CAPITAL MARKETS

 

1- FOREX KERB WATCH

2- COT WEEKLY REVIEW

3- FINEX WEEK

4. STOCK WATCH
5. STOCK MARKET AT A GLANCE
6. PAKISTAN WEEKLY REVIEW
7. RECORD LISTINGS AT THE KARACHI STOCK EXCHANGE
 

RECORD LISTINGS AT THE KARACHI STOCK EXCHANGE


Public offering of state owned enterprises dominate the list


By SHABBIR H. KAZMI

July 04 - 10, 2005

 

 

Financial year 2004-05 turned out to be good year for the equities as well as debt instrument markets. The government was able to take full advantage of the vibrant equities market as offering of shares of state owned enterprises dominated the market. However, public offering of United Bank failed to attract the response and remained undersubscribed. There were 16 stock offerings (including Eye Television and Zephyr Textile as these were fully underwritten), which is the highest number since 1996, surpassing the mark of 13 set in 2004. Another unique feature this time is that all the 16 offerings were first-time offers (IPOs), as against previous years where the government offloaded shares of already listed companies.

According to a report by InvestCap, the equity IPOs managed to raise Rs 15 billion. Out of the 16 IPOs, 3 were government offerings, 8 were greenfield projects and remaining 5 were IPOs of already operational private sector organizations. The interest in stock offerings, especially government offerings, remained vibrant. Against the offerings amounting to Rs 17.7 billion, the subscriptions received was close to Rs 56 billion. This denotes 3.2 times the amount required for subscription.

As was the case last year the government offerings attracted the major chunk of subscription money. The 3 government offerings worth Rs 14.8 billion (including green shoe option) attracted subscription to the tune of Rs 42.8 billion, even with UBL being undersubscribed by Rs 2.8 billion. The UBL offering remained undersubscribed mainly due to the lot size being reduced to 200 shares and also due to the stock market crash in March. KAPCO's offering created a new record with 1.4 million applications received, which may not be broken for years to come.

Attock Petroleum, the latest OMC to be listed, attracted subscription of Rs 10.8 billion against a much smaller offering of Rs 0.58 billion and turned into a lottery-like situation for applicants. The remaining 12 IPOs got subscriptions worth Rs 2.6 billion against offer of Rs 2.3 billion, showing weaker interest in anything other than government and oil stocks.

It is expected that the government will continue to follow its divestment policy by offering shares of state owned enterprises through the stock market. The next entity in line is State Life Insurance Corporation. Several private sector IPOs (around 5) are already in line with more to come surely. The trend in favour of government IPOs will continue to be more pronounced going forward.

The listed corporate debt market, commonly known as the listed Term Finance Certificates (TFCs) market, had been short of newcomers in the low interest rate scenario during 2003-04. After seeing an extraordinary listing of 21 TFCs during 2002-03, new listings almost dried out, only 6 TFCs were listed in 2003-04. However, during the recently concluded financial year the number of listings reverted back into the double digits. The slight revival of TFC issues was due to the banking sector needs and a rising interest rate environment.

 

 

A total number of 12 TFCs were offered to the general public during 2004-05, which was exactly double the 6 TFC offering during 2003-04. The rise in TFCs issues was mainly due to the huge offering by the commercial banks. This was an attempt by the banks to improve their capital adequacy ratios. More than half (to be precise 7) of the 12 TFC issues came from the banking sector, with one of them (UBL) even offering 2 tranches. Conspicuous by its absence from the listed TFC market was the manufacturing sector. Another 2 TFCs came from the financial sector, while 2 were E&P company securitizations, and one from the telecom sector (Telecard).

The amount raised through listed TFCs was very impressive, totaling to Rs 15.6 billion. This represents a marked improvement over just Rs 3.4 billion raised during 2003-04. Out of Rs 15.6 billion raised, more than Rs10 billionn were raised by commercial banks, representing 65% of the total corporate debt listings during the year. Even with this impressive amount being raised during an year the listed corporate debt market still remains very small compared to the listed equity market. The listed TFC market continues to linger below 3% of the equities market. The TFC market, in the rising interest rate scenario, is expected to witness more and larger TFC issues. The commercial banks are expected to continue to tap this avenue for improving their capital adequacy ratio during 2005-06.