By SHABBIR H. KAZMI
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
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
PAGE: What other measures are being undertaken
by the Karachi Stock Exchange to facilitate investment in equities
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
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
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.