LAHORE - It was another bad year for Pakistans capital markets as activities in the local bourses plunged to 9-year low. Buying and selling of shares, floating of new companies and fund raising through right shares remained depressed in FY11. As per stock market experts, due to security concerns, economic slowdown and higher interest rates, leading market players remained concerned about the re-introduction of Capital Gains Tax (CGT) after a gap of more than 3 decades, its understanding and last but not the least its cumbersome calculations. As a result of this uncertainty, the individual investors have been leaving the market. Government has not realized that they have 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 capitalization, though this retail segment contributes positively in the overall market activity and price discovery. 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 Rs4.4 billion ($51million) a day in outgoing FY11 was down 40 per cent from FY10 mainly led by the absence of big players due to their specific issues and individual concerns on the new tax. Though the overall capital market environment was depressing in the outgoing fiscal year 2010-11, the so-called benchmark KSE 100 Index gained 28.5% (including dividends). Interestingly, the consumer giant Nestle Pakistan, which is hardly owned by few investors, contributed 26% to this gain. Nestle volume last year was just 1100 shares a day and its price jumped by 228%. In spite of this headline increase in Index, there must be few investors who have made money as volumes declined by 40% in FY11 to 9-year low and the gains were led by illiquid stocks like Nestle and Unilever. The local bourse outperformed the regional markets by 7%, while under performing the global commodities by 4% (CRB Index gained 33%) during the year. However, the imposition of Capital Gain Tax (CGT) and relatively low participation of foreigners resulted in average daily volumes falling to a 13 year low of 95mn shares (down 41%YoY), while the average daily value traded declined to a 9 year low of Rs3.8bn (US$45mn). The much awaited re-launch of leverage products too failed to spark activity at the local bourse. European financial crisis and inflationary concerns in emerging economies led to offshore investors net investment declining to US$312mn in FY11 vs. US$567mn in FY10. Foreigners bought shares worth US$952mn and offloaded shares worth US$640mn. Foreigners, who held shares worth US$2.3bn (29.5% of markets free float) in the beginning of FY11, are now estimated to have holdings of US$2.9bn (32.3% of markets free float). Muhammad Sohail, stock expert, believes the core macro issues are likely to cloud the sectors performance in the short term. However, high loan coverage and attractive secondary market yields are likely attractions which will enable profits to remain high in 2011. Year end payouts too, may manage to lure investors. No doubt in terms of volumes Pakistans once highly traded market has gone back by 9 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 Rs358 billion (US$5.8 billion) as compared to Rs3trn (US$35 billion) average market cap in FY11. Due to worsening market conditions, issuers are not coming for IPOs as only 3 public offerings were seen in FY11 compared to last decade average annual IPOs of 7 and 1990s annual average of 30 IPOs.