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Brokers, punters, and analysts are upbeat about record breaking volumes traded at the PSX in the last few sessions. Everyday is an all-time high. But that growth in volumes is not necessarily healthy, as volume leaders are extremely low value stocks. Higher the number (not value) of shares traded better it is for brokers in terms of earning commission. The other element is that these low value telco stocks are the glow of 90s and it is rather absurd to see these sparking in 2020s.

That said, it does not mean that bull run at the PSX is uncalled for. Just to put on record, in the recent rally, finally the blue-chip and fundamentally good stocks are showing strength. This rally is beyond the blue-eyed stocks – for details read “PSX & the frenzy of blue-eyed stocks”. One can say this rally is contributing to the shift in sentiments as the new FM has a growth-oriented leaning.

However, there is little explanation for the sudden surge and love of telco stocks. But this does not undermine the pickup in ICT sector and startup culture, and the potential within it. The unfortunate part is that virtually none of these are listed. What is listed on PSX is a story of pre-smartphone days. Some players in the market are trying to revive that glory. That is indeed going to be short-lived and there could be prints of pump and dump.

The PTC scrip in the 90s was a start performer. In 2000s, telecom was deregulated, and mobile phone operators came in. The glory of PTCL started falling. Then in between other companies such as WorldCall, Telecard etc came in and created their own niche. But then the web-based services dominated, and the business models and viability of others died down. The new businesses are thriving and many of these are part of our daily life use. Many of these are household brands. But none of these are listed at the stock exchange.

In 2020, after COVID, the higher money supply and changing lifestyle gave a fresh boom to tech companies around the world. Investors in Pakistan searched for tech stocks. Unfortunately, not many real stories are listed. People started taking punt in whatever is listed in the tech universe.

Now old telcos are turning around. The story is bizarre. But for brokers it is time to mint. The difference between brokerage commission in percentage is huge between high price and low-priced stocks. Commission is prescribed at 3 paisas per share or 0.15 percent of transaction value (whichever is higher). This implies that brokers make more money on smaller shares.

In the last two trading sessions, over 1.5 billion worth of shares were traded in WordCall (WTL) and the share value is less than Rs4. It is in the interest of brokers to sell this share. This is another reason for buying spree in the stock. Nearly 950 million shares of WTL were traded yesterday. Over 700 million shares were traded a day before. Two days volumes are higher than free float (1,599 mn) of WTL. It is a kind of world record, and not at all healthy. The whole company’s free float seems to have flipped hands in two days. There could well be a story of pumping and dumping.

The point here is to not get too excited by this. PSX is lagging far behind the other bourses and it has a lot to catch up to. The market cap of PSX is not even 2 percent of what the Indian stock exchange has. Listings are hard to come by. Mutual funds penetration is low. PSX needs to enhance its width and breadth beyond the casino settings of penny stocks.


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