The reality of the Karachi Stock Exchange
Share values running feverishly high -DAWN - Business; 31 January, 2005
FIRST THE INDEX: The composition of KSE index is such that just two of the 100 shares in the index account for 34 per cent weight age: Oil and Gas Development Corporation (OGDC) -22 per cent and Pakistan Telecommunication Company Limited (PTCL)- 12 per cent.
All of that means that just a rupee rise in the value of those two stocks would add as many as 34 points to the index. A classic example of how much influence PTCL and OGDC exert on the index was witnessed this Thursday.
PTCL stock rose by Rs 4.60, which meant that it pushed the index up by 55 points. Overall the KSE-100 index closed 48 points higher. But that scarcely was a sign of the bullish onslaught, for the shares of most companies across the board had dropped like nine pins.
Were it not for the PTCL stock, the index would have closed 50 points down, instead of 48 points up. It can roughly be worked out that in the phenomenal rise of 1200 points in the KSE-100 index over the last three months, contribution of PTCL and OGDC accounted for 800 points and the other 400 points were added by the remaining 98 companies combined.
That is not really to suggest that the index is altogether misleading. It has been framed in a clear and transparent way and weightage of all 100 stocks fit their criteria.
But having said that, it also has to be seen if the index needs to be recomposed in a way that it encompasses aura of the broader market. An investor who looks up just at the rise and fall of index to make and investment decision is unintentionally misled.
FIRST THE INDEX: The composition of KSE index is such that just two of the 100 shares in the index account for 34 per cent weight age: Oil and Gas Development Corporation (OGDC) -22 per cent and Pakistan Telecommunication Company Limited (PTCL)- 12 per cent.
All of that means that just a rupee rise in the value of those two stocks would add as many as 34 points to the index. A classic example of how much influence PTCL and OGDC exert on the index was witnessed this Thursday.
PTCL stock rose by Rs 4.60, which meant that it pushed the index up by 55 points. Overall the KSE-100 index closed 48 points higher. But that scarcely was a sign of the bullish onslaught, for the shares of most companies across the board had dropped like nine pins.
Were it not for the PTCL stock, the index would have closed 50 points down, instead of 48 points up. It can roughly be worked out that in the phenomenal rise of 1200 points in the KSE-100 index over the last three months, contribution of PTCL and OGDC accounted for 800 points and the other 400 points were added by the remaining 98 companies combined.
That is not really to suggest that the index is altogether misleading. It has been framed in a clear and transparent way and weightage of all 100 stocks fit their criteria.
But having said that, it also has to be seen if the index needs to be recomposed in a way that it encompasses aura of the broader market. An investor who looks up just at the rise and fall of index to make and investment decision is unintentionally misled.
posted by India News Watch at 10:52 AM
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