stocks like PTCL, PPL, PSO, and OGDCL rising far beyond their fair values in Feb-March 2005.
As far as the capital market transactions are concerned, subscriptions worth over Rs 40 billion for PPL and Kapco were received. Kapco also saw the highest ever number of applicants with 1.4 million applications received. However, enthusiasm in government IPOs fizzled out a bit with UBL owing to the shattered investors'' confidence and the small lot size.
"We believe that the KSE-100 Index currently has room for improvement. Earlier, in a report, the brokerage has mentioned that the index could improve to around 8000 points by Dec-end 2005", he said, adding: "We continue to reiterate that it is not the KSE-100 Index one should look at rather it is the individual stocks and discounts to fair values that should be considered. Our top picks for FY06 are NBP, POL, Askari Bank, Kapco, Nishat Mills, Union Bank, Lucky Cement, and Fauji Fertiliser.
The rupee depreciated by 2.55 percent against the US dollar during FY05. This depreciation would have been much higher, had the SBP not intervened and stabilised the rupee. It also showed the same trend against other major currencies ie the euro, British pound and the Japanese yen.
The rupee depreciated against the euro and the pound by 2.59 percent and 2.49 percent respectively, whereas it depreciated a little less against the yen by 1.29 percent. It saw its low against the euro at the end of December, when it had depreciated against the euro by 13.2 percent since the start of FY05, whereas against the dollar it saw its low in October. The highest depreciation against the dollar was 5.62 percent. The highest depreciation seen against the yen and the pound was of 10.8 percent and 9.4 percent, respectively.