Stock market volume plunges to nine-year low in fiscal year 2011

It was another bad year for Pakistan's capital markets as activities in the local bourses plunged to nine-year low, analysts said. Buying selling of shares, floating of new companies and fund raising through right shares, all remained depressed in FY11, they added.
"Besides security concerns, economic slowdown, higher interest rates, leading market players remained concerned about re-introduction of capital gain tax (CGT) after a gap of more than three decades due to its understanding and last but not the least its cumbersome calculations", Muhammad Sohail, leading analyst and CEO of Topline Securities said.
As a result of this uncertainty, the individual investors have been leaving the market, he added. The government has not realised that it has killed the market by imposing this difficult-to-calculate levy on individuals (excluding sponsors who hardly trade) whose share is less than 10 percent in the total market capitalisation, though this retail segment contributes positively in the overall market activity and price discovery.
He said that these low volumes were last seen in FY02 when market size was small and was faced with the 9/11 events. Average daily volumes in the cash and futures market of Rs 4.4 billion ($51 million) a day in outgoing FY11 was down 40 percent from FY10 mainly led by the absence of big players due to their specific issues and individual concerns on the new tax.
No doubt, in terms of volumes, Pakistan's once highly traded market has gone back by nine years. "And if we compare the volumes of FY02 in relative terms the situation is more depressing as in FY02 the average market size was Rs 358 billion ($5.8 billion) as compared to Rs 3 trillion ($35 billion) average market cap in FY11", he said. He was of the view that due to worsening market conditions, issuers are not coming for IPOs as only three public offerings were seen in FY11 compared to last decade average annual IPOs of seven and 1990s annual average of 30 IPOs.
Another thing to mention is that Pakistan is lagging far behind the Bangladesh market that is in the initial stage of capital market reforms. The Dhaka bourse traded $180 million a day last year compared to $51 million seen at Karachi, he said.