for Stock Market
President urged the officials to keep a close watch
on the developments
From Shamim Ahmed Rizvi,
Aug 20 - 26 , 2001
A rescue fund from Rs. 3 billion to 4.5 billion is
being created in a week's time to bolster the country's depressed stock
market. The fund which will be managed by a Committee of experts who
will constantly monitor the ups and down in the bourses and invest in
selected scrip to keep the market at its normal level. The investment
will be made through National and Habib Bank of Pakistan who will be the
custodian of the fund.
This decision was taken at a high level meeting
chaired by President Gen. Pervez Musharraf with Ministers of Finance,
Commerce, Privatization and Chairman Security and Exchange Commission of
Pakistan. The meeting was a follow up of briefing to the President by
the Privatization Commission (PC) a few days earlier on the sale of PTCL,
UBL and NIT. It was felt that the lowest over prices of these scrips
prevailing presently in the stock market may hamper PC's efforts to
secure a reasonable return. According to the experts the sudden fall in
the prices of these scrips appeared manipulated as there was no cogent
reason or plausible explanation for this depression. The proposed fund,
apparently recommended by some Ministers and supported by experts, is
being created to stabilise the stock market.
It was felt in the meeting that there were
significant investment opportunities in the stock market as the key
stocks were highly under valued and therefore there was an urgent need
of providing some institutional support for the market. According to a
source the meeting was informed that foreign investors had pulled out
substantial amount from the stock markets. The foreign investment in
Pakistani scrip has come down to present 150 million US dollars from 1.5
billion a few years back.
The meeting was informed that public sector
institutions have decided to undertake the initiatives of providing
necessary support by pooling their resources and focusing on a blue
chips shares considered highly undervalued compared to their earning
potential. "This support will help stabilize the market and will be
forthcoming quickly to take advantages of attractive value, which exist
in the blue chip stock in the stock market. The support by public sector
institutions will follow professional investment and fund management
procedure," the meeting observed.
According to official sources, the meeting was also
informed that the Asian Development Bank (ADB) has engaged international
consultants for the preparation of agreed second capital market
development programme loan of $ 250 million to improve the capital
market of Pakistan.
This second programme would focus on furtherance of
the already ADB-funded programme for the capital market. The ADB has
sponsored $ 250 million in the first phase while the EXIM Bank of Japan
has provided $ 250 million loan for the first phase programme. The first
parse started in 1997 to introduce the capital market reforms and was
completed in June, last year. Under the second phase of capital market
development programme loan, the bank seeks to create greater depth in
Pakistan capital market.
At the moment, Pakistan does not have the medium or
long-term capital financing for the sector and this programme would
strengthen the local stock market. The sources said that after the
completion of the studies by the international consultants, the
agreement for the capital market loans would be signed.
Meanwhile an official handout about the meeting said
the public sector institutions have decided to undertake the initiative
of providing the necessary support by pooling their resources and
focusing on a few blue chip shares considered highly undervalued as
compared to their earning potential. It said that the support will be
coming quickly so that it takes advantage of the attractive values which
exist in the blue chip stocks.
The handout said that the President underlined the
significance of the stock market and urged the officials to keep a close
watch on the developments. He said the process of stock market reforms
should be advanced while forging partnerships and securing support from
all the stakeholders.
It further said that the meeting viewed that the
recent slowdown in the market was due primarily to the withdrawal of
some foreign funds from the market as well as the global nervousness,
with the emerging markets stocks being faced by several markets. The
handout said there were significant opportunities in the market as the
key stock were highly undervalued and the need, therefore, was for
providing institutional support.
The source said that the chairman of the Securities
and Exchange Commission of Pakistan (SECP) briefed the meeting about the
market situation and the reforms undertaken by the SECP. The chairman
suggested that as a long-term measure to stabilise the market the SECP
would continue to introduce reforms.