Nov 03 - 09, 2008

Delay in implementation of bailout package aimed at revival of activities at all three stock exchanges of the country are keeping the sentiments of investors depressed.

Dull activity persists in the country's bourses, as floor mechanism stays on lack of funds availability for NIT managed fund to bail out stock market. Investors remain concerned over global equity market correction, Pakistan's economic conditions and uncertainty over Pakistan's move towards IMF programs, falling foreign exchange reserves, and falling rupee value, analysts told PAGE.

The Board of Directors of Karachi Stock Exchange has decided that the floor mechanism set on share price will remain in place until the government funds and put option mechanics are finalised. The board did not give any date for removal of floor.

The KSE Board will review the progress and after that any date could be announced regarding removal of the floor mechanism.

Many measures including increasing liquidity in the financial system and additional risk management of leverage products were in place. However, the mechanics of the put option and the NIT-State Enterprise Fund still are required additional time for implementation.

According to sources, the Government of Pakistan, Ministry of Finance, SECP and Karachi Stock Exchange are working together to resolve the issues. However, it would take time to finalise the put option and to establish NIT-State Enterprise Fund. NIT would appoint a foreign consultant to finalise the put option.

Market people said that the fund will invest in nine scrips including OGDC, Kot Addu Power Company, PPL, Sui Southern Gas Company, Sui Northern Gas Pipeline, PSO, National Bank, PTCL and Habib Bank.

It may be mentioned that the floor mechanism on share price was imposed on August 27, 2008 to avoid further losses as the share market was witnessing continuously declining trend.

However, after imposition of floor, the trading activities had reduced as the average ready market volume had declined to 0.187 million shares. The KSE announced that the floor would be removed on October 27, 2008 however the board had to extend the date.