Textiles lag behind others at KSE 100-Index

KARACHI: Pakistan’s textile sector is lagging behind all other sectors on the Karachi Stock Exchange (KSE) with its almost 50 scrip recording zero turnover despite GSP (generalised scheme of preferences) Plus status awarded to the country last year by the European Union, brokers said on Tuesday.
“Some textile shares recorded growth for a few months, but after rupee appreciation textile sector share’s demand declined again,” said Yaqoob Habib Khandwala, an indivdual investor at the KSE. “GSP Plus had only three percent impact on Pakistan’s exports while it had no impact in the stock exchange.”
Borkers said the US dollar rate remained Rs104 to Rs105 in January last year, which stood at around Rs100 this month, while rupee appreciation had dragged it to Rs98 mid of the last year and profit margins of textile sector were reduced.
For the month of December 2014, a total of 110 stocks, including preferential stocks and futures, out of a total of 557 listed companies, recorded zero turnover despite an overall increase of three percent in the KSE 100-Index during the month.
Other companies, which recorded zero turnover, were from automobile and parts (2), commercial banks (2), construction and materials (4), electricity (1), equity investment instruments (7), financial services (10), food producers (9), forestry (1), future contracts (4), general industrials (2), health care equipment and services (1), household goods (6), industrial metals and mining (2), industrial transportation (1) and eight companies from non-life insurance.
Only three major textile companies, including Azgard Nine, Nishat Chunian and Nishat Mills Limited, are part of the KSE-100 Index.
Textile is the largest export sector of the country but its weight in the stock exchange remains behind other sectors, like oil and gas, banking, chemicals and cement.
There was not a big change in demand of textile shares in the market even after GSP Plus, under which 20 percent of Pakistani exports are allowed to enter the EU market at zero tariff and 70 percent at preferential rates.
Bilal Mulla, former chairman of Pakistan Readymade Garments Manufacturers Association said brokers needed some reason to raise prices of textile shares in the stock exchange. “They earn on fluctuation in share prices,” he said.
There were several other reasons for not benefiting from the GSP Plus. Gas and electricity crisis forced the factories to work at 50 percent shortage, Mulla said.
“We are not able to meet the deliveries of buyers as factories remain shut or partially closed most of the times,” he said. “Law and order situation is worst, which also results in shutting down the factories amid strikes.”
He added that if one industrialist established a textile factory to get benefit from GSP Plus, he would not be able to get the benefit as gas connections were not available for five years.