KARACHI: The Karachi Stock Exchange witnessed a decline of 9.5 percent in benchmark 100 index since February 2015 after three years of outperforming the regional markets and growth in the index by 127pc.
However, skewed towards the heavyweight oil & gas and the banking sectors, the benchmark index is barely representative of the market. The oil & gas sector has borne the impact of a steep drop in international crude prices from $109 to $45 per barrel. Similarly the banking sector has seen shrinkage in spreads due to declining interest rates.
Followed by the slowdown in inflation, the SBP has cut interest rates to 8pc. The shareholders in those two sectors had to bear the loss as the profitability of the underlying companies was expected to take a hit. In contrast, the heavy indebted companies such as those in the cement, textile and energy sectors benefitted from low interest rate environment.
There are only 560 listed companies out of the 70,000 registered companies. Ten companies listed on the pharmaceutical sector, say, is not representative of the 500 pharmaceutical companies operating in the country nor could a handful of textile mills with ample free float represent the fortunes of the entire textile sector.
