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Aug 06 - 12, 2001

At present Noman Ahmed is Managing Director of Karachi Stock Exchange (KSE). He holds first class honours degree in technology and business studies from the UK and a member of the Institute of Chartered Accountants of Scotland. He completed his articleship with KPMG Peat Marwick in 1988. Noman's 12-years work experience include senior positions with Imperical Chemical Industries (ICI) in the UK and Engro Chemical Pakistan. Prior to joining the KSE he was working for an international oil company and has been involved in oil and gas development projects in Pakistan and Venezuela.

PAGE: How do you describe the sentiments prevailing at equities market in Pakistan?

Noman Ahmed: Local equities market have been witnessing bearish sentiments for some time. While one many attribute many reasons to this, the phenomena is not unique to Pakistan only. Over the months equities markets in developed as well as emerging markets have been witnessing bearish sentiments. The trend was more pronounced in emerging markets and the decline was significant in Pakistan. Some years ago, international investors started liquidating their positions in emerging markets. The same was also true in case of Pakistan. However, some other factors, including liquidity crunch and massive selling by some foreign fund managers, has increased the market float of the volume leaders and resulted in decline in quoted price. Introduction of T+3 system is also one of the reasons for decline in daily trading volume.

PAGE: Stock Exchanges have recently introduced T+3 system and futures trading and other measures are in the offing. What is the objective of introduction of these steps?

Noman: All these steps are part of Capital Market Reforms programme which has been supported and funded by international financial institutions. The objective is to improve transparency and efficiency of the equities market and protection of the interest of all the stakeholders. The next step is launching of National Clearing and Settlement System. Introduction of all these measures will bring change in the system being followed for years. It is human psychology that they are afraid of change and also resist change. Investors as well as brokers, till the time they could not understand these changes were opposed to these steps. After getting acquainted with new systems they now feel more comfortable. However, during the interim period there has been a decline in KSE-100 index and reduction in daily trading volume.

PAGE: What other measures are being undertaken by the Karachi Stock Exchange to facilitate investment in equities market?

Noman: Most of the measures introduced so far are aimed at facilitating small investors, ensuring decent return for their investment, reducing market volatility and ensuring greater transparency in the operations of stock exchanges. The Karachi Stock Exchange has been following self-regulation policy. This has helped in protecting the interest of small shareholders. There has been a marked increase in the number of listed companies declaring dividend. During last year these companies have distributed over Rs 33 billion among their shareholders. The policy also aims at broadening the shareholders' base as well as ensuring return on investment.

PAGE: What is the basic role of a stock exchange?

Noman: Stock exchanges facilitate resource mobilization process. This could be either in the form of equities or debt instruments. In the last couple of years number of new listing has been very low. However, during this period a number of companies have floated term finance certificates (TFCs) and the total amount raised runs into billions of rupees. While the interest of individual investors in TFCs was rather low, institutional investors and pension funds have placed large amounts in various issues. The reason for this seems to be fixed income and excellent credit rating of these issues.

PAGE: What are the future plans of the Karachi Stock Exchange?

Noman: Apart from the above mentioned steps, the Karachi Stock Exchange has plans to allow installation of terminals outside the building. We are also studying the experience of Internet-based trading of shares in other countries. While the basic idea seems workable, creation of necessary infrastructure and legal framework are the pre-requisite. While speculation is the driving force in equities trading, the Karachi Stock Exchange aims at curbing over-speculation. We also aim at bringing out stock exchange at par with other stock exchanges in the region. Pakistan's efforts have been recognized globally as the country has been chosen to host the international conference on emerging markets in November this year.