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KARACHI : Pakistan's capital market has not witnessed any IPO (initial public offering) in the first six months of 2009 as no company offered shares to public during this period. "This is the worst-ever situation from which Pakistan capital market is passing through. It can be judged from the fact that no company has offered shares to public since January 2009," analysts said.
This has happened for the first time in the last decade of Karachi bourse that no IPO hit the market in the first half of the calendar year. "Despite higher lending rates, new companies were not able to raise funds through initial offerings at the local exchanges mainly due to unwarranted closure of the market for three-and-a-half months, continuous selling by foreigner investors and weak economic fundamentals forcing issuers to delay their offerings, Mohammad Sohail, a leading analyst and CEO of Topline Securities said. As a result, Karachi bourse for the last six-months witnessed no public offerings, a key to the development of any stock market, he added.
The decade of 90s was a booming period for IPOs when on an average approximately 30 offerings were made in a typical year thereby causing the listed firms at KSE to increase from 487 in 1990 to 767 in 2000. Despite record fall in equity values and slowdown in overall economy, Karachi stock market witnessed 10 IPOs in 2008 worth Rs 7.4 billion as compared with 9 IPOs worth Rs 15.5 billion in 2007.
Interestingly, 9 out of 10 offerings in 2008 occurred before the imposition of price floor rule. The country's equity market witnessed 75 IPOs in the period since the year 2000 to 2008, with the HBL, the biggest-ever IPO in the country in terms of value, offering Rs 12.2 billion to general public in July 2007. Due to lesser offerings in last 10 year coupled with mergers and acquisitions, listed firms in Pakistan have fallen to just one percent of the total registered companies.
In the post crisis period, the local equity market is suffering from four main issues namely weak economic fundamentals, security concerns, continuous foreign selling and absence of any leverage product, Sohail said, adding that once the situation improves, new IPOs will come to the market slowly and gradually. However, he said, the government can play a key role in the IPO market by offering shares of public companies. "This will not only increase the free float but will also provide the much-needed depth to the Pakistan stock market," he added.
Copyright Business Recorder, 2009
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