NARROW TRADING BASE AT KSE 2001-10

SUMAIR SIRAJ
(feedback@pgeconomist.com)

Updated Mar 24, 20
12

On an average, the top 10 traded companies accounted for 83 per cent of KSE-100 volume during the period FY'01-FY'10. This shows that the market was highly skewed and relied on only a handful of shares to generate trading activity.

Trading volumes and market capitalization of KSE-100 index companies, as a percentage of the market's total trading volume and market capitalization, continued to remain significantly high in FY'10 with KSE-100 companies accounting for 96 and 73 per cent of the total market capitalization and trading volume respectively. This means that a significant portion of activity at the KSE was generated by only 15 per cent of the total listed companies.

Moreover, out of the KSE-100 companies, very few companies accounted for a major portion of trading activity. The top 10 companies by trading volume accounted for 65 per cent of the total trading volume in FY'10.

 

FREQUENCY OF TOP 10 TRADED COMPANIES 2001-10

COMPANY NO. OF TIMES IN TOP 10
PTCL 8
HUBCO 6
MCB 5
Bank of Punjab 5
NBP 5
DG Cement 5
OGDC 5
PSO 4
Lucky Cement 4
SNGPL 3
Source: Independent Research

The mix of the top ten traded companies changed slowly from FY'01 to FY'10, which reflects the one-sidedness of the market in favor of some companies. This slow change in the 'trading mix' indicated weak dynamism and diversification in the market. A higher rate of change in the 'trading mix' would show a high extent of dynamism and market depth. The trading mix also indicated that the banking, cement, and fuel and energy companies attracted investors in recent years. Trading activity limited itself to a handful of companies only and sectors showed that the stock market lacked diversity.

 

SECTORAL REPRESENTATION IN TOP TEN VOLUME LEADERS

SECTOR 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Banks 1 2 1 2 3 3 3 4 5 3
Cement 0 1 3 3 0 3 3 0 2 0
Telecommunications 1 2 1 1 1 1 4 0 1 1
Fuel and Energy 3 3 4 4 3 3 0 3 1 2
Others 5 2 1 0 3 0 0 3 1 4
Source: Independent Research

(The writer is assistant professor teaching economics and finance at SZABIST.)